July 9, 2025 • 11 mins
“Hey Mike, I want guaranteed income for the first few years of retirement, not for life. Is a bond ladder the best strategy?”Discover different ways you would set up your retirement income strategy for the first five years of your retirement without depending on lifetime income streams from annuities.
Text your questions to 913-363-1234.
Request Your Wealth Analysis by going to www.retireontime.com
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Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Mike (00:05):
Welcome to How to Retire on Time, a show that answers
your retirement questions. Myname is Mike Decker along with
David Franson over here, andwe're gonna be taking your
questions. Just text them rightnow to (913) 363-1234, and we'll
take them one at a time. Again,that number, (913) 363-1234.
Let's begin.
David (00:22):
Hey, Mike. I want guaranteed income for the first
few years of retirement, not forlife. Is a bond ladder the best
strategy?
Mike (00:30):
When you think of laddered investments, David, what do you
think of? There's the bondladder, but can you think of any
other ones?
David (00:35):
Yeah. So a laddered investment. So you're you're
saying like there's stages, Iguess. So are you like
withdrawing in in certain in asequence? Is that what that
means?
Mike (00:43):
So I think that's what most people would assume. Those
that that don't know, a bondladder is basically you buy a
bond that matures in one year,then in that year, then you
liquidate it, and you spend it.But when you retire, you also
bought a bond that matures inyear one, year two, year three,
year four, year five. They'reall at fixed rates, and so
basically, you're just spendingwhen as it comes due. And you
(01:04):
can ladder it out for threeyears, five years, ten years.
I mean, really as much as youwant.
David (01:08):
And when did this strategy first come about? Is
this an old strategy?
Mike (01:11):
I don't know. Twenties or thirties or something. I mean,
it's the idea of laddering outincome Mhmm. Has been around for
a very long time. The threeladders that I'm most aware of
is you've got the bond ladder.
So you're buying treasuries orbonds and laddering them out on
the maturity dates. You could doa CD ladder, but CDs aren't
really offered past five years.Generally speaking, I know
there's always exceptions, butgenerally speaking, you'll
(01:34):
ladder out to five years or so.Fixed annuities, if you're past
the age of 59, you could buybasically CD from an insurance
company. So it's a fixedinterest rate, a fixed growth
rate for a preselected period oftime, and they can be laddered
out to about ten years or so.
So these are different ways thatyou can structure your income,
(01:55):
and there's a benefit to that.Structured income means it
doesn't matter if the markets goup, down, or stay flat. You have
predictability for a certainperiod of time. That's the idea
behind it.
David (02:05):
So it's like, here's my 200,000 insurance company now.
Pay it back to me over fiveyears at this rate.
Mike (02:10):
Or bank or treasury. Okay. You've laddered it out. The
problem with bond ladders,before we talk about other ways
to do this, is and any ladder,if that matter, is inflation. So
these are all what I would callcash or cash equivalent
accounts.
And if we experiencehyperinflation, it doesn't
matter. You have your fixedrate. So if we have
hyperinflation, and let's say,cumulatively over two or three
(02:33):
years, there's a 30%inflationary, like we just
recently experienced, your bondletter's worth 30% less. Mhmm.
So you need to be proceedingcarefully with this.
The reason why I say this isI've met enough very high net
worth individuals who say, well,I just wanted security. I got
out of the market, and I justdid a bond ladder for the next
(02:54):
I've I've even seen twenty tothirty years. And I went, how
are you handling inflation risk?I said, what do you mean? I
don't have market risk, but howare you handling inflation risk?
And that's typically wherethey'll stumble a little bit,
and they say, I didn't reallythink about that, or, oh, well,
I'll just and then they kind oftry to talk themselves out of
the risk instead of saying,yeah. That's a good point. How
(03:15):
do we solve that? There areother ways to do this. So this
person, if the question's right,they don't want lifetime income.
Correct?
David (03:21):
Yeah. They want guaranteed income for the first
few years of retirement.
Mike (03:25):
K. So they must have read my book, and what they want is
structured income with a smallreservoir. So just to translate
what that means is structuredincome, they want no ambiguity
on the first couple of years sothat when they wanna retire,
they know they're gonna walkright onto the first year is
principal protected income. Thesecond year is principal
protected income. The thirdyear, it's a nice transition
(03:47):
into retirement, but there'sstill assets in the market.
There's still assets and growth.You're still able to offset
inflation. You're not asconcerned about market risk and
so on. It's a very balancedapproach. The way that I have
seen more people resonate withthat usually have no idea this
option even exists is calledperiod certain annuitization.
(04:07):
Okay. K? So let me explain whatthat is. So most people seem to
believe that when you buy anannuity, you turn on lifetime
income. That's not actually howit works.
