Step by Step: How to Create a Simple Bond Ladder

A beginner-friendly guide to dependable income in retirement

If you’re looking for steady, predictable income in retirement without riding the ups and downs of the stock market, a bond ladder might be the perfect solution. It’s easy to set up, surprisingly flexible, and can help protect your nest egg from both inflation and interest rate swings.

In this post, you’ll learn exactly what a bond ladder is, how it works, and—step by step—how to build your own using safe, high-quality bonds that match your income needs and time horizon.

Let’s get started.

What Is a Bond Ladder?

A bond ladder is a series of individual bonds (or bond-like investments) that mature at regular intervals—usually spaced out evenly over several years. Think of the rungs of a ladder: each rung is a bond that matures at a different time.

For example, you might build a 5-year bond ladder with bonds maturing in 1, 2, 3, 4, and 5 years.

Here’s why this matters:

You get regular access to your money as each bond matures
You avoid locking in all your money at today’s interest rates
You spread out your risk if rates rise or fall in the future
You create a predictable income stream from the interest payments

Bond ladders are simple, smart, and ideal for retirees who want to protect their savings while generating steady income.

Step-by-Step Guide to Creating a Bond Ladder

✅ Step 1: Decide How Long Your Ladder Will Be

First, determine your time horizon. How many years do you want the ladder to span? A typical ladder might be 3, 5, or even 10 years long, depending on your retirement income plan.

Here’s a simple way to think about it:

Short-term ladder (3–5 years): More liquid, lower interest rate risk
Longer-term ladder (5–10+ years): Higher yield potential, more exposure to rate changes

Let’s assume you want a 5-year ladder for this example.

✅ Step 2: Choose the Number of Rungs (Intervals)

Next, choose how often you want bonds to mature. Many retirees go with annual intervals, but you can also build ladders with maturities every 6 months or even quarterly.

For a 5-year ladder with annual intervals, you’ll need five bonds:

Bond 1 matures in 1 year
Bond 2 in 2 years
Bond 3 in 3 years
Bond 4 in 4 years
Bond 5 in 5 years

✅ Step 3: Divide Your Investment

Let’s say you have $50,000 to invest. You’d simply divide the total into five equal parts—$10,000 for each rung.

Then you’d purchase:

$10,000 of a 1-year bond
$10,000 of a 2-year bond
$10,000 of a 3-year bond
$10,000 of a 4-year bond
$10,000 of a 5-year bond

Now, you’re on your way to a smooth, structured income stream.

✅ Step 4: Choose the Right Types of Bonds

Here’s where your risk tolerance and income needs come into play. You want safe, reliable bonds—especially in retirement.

Some good choices for a beginner-friendly ladder include:

U.S. Treasury Bonds or Notes – Backed by the federal government. Virtually risk-free.
FDIC-Insured CDs – Very safe; great for shorter rungs in your ladder.
Investment-Grade Corporate Bonds – Higher yield, but only choose strong companies with high credit ratings.
Municipal Bonds (for taxable accounts) – If you’re in a higher tax bracket, “munis” offer tax-free income.

Tip: Avoid high-yield or “junk” bonds in a ladder. The higher income doesn’t justify the extra risk—especially if you need that money in a year or two.

✅ Step 5: Build the Ladder

You can buy individual bonds through:

Your brokerage account (Fidelity, Schwab, Vanguard, etc.)
TreasuryDirect.gov for Treasury bonds
Bank CDs through your bank or brokerage

If you’re not comfortable buying individual bonds, you can use bond ETFs or CEFs with maturity dates.

For example:

iShares iBonds ETFs (like IBTD, IBDQ, IBDV) – These ETFs hold bonds that mature in a specific year, and then the fund closes. They’re a great way to ladder without choosing individual bonds.
Invesco BulletShares – Similar concept, with funds maturing in a target year.

You simply choose 5 different funds, each with a maturity year from now through year five.

✅ Step 6: Reinvest as Bonds Mature

When the 1-year bond matures, you reinvest the proceeds into a new 5-year bond. Each year, you do the same:

The ladder keeps rolling forward
You always have one bond maturing soon (liquidity)
You earn higher yields as rates rise (because you’re reinvesting at current rates)

It’s a simple, repeatable process—and one that can serve you well for decades.

Example: Building a 5-Year Bond Ladder with $100,000

Here’s a real-world scenario:

You’re 68 years old and want reliable income with minimal risk. You decide to build a 5-year ladder with:

$20,000 in each rung
A mix of Treasury notes and FDIC-insured CDs
Bonds that pay semiannual interest for income

Your broker helps you select:

1-year Treasury note
2-year Treasury note
3-year CD (FDIC-insured)
4-year investment-grade corporate bond
5-year Treasury note

Each year, you roll over the maturing bond into a new 5-year security. The interest payments help cover your monthly expenses, and the principal stays relatively protected.

You’ve now created a personal income machine.

Bonus Tips

Use a spreadsheet to track maturities, interest payments, and reinvestment dates
Stay diversified across issuers and sectors if using corporate bonds
Work with a financial advisor if you’re unsure about picking bonds yourself
Keep an emergency fund separate from your ladder for unexpected costs

Final Thoughts: Steady, Reliable Income You Can Count On

A bond ladder isn’t flashy—but that’s the point. It’s steady, simple, and tailored to your timeline. For retirees, it can offer just what you need: predictability, safety, and income.

It’s one of the best ways to take control of your financial future without taking on unnecessary risk.

And once you set it up, it practically runs itself.

Want a deeper dive into how to make bonds work for your retirement?
Check out my book: Retirement Income Machine: How to Invest in Bonds for Steady Income, available now at Amazon in both paperback and eBook formats. It’s your complete guide to safe, smart income strategies using bonds.

Disclaimer: This article is for informational purposes only and is not intended as investment advice. All investments carry risks. Please consult a licensed financial advisor before making any investment decisions. Past performance is not a guarantee of future results.