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Is now the time to lengthen your CD ladder?
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"For the typical investor there's no need for them to be an expert -- the decisions aren't moment-to-moment. Banks will follow with rate moves. They've been a follower in that process; they're not trying to get ahead of the curve. The individual, if a buy-and-hold investor, doesn't have to try to guess if the Fed will raise rates further. The banks will give them an opportunity to get in," he says.

Ed Gjertsen, CFP and vice president of Mack Investment Securities in Glenview, Ill., says the time is right to build the CD ladder, but cautiously.

"CD duration should start to be extended. People who have been buying CDs with maturities of one year to 18 months should consider going out two to three years."

The yield curve for high-yield CDs is flat. As of this writing, here are the highest yields you can find for various maturities, according to surveys by

Highest yields:
Maturity Yield Maturity Yield
Three-month CD 5.3% Two-year CD 5.5%
Six-month CD 5.5% Three-year CD 5.5%
Nine-month CD 5.58% Four-year CD 5.3%
One-year CD 5.6% Five-year CD 5.3%

Whether you extend a ladder to two years or five, you're averaging better than 5 percent annually. Not a bad return on a risk-free investment. The key is to buy high-yield CDs. Your local bank or credit union may or may not offer the best rates. Nationwide, average yields are considerably lower.

Your ladder doesn't have to be CDs. Bonds, for instance, can be laddered, but be sure to study the pros and cons of various investments before laddering.  You can lose principal with corporate bonds if you sell before maturity or if the company defaults.

Some investments, such as Treasury notes, may yield less than a CD, but you won't pay state or local tax on the interest. You'll have to do some math to decide if that beats a CD of comparable length. You'll accrue "phantom" interest with some government securities, such as Treasury Inflation-Protected Securities, also known as TIPS. That means you don't actually receive the interest until maturity, but you must pay taxes on it as it accrues.'s corrections policy -- Updated: Sept. 27, 2006
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