What is a Bond Ladder? (Generate Safe Monthly Income)
Locking all your money in a 5-year bond is scary. What if you need cash next year? What if interest rates skyrocket? The “Bond Ladder” solves this. It is a strategy to get high yields without sacrificing liquidity.
The “Conveyor Belt” of Cash
Think of a Bond Ladder not as a ladder, but as a conveyor belt. You put money on it, and it keeps coming back to you on a schedule.
| Rung # | Investment | Maturity Date | Action when Done |
|---|---|---|---|
| Rung 1 | $2,000 | 1 Year (2027) | Reinvest to 5 Yr |
| Rung 2 | $2,000 | 2 Years (2028) | Wait… |
| Rung 3 | $2,000 | 3 Years (2029) | Wait… |
| Rung 4 | $2,000 | 4 Years (2030) | Wait… |
| Rung 5 | $2,000 | 5 Years (2031) | Wait… |
3 Ways to Build Your Ladder
You don’t need a fancy financial advisor. You can do this in your pajamas.
1. Treasury Direct (The Safe Route)
Log in to TreasuryDirect.gov. Buy T-Bills or Notes.
Set up maturities for 4 weeks, 8 weeks, 13 weeks, etc. (for a short-term ladder) or 1yr, 2yr, 3yr (for long-term).
Pros: Zero fees. Cons: Terrible website interface.
2. Fidelity / Schwab (The Easy Route)
Go to the “Fixed Income” section. Look for the “Bond Ladder Tool.”
You type in: “I have $10,000 and want a 5-year ladder.”
The tool automatically finds the best bonds (CDs or Treasuries) and builds it for you. Click “Buy.” Done.
3. CD Ladder (The Bank Route)
If you prefer FDIC insurance, do this with Certificates of Deposit (CDs) at your bank.
Warning: Banks often have lower rates than Treasuries. Check Article 223 for the best rates.
Pro Tip: The “ETF” Alternative
Too lazy to manage 10 different bonds?
Target Maturity ETFs
Unlike regular bond funds (which never mature), these ETFs actually close down and return your cash on a specific date. You can buy 5 different tickers (2026, 2027, 2028…) to build an instant ladder in your brokerage account.