RateAPY

Layering Your CD Interest Rates

Posted by: RateAPY Bank Rates News
May 12th, 2010

If you have $125,000 and you know you need to use $25,000 of it each year, you can put the whole $125,000 into a certificate of deposit with a one-year maturity, earning an APY of 1.49%. The first year you would make about $1,860. Once the CD matured, you could withdraw the $25,000 you needed and reinvest the $100,000 balance for another year. Each time you reinvest, you are dependent on current interest rates–which can go up or down. In this scenario–assuming the CD interest rates stayed the same–you would earn $5,610 over five years.

Layering Certificates of Deposit for Maximum Yield

If you layer your CDs instead, you could potentially earn $10,668, improving your interest income by over $5,000!

• $25,000 1-year term at 1.48% APY earns about $372
• $25,000 2-year term at 1.99% APY earns about $1,009
• $25,000 3-year term at 2.36% APY earns about $1,832
• $25,000 4-year term at 2.47% APY earns about $2,593
• $25,000 5-year term at 3.56% APY earns about $4,862

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