This Is How Much Money You Can Make With $10,000 in a CD Ladder
KEY POINTS
- At today's interest rates, a $10,000 CD ladder can be reasonably expected to produce $400 to $450 in annual income.
- The exact amount of income depends on the banks you use and the interest rates available at the time.
- It's difficult to project CD ladder income beyond the first year, mainly due to changes in interest rates.
A CD ladder can be an excellent way to combine financial flexibility with risk-free, steady income. A CD ladder consists of dividing your money into several CDs of staggered maturity terms. The idea is that every year, some of your money will mature and can be either used or reinvested, while the bulk of your money takes advantage of stable interest income.
With CD interest rates still at their highest levels since before the 2008 financial crisis, it's possible to set up a CD ladder that produces a relatively high income stream. Here's a look at how much you can make with $10,000 in a CD ladder, and a couple of things to keep in mind before you start opening accounts.
An example of a $10,000 CD ladder
The exact amount of money you can make from a CD ladder depends on the CDs you choose, as well as the prevailing interest rates at the time.
Depending on when you're reading this, CD rates could be significantly higher or lower than they are as of this writing (Aug. 9).
Our Picks for the Best High-Yield Savings Accounts of 2024
| Product | APY | Min. to Earn | |
American Express® High Yield Savings
Member FDIC.
APY
3.80%
Rate info
3.80% annual percentage yield as of January 9, 2025. Terms apply.
Min. to earn
$0
Open Account for American Express® High Yield Savings
On American Express's Secure Website. |
3.80%
Rate info
3.80% annual percentage yield as of January 9, 2025. Terms apply.
|
$0
|
Open Account for American Express® High Yield Savings
On American Express's Secure Website. |
Capital One 360 Performance Savings
Member FDIC.
APY
3.80%
Rate info
See Capital One website for most up-to-date rates. Advertised Annual Percentage Yield (APY) is variable and accurate as of Dec. 6, 2024. Rates are subject to change at any time before or after account opening.
Min. to earn
$0
Open Account for Capital One 360 Performance Savings
On Capital One's Secure Website. |
3.80%
Rate info
See Capital One website for most up-to-date rates. Advertised Annual Percentage Yield (APY) is variable and accurate as of Dec. 6, 2024. Rates are subject to change at any time before or after account opening.
|
$0
|
Open Account for Capital One 360 Performance Savings
On Capital One's Secure Website. |
Western Alliance Bank High-Yield Savings Premier
Member FDIC.
APY
4.40%
Rate info
The annual percentage yield (APY) is accurate as of Jan. 2, 2025, and subject to change at the Bank’s discretion. Refer to product’s website for latest APY rate. Minimum deposit required to open an account is $500 and a minimum balance of $0.01 is required to earn the advertised APY.
Min. to earn
$500 to open, $0.01 for max APY
Open Account for Western Alliance Bank High-Yield Savings Premier
On Western Alliance Bank's Secure Website. |
4.40%
Rate info
The annual percentage yield (APY) is accurate as of Jan. 2, 2025, and subject to change at the Bank’s discretion. Refer to product’s website for latest APY rate. Minimum deposit required to open an account is $500 and a minimum balance of $0.01 is required to earn the advertised APY.
|
$500 to open, $0.01 for max APY
|
Open Account for Western Alliance Bank High-Yield Savings Premier
On Western Alliance Bank's Secure Website. |
Having said that, here's an example of a CD ladder using some of the best readily available CD rates from our top online banks, and what it could mean for your income:
| CD term | Amount deposited | APY | Year 1 income |
|---|---|---|---|
| 1 year | $2,000 | 5.00% | $100 |
| 2 years | $2,000 | 4.60% | $92 |
| 3 years | $2,000 | 4.25% | $85 |
| 4 years | $2,000 | 4.15% | $83 |
| 5 years | $2,000 | 4.00% | $80 |
| Total | $10,000 | $440 |
In this example, our CD ladder would produce a total of $440 in interest income over the course of one year.
A couple of things to keep in mind
First and foremost, if you're starting a CD ladder with any amount except exactly $10,000, simply multiply or divide the figures in the chart accordingly. As an example, if you want to create a $50,000 CD ladder, multiply the income by five to get a good idea of what you could make.
Second, keep in mind that this is just the CD ladder's first-year income, and it can get difficult to accurately project what you could make beyond one year. There are two main reasons for this:
- Your 1-year CD will mature, and you'll roll it into a new 5-year CD. There's no way to know what the prevailing 5-year CD rates will be at that point.
- With all your other CDs, you can either collect the interest income they earn to cover your expenses, or you can leave it in the account to compound. There's no right or wrong way to do it, but the option you choose will have an impact on your income in year two and beyond.
The bottom line
A CD ladder can be an excellent way to take advantage of the income visibility of long-term CDs, while still maintaining financial flexibility and a high level of current income.
Your income from a CD ladder depends on how much money you have, the bank(s) at which you open CDs, and the interest rate environment both now and in the future. But it can be a great way to set up a recurring income stream without locking all of your money up for several years.
Our Research Expert
Matt is a Certified Financial Planner™ and investment advisor based in Columbia, South Carolina, and has been writing about personal finance since 2011.
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