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I have some cash in savings that I'll need to draw down over the next few years, monthly. It seems like a CD ladder would be the best way to get a better return, but maintain safety and some liquidity. But I don't know how to put into each rung. Say like I have $10,000 and need $100/m. How do I figure out how to divide it up?

  • How soon do you need to start drawing $100/m, and does it have to be $100/m or could it be $300 every 3 months? – Hart CO May 4 at 3:43
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Here's an example for deploying $13,000 into a monthly ladder going out 6 months with $2k coming due every month (adjust your numbers to fit this scheme).

$1k of the $13k will be set aside to cover monthly withdrawals as well as some buffer.

Day 1: Put $2k each in a 3 month and a 6 month CD. In shorthand, you have a 3 and a 6.

Day 31: Put $2k each in new 3 and 6 month CDs. In shorthand, you have a 2, 3, 5 and a 6.

Day 61: Put $2k each in new 3 and 6 month CDs. In shorthand, you have a 1, 2, 3, 4, 5 and a 6 and you will have $2k coming due every month at which time you'll get a new 6 month CD. When there are no more 3 month CDs remaining, you'll just roll each maturing 6 month CD into a new 6 month CD (a phone call if not done automatically by the bank).

There are several problems with this.

  • You have only deployed $4k in month one so you're going to need a high yield MM account for the balance.

  • It's a lot of time at the bank or online (paperwork) to get this set up

  • There are 1/2 a dozen or so high yield MM accounts that pay 2.40% to 2.50% and that beats current 3 month CD rates and isn't much less than 6 month CD rates. I'd skip all the hassle and just put the money in the 2.50% MM account.

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    Or hybrid, 1 year or longer CD's to get the better rate, with balance in an MM account while you build the ladder. – Hart CO May 4 at 4:51
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You might want to consider Treasury Direct instead. This allows you to buy treasury on the increment of $25 face value. You can build a monthly or even weekly ladder using 1~3 month bills.

Even easier alternative is just using money market fund/ETF, or an online saving that pays at least 2.25% APY.

Many banks require a few thousands minimum for CD, which will make things harder.

  • On the pro CD side, I can open CD's in seconds with a bank I already have an account with, so transfers out are nearly instantaneous, and there's no minimum for the CD's. Treasury Direct is pretty slick though. Could you point me at one of those online savings in the 2.25% range? I've not seen one that doesn't limit the good rate to a small amount of money, but I haven't hunted in a while and would be very interested. – Hart CO May 4 at 4:50
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    @Hart: Discover, American Express, Ally, PNC High Yield, Citi Accelerate are just the major ones between 2.1% and 2.4%. For a larger list including less known entities, see doctorofcredit.com/high-interest-savings-to-get/… – Ben Voigt May 4 at 5:20
  • @BenVoigt Handy, thanks! Looks like of the major ones you noted only PNC and Citi are above 2.25%, but quite a few good-sized banks on the link you provided. Looks like a lot of money market accounts are dropping the higher min balance for decent interest rate requirement, good stuff. – Hart CO May 4 at 13:38
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What you are asking for ($100/month interest on a $10,000 investment) is mathematically possible but impossible now in the real world.

$100/month is $1,200/year, and $1,200 is 12% of $10,000. No banks offer anything near that high of an interest rate. You'd need $60,000 at a currently reasonable 2% APY to earn $100/month.

Every month for 12 months open a 1 year $5,000 CD and in the 13th month you'll start getting $100/month.

  • I don't think that's (make $100/month on interest) what the OP wants. OP just wants to withdraw $100 a month from the $10000 saving for a finite period of time and is asking for the best way to generate a little interest on cash. – user67084 May 6 at 4:02

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