Glossary
What is a bond ladder?
A bond ladder is a set of bonds bought with staggered maturity dates, so a portion matures each year. Held to maturity, each bond returns its face value on a known date regardless of what interest rates did in between — which makes it useful for funding income you need on a schedule.
The appeal in retirement is certainty of timing. A bond fund's price moves with rates and has no maturity date; an individual bond held to maturity pays a known amount on a known day.
That maps neatly onto a segmented income plan: the near-term segments need money to be there on specific dates, which is exactly what a ladder provides.
The trade-offs are real. Ladders need enough capital to diversify credit risk, they take work to maintain, and Treasury ladders give up yield relative to corporates in exchange for removing default risk entirely.
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