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What Is Mobile Check Deposit?Do CD Ladders Still Make Sense?
The main idea behind a CD ladder is that you are not locked into just one CD. The ladder should be composed of several CDs each maturing once a year or in some regular interval. This provides two benefits. First, it gives you regular access to your CD money without having to worry about early withdrawal penalties. Second, it allows you to take advantage of higher rates of long-term CDs, and it gives you the opportunity to reinvest in higher rates as the CDs mature.
Poll: Are you still using a CD ladder?
With today's interest rates being so low, do CD ladders still make sense? I thought this would make for a good poll. Are you still using a CD ladder? If you are still laddering CDs, have you made changes? For example, some may have decided to renew CDs on their ladders into longer-term CDs to take advantage of higher rates. Others may have decided to renew CDs into shorter-term CDs to prevent being stuck into a low-rate CD if interest rates rise.
My Take on CD Ladders
I've seen some financial advisors who have claimed that the CD ladder strategy is all but dead. It might seem unwise to renew CDs that mature today into new long-term CDs which have such low rates. However, many had those same concerns two years ago. I'm sure many readers who opened long-term CDs two years ago are glad about their choices. The problem is no one knows about how interest rates will change. The CD ladder provides a strategy that doesn't require you to guess about future rates.
CDs don't have to make up one's entire portfolio. For the fixed-income part of your portfolio that you want to keep safe, CDs and CD ladders can still make sense. For example, Allan Roth who writes for CBS News has written that he has "roughly" 70% of his "fixed-income portfolio in high-paying CDs that have easy early withdrawal penalties."
CD Ladder Overview, Strategies and Tips
If you're not familiar with a CD ladder, we have a CD ladder overview with an infographic. There are ways you can tweak a CD ladder. I described some of these ways in my post on Alternatives to CD Ladders. There are issues that can mess up your CD ladder and reduce your CD earnings. I reviewed some of these in my posts Issues to Consider for Your CD Ladder and 10 Gotchas to Avoid for Bank CD Investors.
We would be so happy to have you sign it. If you know of anyone else who might sight it, please give them the url. Thanks so much for your help!
with the rates of today, i have moved about 2 years money into Fixed income like Prefered stocks and High dividend ETF's....... as the rest of the CD matures, i will go back into a ladder with the lower rates...
I am getting around 7% in my fixed income, so the other 1/2 of the money at 2% will not hurt as bad...
I've been going barbell for several years, and right now my short stuff is really getting creamed. The long stuff looks fine but there is nothing about which I can boast. So much of the future will not be determined until November. And even after that, nothing is going to happen instantly. It took Ronald Reagan three years to clean up after Carter. Even if Romney gets in, which is far from a sure thing, he's not gonna be able just to snap his fingers and make the catastrophe disappear.
I don't really regret the barbell over laddering. I don't know what I would have done differently. When the entire building is collapsing it's tough to be a winner no matter which floor you're on!
Also, was wondering, what other strategies are people taking action here? Sure, bank accounts/credit union accounts are insured, bonds are pretty safe backed by the US, or local goverments...but any no brainer investment strategies (simple, like the cd ladder) into other securities, trying to keep risk low or lower...stressing on the "no brainer" and "less risky"part...
Just wondering how people are doing now...going into mutual funds? getting into the stock market? or going into forex? The thing with forex is that, you could automate the trades, mainly thru the usage of scripts or EA (expert advisor) on the mt4 trading platform...so that U don't have to be glued to the monitor...
Just looking for opinions...! thanks!
Kaight - #7, Monday, May 14, 2012 - 3:44 PM
I believe many people are in your same situation. From what I read and heard many of the 5 year CDs that were paying over 5% are now coming to maturity. I'm in the same boat. We (savers) need a Bailout like everone else got. But that will never happen, since we'll be forced to cut back on expenses or start using our principle. Anyway good luck.
No one knows what will happen we just try to do what is best and still be able to sleep at night. I don't even think about CD penalties because we have the reward checking accounts and also if we need money we would just cash one of the CD's in.
Obama, if he is re-elected, will put Bernanke in for a third term. Romney is no prize, God knows. But he has promised not to reappoint Bernanke, and that's good.
My concern about Romney is that he might appoint a Bernanke clone, or somebody even worse!! Romney is not a Conservative, but Conservative policies and approaches are what we need in place today. Regardless, it's simply not going to happen in the next 4 years.