Implementation
John Stoj · October 7, 2026
When someone retires, they rarely say, “I’m worried I won’t beat inflation by 30 basis points.”
What they say sounds more like this. “What if I stop working and the market tanks right after?” “What if I have to sell stocks in a bad year just to pay the bills?” “What if I can’t sleep because the portfolio is my paycheck now?”
A bond ladder is one answer to those questions, and a good one. It’s also a tool, and a tool is only as good as the job it’s given.
Start with the liability
Ladders tend to get discussed as if the ladder were the question. Build one and retirement is safe. The question comes first: what does the money have to do, and when?
Try a made-up retiree. The retiree and the numbers are invented. This is an illustration, not a recommendation for anyone.
Essential spending (housing, groceries, utilities, insurance, healthcare premiums, taxes, the real stuff) runs $7,000 a month, or $84,000 a year. Taxes belong on the list. With no more withholding, taxes become, “spending,” in retirement.
Now subtract the guaranteed income: Social Security, a pension, an annuity, rental income if it’s stable. Say that comes to $55,000 a year. $84,000 minus $55,000 leaves a $29,000 gap. Round it to $30,000 a year, and round late, not early.
That $30,000 is the liability. It’s what the portfolio has to produce every year, whether or not stocks cooperate, without forcing a sale in a downturn.
Next, give it a length. Say five years. $30,000 a year for five years is $150,000.
Why five? Because people retire into markets, not averages, and history is full of unlucky retirements: 1973, 2000, 2008. Each one punished people who had to sell stocks to pay the bills. Five years gives stocks time, and it gives the retiree room to make decisions instead of reactions.
Then choose the tool
Only now does the ladder show up. That $150,000 needs known maturity dates. Cash isn’t the answer, because it drips away with no schedule. A bond fund isn’t either, because it has no maturity date and carries interest rate risk. A ladder does the job: one rung per year, each maturing about when that year’s $30,000 comes due.
The building blocks stay boring on purpose. Treasuries. FDIC-insured CDs. TIPS, if inflation protection matters. Targeted-maturity funds. I avoid callable corporates, junk bonds, and reaching for yield like it’s 1999. A ladder isn’t a, “performance engine.” It’s an oxygen tank for when markets go underwater. I’m not recommending any particular product here.
Once a year, the next rung matures, the cash goes to checking, and life carries on. No guesswork. No selling stocks low. No, “I hope the market cooperates this year.”
What the ladder is, and isn’t
Look at what the liability says. Essential spending has a known timing, high certainty, little flexibility, and a severe consequence if the money isn’t there. Those characteristics are what point toward something with a defined maturity. Inflation sensitivity is why some retirees add TIPS.
Here’s what the ladder is not: the whole plan. It’s the, “shock absorbers,” on the plan. It doesn’t replace growth assets. It protects the ability to let them grow. That’s the practical side of the sequence of returns piece: money matched to the next five years isn’t waiting on the market’s timing.
Why five and not ten
Five is an example, not a magic number. It’s a period many folks feel comfortable with, because half a decade feels right.
Can a recovery take longer than five years? Certainly. But putting more than five years of spending into a ladder can be a significant drag on a portfolio, and many folks simply can’t afford it. Five years also gives most people enough time to adjust their spending if things aren’t improving.
Refill it, or spend it down
There are two philosophies here. The first is to spend it down. The five years are the, “on-ramp,” and afterward the retiree moves to a flexible withdrawal rule. (Remember, the 4% rule is meant to be adjusted.)
The second is to keep rolling it. In a kind year, sell some stocks and add another rung. In an ugly year, skip the refill and let the ladder shorten.
Either way, the ladder gives choice. Choice gives confidence. Confidence keeps people invested. And staying invested funds the rest of retirement.
The short version
A bond ladder is a tool, and a good one when the liability comes first. Without the liability, it’s just a pile of bonds with maturity dates.
This resource is part of the Asset Life Matching library. Start with What Is Asset Life Matching? →
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