Financial Basics · Income Strategies

Bond Ladder

Definition

A bond ladder is a portfolio of bonds with staggered maturity dates. Each year, one bond matures — providing predictable cash flow and automatic reinvestment at current rates.

Why it matters in retirement

Bond ladders solve a specific retirement problem: matching cash flows to expenses without taking interest-rate risk. A 10-year ladder covering years 1–10 of retirement spending means you never have to sell bonds at bad prices.

Key Numbers — 2026

Typical ladder length
5–10 rungs
10-yr ladder avg yield
~4.2%
Duration of 10-rung ladder
~5 yrs
Min practical capital
$100K+

Pros

  • Predictable cash flow
  • Eliminates reinvestment risk
  • No manager fees
  • Interest-rate neutral over time

Cons

  • Capital-intensive
  • Requires active management
  • Less diversification than bond funds
  • Credit risk if corporate bonds used

Common mistakes

  • Using corporate bonds without understanding credit risk
  • Building a ladder in a taxable account with corporates (prefer Treasuries)
  • Not laddering across multiple issuers
  • Ignoring call features on callable bonds

Related

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