Lifetime income is, from what Iunderstand, a relatively new
concept that the insurancecompanies have offered. And if
you think I'm pitching lifetimeincome right now, sorry to
inform you, I actually wrote theentire book, how to retire on
(04:29):
time, to protest or try to talkpeople out of doing that. K? I
don't think it's financially inpeople's best interest,
personally speaking. Now I haveclients that ask for it.
That's fine. I understand theemotional side of the comfort of
lifetime income, but peopletypically associate annuities
with a lifetime contract withlifetime income. Annuities have
(04:51):
been around since, I believe,somewhere between the seventeen
hundreds and eighteen hundreds.
David (04:56):
Really?
Mike (04:57):
They've been around for a very, very long time, but the
original version of an annuityis under the term annuitization,
which is where you receivepayments for a certain period of
time. That's the old schooldefinition. Why do I bring this
up? People typically areconcerned about lifetime income
because they want control overtheir money, but they want some
(05:19):
structured payments for someperiods of time. So what you
could do and read the contracts,do your due diligence, but you
could buy certain annuities thatoffer the period certain
annuitization option.
And so let's say, David, you'veyou've got a couple million
dollars.
David (05:37):
Oh, I like where this is going already.
Mike (05:39):
I love this. Yeah. Yeah. Congratulations. Merry But
you're working, and you stillenjoy working.
You don't know exactly when youwanna work. That's a difficult
situation when it comes to howdo you line up your your
treasury letter or your bondletter or your CD letter,
because you don't really knowwhat's gonna work. So what you
could do is you could put someassets into an annuity knowing
(06:01):
that at any given moment, youcould turn on annuitization for
a period of certain time, and itcould be five years, seven
years, or ten years. K? I likethe five year option because I
like more flexibility in theportfolio personally, but
everyone's gonna be different.
But the idea is the day you havethat last day, you're like, I'm
done with this. I am sick ofthese people. I used to love
them, but this things havereally changed. The culture has
(06:23):
shifted, and I don't recognizethe company anymore. I don't
need to do this anymore.
I'm ready. What if that momenthappens when the markets crash?
What would happen? This is wherebuying an annuity within five
years, two to five years of whatyou wanna retire. You don't buy
them ten years or twenty yearsbefore you wanna retire.
You buy it when you're nearretirement, and that moment that
(06:43):
you're ready to turn on income,you turn on the income. You
gotta know how much income youneed, but you'll take either
half the majority or all of theincome you need in retirement,
and you turned on annuitizationfor about five years. So in that
moment, because it's dynamic,you can turn it on whenever you
want. The first five years ofretirement are completely
guaranteed, like a CD ladderthat can start whenever you say
(07:07):
it starts. So the asset or theannuity would have growth
potential.
Markets go up. You're makingmoney. You're not gonna get rich
off of this, but hopefully itgrows better than it would a
bond or CD ladder would. Has nodownside risk, and it turns on
the day you wanna retirewhenever that day is. It's a way
that people can transition toretirement while still keeping
(07:28):
the majority of their assets inthe market for growth, for
future flexibility, to offsetinflation, and so on.
Is this right for everyone? No.Sometimes the treasury ladder is
gonna make sense. Sometimes theCD ladder is gonna make sense.
Sometimes buying a smallerannuity, knowing that it's gonna
(07:48):
cover the first five years ofsome or all of the income,
depending on what your planlooks like, could be a right
option for it depends on whatyou want.
So I don't want this to soundlike a product pitch. I hope
everyone that's listening andunderstands, I am defining a
tool as it is. You would neveruse a hammer to cut wood. No.
But you would use a hammer ifyou need to put some nails into
(08:10):
a wall or whatever that is.
You would use a saw to cut wood.I'm not a contractor, but you
get the idea. Right. This is atool being defined for a very
specific purpose if that makessense. But the idea is you need
to live your best life.
Sometimes that means you keepworking. But when that day
(08:30):
comes, are you going to beprevented from retiring on time?
Even though you could haveafforded it, but maybe the
markets turned or somethinghappened, are you prepared for
that that dynamic evolution ofthe markets of your lifestyle
and so on? I found most peopleseem to have a plan for when the
markets go up, but there's verylittle downside protection. So
(08:53):
there's not really much of aplan for when the markets go
down.
They might say, well, but we'vegot these bond funds over here.
Bond funds can lose money. Ifthe markets crash, Iran has that
scare and things go the way wedon't want them to go, and they
clog up in oil, inflation'sgonna get out of control. And if
inflation gets out of control,even when the markets are
crashing, then they're gonnajack up interest rates. And if
(09:13):
they jack up interest rates,then the bond funds are gonna
lose money.
If bond funds lose money and theequities, your stocks lose
money. Is that really a a soundretirement plan? No. It's not.
Yeah.
So the idea that, oh, we havethese bond funds. They're less
risky. That's not a plan, in myopinion. That is how to sell
someone a stock and bond fundportfolio to either charge them
(09:33):
a percentage of fees to keepthem all in something they can
charge you on, or they can getback in commissions because they
gave you bond funds instead ofbonds. I mean, just just
understand the nuance of thesesituations.
