Bond Laddering: Staggered Maturities and the Income Glide

A bond ladder is a portfolio of bonds with staggered maturities — one maturing every year or two instead of everything at once — so that a slice of your money comes due on a regular schedule, ready to be reinvested at whatever rates exist then. It is the classic income strategy for retirees and near-retirees, and in 2026, with the 10-year Treasury around 3.5-4.5% and the curve offering a little extra for longer rungs, ladders give you both income and control: you never have to sell a bond early, and you are never forced to reinvest everything in one year's rates.

The ladder structure

• Divide your bond money into equal rungs — five rungs of $20,000 on $100,000, or ten rungs for a 10-year ladder
• Buy each rung at a different maturity: year 1, year 2, year 3, and so on
• Each year one rung matures and returns its face value
• Reinvest that money in a new bond at the longest rung, rolling the ladder forward
• The average maturity of the ladder is half the full term — moderate duration, moderate rate sensitivity

Reinvestment math: why ladders beat one big bond

The ladder's real advantage is that only a fraction of your money faces reinvestment at any given time. With a single 5-year bond, your entire principal is redeployed once, at whatever rates happen to exist in year five — the reinvestment risk is all-or-nothing. With a five-rung ladder, only 20% of the portfolio reinvests each year, so any single year's rate shock touches a fifth of your money, and over time you earn close to the average yield of the curve.

                Rungs: 1-yr at 4.0%, 2-yr at 4.2%, 3-yr at 4.4%, 4-yr at 4.6%, 5-yr at 4.8%
Year 1 income: 800 + 840 + 880 + 920 + 960 = $4,400 (4.4% average)
Year 1: the 4.0% rung matures — reinvest $20,000 at the 5-year rate
If rates have risen to 5.2%: new rung pays 5.2% — the ladder just got richer
If rates fell to 3.6%: only 20% of capital suffers — the rest is locked in
Average rate earned over time: the curve's average, not a single year's coin flip
              

The yield curve shapes your ladder

The curve's shape decides how much the ladder rewards patience. A normal upward curve (short rates below long) pays you for extending — longer rungs earn more. A flat curve pays the same for every maturity, so the ladder's maturity choice stops mattering for yield and only duration risk matters. An inverted curve (short above long) is the rare case where staying short wins, since the short end pays more while the long end carries the biggest price risk if rates move.

Risks a ladder still carries

Ladders manage interest-rate risk and reinvestment risk, not the other threats. Inflation is the big one: at 3% inflation, a ladder yielding 4.4% delivers about 1.4% real — the real return article shows why the income glide should be measured in purchasing power, not dollars. Credit risk remains if you use corporate bonds; Treasuries and FDIC-insured CDs sidestep it, at the cost of yield. And if you must sell a rung early, you take the price at the time — which is why the first rule of a ladder is to fund it only with money you will not need until its rungs mature.

For retirement income, a ladder pairs with equity holdings the way a floor pairs with a growth engine: the ladder covers the first 5-10 years of withdrawals with known cash flows, while the equity portfolio compounds untouched. The retirement calculator can show the income stream the ladder needs to replace, and the compound interest calculator shows what the rolled-forward rungs add over time. The bonds and yields article covers the yield math each rung relies on.

Building your first ladder