The Laddering Strategy: Balancing Returns and Access

What Is Deposit Laddering?

Laddering involves spreading your investment across multiple term deposits with staggered maturity dates. This provides both higher returns and regular liquidity.

How a Ladder Works

Example with $100,000:

• $20,000 in 1-year term: Matures Year 1
• $20,000 in 2-year term: Matures Year 2
• $20,000 in 3-year term: Matures Year 3
• $20,000 in 4-year term: Matures Year 4
• $20,000 in 5-year term: Matures Year 5

Benefits of Laddering

• Regular access: One deposit matures each year
• Higher average rate: Longer terms earn more
• Rate flexibility: Reinvest maturing funds at current rates
• Reduced timing risk: Not all funds locked at one rate

Building Your Ladder

Step-by-step approach:

1. Decide your total investment amount
2. Choose your ladder length (3, 4, or 5 years typical)
3. Divide equally across each term
4. Select institutions with best rates for each term
5. As each matures, reinvest in the longest term

Maintaining the Ladder

Once established:

• Each year, one deposit matures
• Reinvest in a new longest-term deposit
• After initial setup, you always have a deposit maturing annually
• Eventually, all deposits are at the longest (highest-rate) term

Variations to Consider

• Quarterly ladder: Deposits mature every 3 months
• Weighted ladder: More in longer terms for higher returns
• Short ladder: 6-month, 12-month, 18-month for flexibility

Current Rate Advantage

With rates at multi-year highs, laddering now locks in excellent rates for years while maintaining flexibility for future opportunities.