Bond Ladders: Buy Yourself Peace Instead of Praying for Good Markets

(First of all, you have to forgive the, "mixed metaphor," of the bridge in the accompanying picture vs a ladder. I just liked that ChatGPT generated pic best.)

When someone retires, they rarely say,

“I’m worried I won’t beat inflation by 30 basis points.”

What they do say is,

“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?”

This is one of the primary strategies I use with clients who want a calm first chapter (or more) of retirement instead of a jittery one:

Buy yourself five years of known paychecks with a bond ladder.

Not for bragging rights.
Not for squeezing every drop of yield.
Just to give your future self five years where your lifestyle is funded, no matter what stocks do.

This is not the whole plan, just the the shock absorbers on the plan.

Let’s walk through what this looks like in real life.

Step 1: Determine your fixed costs

We’re not talking travel, fancy gifts, or new guitars (we can always talk guitars later).

We’re talking:

• Housing
• Groceries
• Utilities
• Insurance
• Healthcare premiums
• Gas and groceries
• Taxes (with no more withholding, taxes become, "spending," in retirement)
• The real stuff

Call it essential expenses. Fixed costs vs variable costs, or the spending that allows you to just keep living your life, and to sleep at night.

Let’s say that’s $7,000/month → $84,000/year.

Write it down. Don’t round yet. (Clients usually want more precision than needed or to round too soon. Round later.)

Step 2: Subtract any, “guaranteed income”

You may already have some, “paychecks,” built in:

• Social Security
• Pension, if you have one
• Annuity income, if you bought one
• Rental income if it’s stable (many aren’t)

Say you’ve got $55,000/year coming in no matter what.

Now the math is simple:

$84k essential – $55k guaranteed = $29k gap

Now we get to round. Call it $30,000 a year that you need your portfolio to reliably produce without forcing you to sell stocks during a downturn.

Step 3: Commit to a period of time, say, five years¹

Why five?

Because people retire into markets, not averages, and history is full of unlucky retirements:

• 1973
• 2000
• 2008

Each one of those punished people who had to sell stocks to pay the bills.

Five years gives you room.
Five years gives your stocks time.
Five years buys you the ability to make good decisions instead of emotional ones.

So we want:

$30,000 × 5 years = $150,000
allocated to safe, maturing assets

Notice I didn’t say, “cash,” or a bond fund. We want known maturity dates, not a bottomless savings account that drips away or a fund that’s exposed to interest rate risk.

Step 4: Pick the right building blocks

In Verbatim land, I keep this part boring. Why? Because the ladder isn’t where we get fancy. The ladder is where we get reliable.

What I like:

• U.S. Treasuries
• FDIC-insured CDs
• TIPS (inflation protection if you want it)
• Targeted Maturity ETFs²

What I avoid:

• Callable corporates
• Junk bonds
• Reaching for yield like it’s 1999

Your ladder is not a, “performance engine,” it’s your oxygen tank for when markets go underwater.

Step 5: Build the rungs

Each rung = one year of spending maturing when you need it.

Example:

Total purchase ≈ $150k face value.

While I do this for clients, a brokerage can literally help you click your way through this in 10 minutes.

Step 6: Use it like a paycheck (if you need it)

Once a year:

1. The next rung matures, you get cash
2. You transfer that cash into your checking account or monthly drips
3. You live your life

No guesswork.
No selling stocks low.
No, “I hope the market cooperates this year.”

That’s peace of mind, not just planning.

Step 7: Decide whether to refill

There are two philosophies here:

A) Spend it down

The five years were the, “on-ramp,” and after that, you can adjust to a flexible withdrawal rule. Remember, the 4% rule is meant to be adjusted.

B) Keep rolling it

Each year:

• If markets were kind, sell some stocks and buy another rung
• If markets were ugly, skip refilling and let the ladder shorten

Either way:

The ladder gives you choice,
Choice gives you confidence,
Confidence keeps you invested,
Staying invested funds the rest of retirement.

That’s the game.

Why this works

Because the first five years of retirement are where outcomes diverge.

A bond ladder doesn’t replace your growth assets, but it protects your ability to let them grow.

You’re buying yourself:

• The right to not panic
• The right to not sell low
• The right to sleep the first five years of retirement

What’s that worth?

Want help building yours?

At Verbatim, I:

• Do the math with you
• Build the ladder with you
• Tie it into:
  • Roth conversion timing
  • Social Security claiming strategy
  • RMD planning
  • Tax-efficient withdrawal order

Flat fee.
No percentages.
No commissions.
No games.

Just retirement you can live with.

¹ I chose a five year ladder as an example because it's a period that many folks fell comfortable with (half a decade, "feels," good). Certainly, as seen HERE, it can take more than five years to recover from a correction, but it's often the case that placing more than five years of retirement savings into a bond ladder can be a significant drag on a portfolio, and many folks simply can't afford it. Also, a five year window gives most people enough time to make adjustments to their spending if it looks like things aren't going to improve.

² I'll often use targeted maturity ETFs like Bulletshares, issued by Invesco, or iBonds, from BlackRock, but more companies offer these tools as well, like State Street. I am not recommending any particular product in this blog post.