Building a CD ladder

A CD ladder is the concept of purchasing several certificates of deposit at different points in time.

In the past, people would purchases CD's at different times so they could wait around for a while to get the best interest rate possible.

When the CD matures, you can renew it if you like the interest rate.

This is a strategy for people who want a very safe way to invest money (won't lose principle).

I started this process back in 2011 but this was before my first job was terminated and before interest rates for most banks plunged.

In 2011, the best interest rate I could get at my primary bank was 2.4%. In the following months, I watched the rates dip towards 1.75%, 1.25%, then 1% and it kept going down.

Nowadays, the best interest rate you can get at the same bank is 0.3%. Three tenths of one percent.

Anything less than 2% interest did not seem worth it to me. I'd feel better having the liquidity of my cash.

One month ago, after some research, I found that there is still a bank today that will offer 2% on a certificate of deposit. 

As of 5/12/14, that bank is ---------------.

For fun, I put together this illustration if interest rates stayed at 2% for the next 40 years (I have no idea how realistic that is).

This illustration has a man putting $10,000 into a CD gaining 2% per year for 40 years.

age	amount	rate	addition	compound		principle	interest
27	10000	1.02	0	10200		10000	200
28	10200	1.02	10000	20604		20000	604
29	20604	1.02	10000	31216.08		30000	1216.08
30	31216.08	1.02	10000	42040.4		40000	2040.402
31	42040.4	1.02	10000	53081.21		50000	3081.21
32	53081.21	1.02	10000	64342.83		60000	4342.834
33	64342.83	1.02	10000	75829.69		70000	5829.691
34	75829.69	1.02	10000	87546.28		80000	7546.284
35	87546.28	1.02	10000	99497.21		90000	9497.21
36	99497.21	1.02	10000	111687.2		100000	11687.15
37	111687.2	1.02	10000	124120.9		110000	14120.9
38	124120.9	1.02	10000	136803.3		120000	16803.32
39	136803.3	1.02	10000	149739.4		130000	19739.38
40	149739.4	1.02	10000	162934.2		140000	22934.17
41	162934.2	1.02	10000	176392.9		150000	26392.85
42	176392.9	1.02	10000	190120.7		160000	30120.71
43	190120.7	1.02	10000	204123.1		170000	34123.12
44	204123.1	1.02	10000	218405.6		180000	38405.59
45	218405.6	1.02	10000	232973.7		190000	42973.7
46	232973.7	1.02	10000	247833.2		200000	47833.17
47	247833.2	1.02	10000	262989.8		210000	52989.84
48	262989.8	1.02	10000	278449.6		220000	58449.63
49	278449.6	1.02	10000	294218.6		230000	64218.62
50	294218.6	1.02	10000	310303		240000	70303
51	310303	1.02	10000	326709.1		250000	76709.06
52	326709.1	1.02	10000	343443.2		260000	83443.24
53	343443.2	1.02	10000	360512.1		270000	90512.1
54	360512.1	1.02	10000	377922.3		280000	97922.35
55	377922.3	1.02	10000	395680.8		290000	105680.8
56	395680.8	1.02	10000	413794.4		300000	113794.4
57	413794.4	1.02	10000	432270.3		310000	122270.3
58	432270.3	1.02	10000	451115.7		320000	131115.7
59	451115.7	1.02	10000	470338		330000	140338
60	470338	1.02	10000	489944.8		340000	149944.8
61	489944.8	1.02	10000	509943.7		350000	159943.7
62	509943.7	1.02	10000	530342.5		360000	170342.5
63	530342.5	1.02	10000	551149.4		370000	181149.4
64	551149.4	1.02	10000	572372.4		380000	192372.4
65	572372.4	1.02	10000	594019.8		390000	204019.8
66	594019.8	1.02	10000	616100.2		400000	216100.2
67	616100.2	1.02	10000	638622.2		410000	228622.2

Over 41 years, $410,000 was invested into CDs. The interest gained would have been $228,622.20.

Under this illustration, the average return per year is $5,576.15.