What is the CD account barbell strategy?

Finding ways to maximize the returns on your money can make a lot of sense in today's high-rate environment. For example, while certificate of deposit (CD) accounts are a smart option to consider right now overall, as it's easy to find CD accounts offering interest rates of 4% or more, opening a single CD account is only the first step if you want to ensure you're earning hefty returns on your money.

Savers who want to earn the most interest possible in today's relatively high-rate environment could benefit from taking a more strategic approach, like using CD barbells and ladders to maximize their returns. And, CD barbells, in particular, could be a particularly solid strategy right now. But what exactly are CD barbells and how do they work?  

Find out how much you can earn with today's CD rates here.

What is the CD account barbell strategy?

A CD barbell is a strategy that uses a short-term (less than one year) and long-term (one year or longer) CD in tandem, like two ends of a barbell, to help you earn more interest while maintaining liquidity. It differs from a CD ladder by excluding the middle-term CDs, focusing solely on short- and long-term CDs. 

By putting some of your money into a short-term CD, you maintain access to a portion of your funds in case you need them. The long-term CD on the other end of the barbell ensures that you're still earning a high rate of return over time while maintaining that liquidity.

So, say you have $10,000 to invest in a CD barbell. You put $5,000 in a 6-month CD and the remaining $5,000 in an 18-month CD. Here's what your returns at maturity would be using today's available rates for each $5,000 part of the barbell: 

• 6-month CD at 4.45%: $110.04 for a total of $5,110.04 
• 18-month CD at 4.16%: $315.22 for a total of $5,315.22

Starting a CD barbell strategy today like the one above would earn you more than $425. That being said, you don't have to make equal deposits into both accounts. 

Now let's say you have $10,000 but put $7,000 in an 18-month CD and the remaining $3,000 in a 6-month CD. Here's how those earnings would look based on today's available rates: 

• 6-month, $3,000 CD at 4.45%: $66.02 for a total of $3,066.02 
• 18-month, $7,000 CD at 4.16%: $441.31 for a total of $7,441.31

In this case, taking a weighted deposit approach to your CD barbell would earn you more than $500.

See what your CD rates could be now.

When does the CD account barbell strategy make sense?

The CD barbell strategy works well for cautious savers who want both accessibility and higher returns. By dividing your money between short-term CDs and long-term CDs, you can maintain some liquidity while still benefiting from the higher rates of longer commitments.

For example, retirees and near-retirees often benefit from this approach as they typically need regular income from their investments while protecting their principal. The strategy allows them to access the funds every few months from their maturing short-term CDs for living expenses, while their long-term CDs generate higher interest for future needs. Empty-nesters saving for travel or eventual healthcare costs may also find this balanced approach helpful.

Risk-averse savers with emergency funds already in place are good candidates for this strategy as well. These savers have already set aside enough cash for immediate emergencies but want to maximize returns on their remaining savings, and the barbell strategy helps them avoid having too much money sitting in low-yield accounts while still maintaining some flexibility.

Those saving for both short-term goals (like home repairs or vacations) and longer-term objectives (like college funds) can also benefit from this dual-purpose approach. The short-term CDs provide funds for upcoming expenses, while the longer-term CDs help them save for more future goals at good rates.

And, this strategy also suits those who prefer simplicity over complexity. Rather than managing numerous CDs with different maturation dates, they focus on just two timeframes. This makes the strategy easier to implement and maintain, especially for savers who don't want to constantly monitor interest rates and complex laddering schemes.  

The bottom line

The CD barbell strategy offers a practical compromise between accessibility and earning potential in today's high-rate environment. By balancing your investments between short-term and long-term CDs, you create a financial structure that provides both liquidity when needed and maximized returns over time. Before implementing this approach, compare rates across different financial institutions to ensure you're getting the best possible returns at both ends of your barbell. Remember that while this strategy requires less maintenance than a traditional CD ladder, you'll still want to reassess your approach as economic conditions change and your financial goals evolve. With thoughtful planning, a CD barbell can be an effective tool for savvy savers looking to make their money work harder while maintaining financial flexibility.