If you've been enjoying the highest savings rates in nearly two decades, the clock is ticking. The Federal Reserve cut its benchmark rate three times in 2025, bringing the federal funds rate to its current range of 3.5% to 3.75%. While another cut isn't expected until June at the earliest, the direction is clear: rates are heading lower.

For savers, this creates an urgent question: how do you preserve today's attractive yields while maintaining flexibility for your financial needs? The answer, for many, is a time-tested strategy called CD laddering.

The Current Rate Landscape

As of January 17, 2026, the best CD rates available include:

  • 6-month CDs: Up to 4.05% APY (Marcus by Goldman Sachs, America First Credit Union)
  • 1-year CDs: Up to 4.00% APY (Marcus by Goldman Sachs, Live Oak Bank)
  • No-penalty CDs: Up to 3.95% APY (Marcus by Goldman Sachs)
  • High-yield savings: Up to 4.00% APY (SoFi, Valley Bank Direct, Barclays)

These rates, while still attractive by historical standards, are down from the 5%+ peaks seen in early 2025. And with the Fed likely to cut rates further, today's yields may look even better in hindsight.

What Is a CD Ladder?

A CD ladder is a strategy of spreading your savings across multiple CDs with different maturity dates. Instead of putting all your money in one CD, you divide it among several terms—typically ranging from 3 months to 5 years.

Here's how a basic five-rung ladder might work with a $25,000 deposit:

  • $5,000 in a 3-month CD
  • $5,000 in a 6-month CD
  • $5,000 in a 1-year CD
  • $5,000 in a 2-year CD
  • $5,000 in a 3-year CD

As each CD matures, you can either use the funds if needed or reinvest in a new CD at the longest term of your ladder. Over time, you'll have a CD maturing every few months while earning higher rates on your longer-term deposits.

Why Laddering Makes Sense Now

In a falling rate environment, a ladder offers several advantages:

Lock In Higher Rates on Longer Terms

While short-term CD rates will decline as the Fed cuts, your longer-term CDs will continue earning today's higher rates. A 3-year CD opened now at 3.80% will still be paying 3.80% even if rates fall to 2.5% in 2027.

Maintain Liquidity

With CDs maturing at regular intervals, you'll have access to a portion of your funds without paying early withdrawal penalties. This is particularly valuable given economic uncertainty.

Average Out Rate Fluctuations

No one can perfectly time interest rate movements. By spreading your investments across multiple maturity dates, you naturally average into different rate environments, reducing the impact of any single timing decision.

Building Your Ladder: A Step-by-Step Approach

Step 1: Determine Your Ladder Amount

Start with funds you won't need for at least your longest CD term. This isn't money for your emergency fund (keep that in high-yield savings) or near-term goals. Think of it as the "stable" portion of your savings that can be locked away for higher returns.

Step 2: Choose Your Rungs

A traditional five-rung ladder spans from 1 to 5 years. In the current environment, you might consider a more compressed approach:

  • Aggressive: 3-month, 6-month, 9-month, 12-month, 18-month
  • Moderate: 6-month, 12-month, 18-month, 24-month, 36-month
  • Conservative: 12-month, 24-month, 36-month, 48-month, 60-month

The aggressive approach provides more flexibility and frequent access to funds. The conservative approach maximizes rate lock-in for those confident they won't need the money.

Step 3: Shop for the Best Rates

Don't limit yourself to your current bank. Online banks consistently offer higher rates than traditional brick-and-mortar institutions. Some of the top options right now include:

  • Marcus by Goldman Sachs
  • Ally Bank
  • Discover Bank
  • Capital One
  • Credit unions (often have competitive rates)

Step 4: Consider No-Penalty Options for Shorter Terms

For your shortest rung, a no-penalty CD offers flexibility with minimal rate sacrifice. Marcus by Goldman Sachs's no-penalty CD at 3.95% APY lets you withdraw your full balance without penalty after just 7 days.

The Yield Curve Factor

One unusual aspect of the current environment is the relatively flat yield curve. Long-term CD rates aren't dramatically higher than short-term rates—sometimes they're even lower. This makes shorter-term ladders particularly attractive, as you're not giving up much yield for the added flexibility.

Compare current typical rates:

  • 6-month: 4.00-4.05% APY
  • 1-year: 3.95-4.00% APY
  • 2-year: 3.70-3.85% APY
  • 3-year: 3.60-3.80% APY

When the curve is flat or inverted, there's less benefit to locking up money for longer terms—but also less penalty for doing so if you want to guarantee rates.

Tax Considerations

CD interest is taxable as ordinary income in the year it's earned, even if the CD hasn't matured. If you're building a substantial ladder in a taxable account, consider:

  • Placing longer-term CDs in tax-advantaged accounts like IRAs
  • Timing purchases to spread interest income across tax years
  • Using municipal money market funds for a portion of your savings if you're in a high tax bracket

When CDs Might Not Be the Best Choice

While CD laddering is powerful, it's not right for everyone:

  • If you need guaranteed liquidity, stick with high-yield savings or money market accounts
  • If you're investing for long-term growth (10+ years), stocks have historically delivered better returns
  • If interest rates were to rise significantly, locked-in CD rates would underperform

The Bottom Line

The era of 5% savings rates has passed, but 4% yields are still historically attractive—and they won't last forever. A thoughtfully constructed CD ladder lets you capture today's rates while maintaining the flexibility to adapt as conditions change. For conservative savers looking to maximize returns without market risk, now may be an opportune moment to build or expand your ladder before the next round of Fed cuts arrives.