Bond Ladder Income Planner

What Is a Bond Ladder?

A bond ladder is a fixed-income strategy where you buy bonds with staggered maturity dates.
For example, if you have $100,000 and want a 5-rung ladder, you invest $20,000 each in bonds maturing in years 1, 2, 3, 4, and 5.

Each year, one bond matures and you receive your principal back.
You then reinvest that principal into a new bond at the long end of the ladder.

Why Use a Bond Ladder?

Reduces interest rate risk: you are never fully locked into one rate environment.
Provides predictable cash flow: coupons arrive regularly throughout the year.
Great for retirement income: you can match bond maturities to known future expenses.

The Math

Investment per rung = total investment / number of rungs
Annual coupon per rung = investment per rung × yield
Total annual coupon income = annual coupon × number of rungs (while all bonds are held)

When a bond matures, you receive the principal back.
If reinvested, the ladder continues at potentially a new yield.
If taken as income, the ladder shrinks by one rung each year.

Worked example

$100,000 across 5 rungs at 4.5% puts $20,000 in each rung, and each rung pays $900 a year.
While all five are held that is $4,500 a year, or $375 a month.
Spend each bond as it matures and the coupons fall to $3,600, then $2,700, $1,800 and $900, so the ladder pays $13,500 of interest across its life on top of returning the $100,000.
Reinvest each maturity at the long end instead and the $4,500 keeps coming, at whatever five-year yields are by then.

The weak spot is the single “average yield” box. A real ladder earns less on its short rungs than its long ones in a normal market, so once the short rungs mature and are spent, the ones left earn a little more than the average says.

Tax Note

Treasury bond interest is exempt from state and local tax but taxable at the federal level.
Municipal bond interest may be fully tax-free depending on your state and the bond issuer.
Always consult a tax advisor for your specific situation.