• Revenue Cycle Management
  • COVID-19
  • Reimbursement
  • Diabetes Awareness Month
  • Risk Management
  • Patient Retention
  • Staffing
  • Medical Economics® 100th Anniversary
  • Coding and documentation
  • Business of Endocrinology
  • Telehealth
  • Physicians Financial News
  • Cybersecurity
  • Cardiovascular Clinical Consult
  • Locum Tenens, brought to you by LocumLife®
  • Weight Management
  • Business of Women's Health
  • Practice Efficiency
  • Finance and Wealth
  • EHRs
  • Remote Patient Monitoring
  • Sponsored Webinars
  • Medical Technology
  • Billing and collections
  • Acute Pain Management
  • Exclusive Content
  • Value-based Care
  • Business of Pediatrics
  • Concierge Medicine 2.0 by Castle Connolly Private Health Partners
  • Practice Growth
  • Concierge Medicine
  • Business of Cardiology
  • Implementing the Topcon Ocular Telehealth Platform
  • Malpractice
  • Influenza
  • Sexual Health
  • Chronic Conditions
  • Technology
  • Legal and Policy
  • Money
  • Opinion
  • Vaccines
  • Practice Management
  • Patient Relations
  • Careers

Climbing the CD Ladder

Article

To maximize yield in the current low-interest environment, financial experts recommend the CD ladder. These take advantage of higher long-term CD yields without tying up cash for long periods of time.

For investors, trying to squeeze a few extra pennies of yield in the current low-interest environment can be frustrating. One suggestion from financial advisors is a CD ladder that lets you take advantage of higher long-term CD yields without tying up all your cash for long periods of time.

The concept is simple. Take your cash stash and divide it into five equal parts, then invest it in five CDs of varying maturities. For example, you might put one-fifth of your money into a five-year CD, another fifth into a four-year CD, and so on down the ladder, putting the final portion into a one-year CD. Currently, the average five-year CD is paying just under 3%, but you may be able to find a better deal at Bankrate.com. The yield on a one-year CD is averaging about 1.7%. When the one-year CD matures, you reinvest the money into a five-year CD, hopefully at an even better interest rate. Eventually, you will have five CDs earning top interest but never be more than a year away from being able to cash one in.

CD ladders can come in any size and you can adjust the maturities to suit your comfort level and your cash-flow needs. If you want to be able to reach your money faster, choose shorter maturities, such as three-month or six-month CDs, for your ladder. The shorter maturities offer you more liquidity and may also help you avoid early withdrawal penalties, which could burn up that extra yield that you worked hard to get.

Related Videos
Victor J. Dzau, MD, gives expert advice
Victor J. Dzau, MD, gives expert advice