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Advice Needed, CD Ladder Or Not?

NewStar
  |     |   22 posts since 2018

I am currently evaluating the two scenarios below:

Scenario 1 (No Ladder)

Invest equal amount in four different 5-year CDs (two with 3.50% APY, one with 3.60% APY and another one with 3.56% APY)

Scenario 2 (CD Ladder)

Invest equal amount in a 4-year CD (3.35% APY), 5-year CD (3.60% APY), 6-year CD (3.45% APY) and 7-year CD (3.45% APY)

NOTE:

-Scenario 1 have higher monthly returns but leaves me in a similar situation in 5 year

-Scenario 2 provide the benefit of CD ladder but offer lower monthly returns compare to scenario 1

Please advise.

Thanks

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2


Answers
paoli2
  |     |   2,641 posts since 2011
I would look at what their EWPs are and make my decision according to that. If you can get a 5 year CD with 3.60 APY and doesn't have an EWP over 6 months or so, I would grab the highest rate for all 4. With a lower EWP, if you see rates going higher in 3 years or so, you can always take your tax deduction and close a couple of the 5 yrs and buy other CDs. I think the best EWP is your option to make new decisions in the future.
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4
Ricochet
  |     |   522 posts since 2010
I would do Scenario 2 in stead of locking yourself out future rates.
Use this site to find highest Apy for 1yr, 2yr, 3yr, and a Add-on 5yr
Give yourself some wiggle room
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4
Percussed
  |     |   74 posts since 2011
Both scenarios are worth consideration. The EWP info might be very important if you would possibly be in need of the money prior to maturity. I am a fan of laddering whenever practical so scenario #2 would be my preference depending on EWP info for those mentioned and the total investment value of each CD. Also, I would want to know if partial withdrawals are possible particularly in the case of larger value CD's, i.e. $25K plus.
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4
Duck
  |     |   111 posts since 2010
I can only say I like spreading my $$$ around personally I like 2nd better than 1st but thats me
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3
NewStar
  |     |   22 posts since 2018
Good comments, thank you all.
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1


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