Is it possible that the day youwanna retire, you can walk in a
retirement and take income froma principal protected source
regardless of what markets aredoing? Most people that come in
(09:55):
the office, they can't say theyknow how to do that, and it's
explained away by their currentadviser. So I really wanna push
hard and say, yes, there's morethan one option. The bond or
treasury ladder or CD ladder isan option if you know exactly
when you wanna retire. And ifyou don't, you wanna keep things
open, it may not be appropriatefor you.
It just depends. But this is thekind of conversation I think
(10:16):
people need to have individuallywith someone that understands
how to do comprehensive andholistic retirement planning.
That's all the time we've gotfor the show today. If you
enjoyed the show, considersubscribing to it wherever you
get your podcast. Just searchfor how to retire on time.
Discover if your portfolio isbuilt to weather flat market
cycles or if you're missing taxminimization opportunities that
(10:38):
you may not even know exist.Explore strategies that may be
able to help you lower youroverall risk while potentially
increasing your overall growthand lifestyle flexibility. This
is not your ordinary financialanalysis. Learn more about Your
Wealth Analysis and what itcould do for you regardless of
your age, asset, or targetretirement date. Go to
www.yourwealthanalysis.com todayto learn more and get started.
Welcome to How to Retire on Time, a show that answers
your retirement questions. Myname is Mike Decker along with
David Franson over here, andwe're gonna be taking your
questions. Just text them rightnow to (913) 363-1234, and we'll
take them one at a time. Again,that number, (913) 363-1234.
Let's begin.
David (00:22):
Hey, Mike. I want guaranteed income for the first
few years of retirement, not forlife. Is a bond ladder the best
strategy?
Mike (00:30):
When you think of laddered investments, David, what do you
think of? There's the bondladder, but can you think of any
other ones?
David (00:35):
Yeah. So a laddered investment. So you're you're
saying like there's stages, Iguess. So are you like
withdrawing in in certain in asequence? Is that what that
means?
Mike (00:43):
So I think that's what most people would assume. Those
that that don't know, a bondladder is basically you buy a
bond that matures in one year,then in that year, then you
liquidate it, and you spend it.But when you retire, you also
bought a bond that matures inyear one, year two, year three,
year four, year five. They'reall at fixed rates, and so
basically, you're just spendingwhen as it comes due. And you
(01:04):
can ladder it out for threeyears, five years, ten years.
I mean, really as much as youwant.
David (01:08):
And when did this strategy first come about? Is
this an old strategy?
Mike (01:11):
I don't know. Twenties or thirties or something. I mean,
it's the idea of laddering outincome Mhmm. Has been around for
a very long time. The threeladders that I'm most aware of
is you've got the bond ladder.
So you're buying treasuries orbonds and laddering them out on
the maturity dates. You could doa CD ladder, but CDs aren't
really offered past five years.Generally speaking, I know
there's always exceptions, butgenerally speaking, you'll
(01:34):
ladder out to five years or so.Fixed annuities, if you're past
the age of 59, you could buybasically CD from an insurance
company. So it's a fixedinterest rate, a fixed growth
rate for a preselected period oftime, and they can be laddered
out to about ten years or so.
So these are different ways thatyou can structure your income,
(01:55):
and there's a benefit to that.Structured income means it
doesn't matter if the markets goup, down, or stay flat. You have
predictability for a certainperiod of time. That's the idea
behind it.
David (02:05):
So it's like, here's my 200,000 insurance company now.
Pay it back to me over fiveyears at this rate.
Mike (02:10):
Or bank or treasury. Okay. You've laddered it out. The
problem with bond ladders,before we talk about other ways
to do this, is and any ladder,if that matter, is inflation. So
these are all what I would callcash or cash equivalent
accounts.
And if we experiencehyperinflation, it doesn't
matter. You have your fixedrate. So if we have
hyperinflation, and let's say,cumulatively over two or three
(02:33):
years, there's a 30%inflationary, like we just
recently experienced, your bondletter's worth 30% less. Mhmm.
So you need to be proceedingcarefully with this.
The reason why I say this isI've met enough very high net
worth individuals who say, well,I just wanted security. I got
out of the market, and I justdid a bond ladder for the next
(02:54):
I've I've even seen twenty tothirty years. And I went, how
are you handling inflation risk?I said, what do you mean? I
don't have market risk, but howare you handling inflation risk?
And that's typically wherethey'll stumble a little bit,
and they say, I didn't reallythink about that, or, oh, well,
I'll just and then they kind oftry to talk themselves out of
the risk instead of saying,yeah. That's a good point. How
(03:15):
do we solve that? There areother ways to do this. So this
person, if the question's right,they don't want lifetime income.
Correct?
David (03:21):
Yeah. They want guaranteed income for the first
few years of retirement.
Mike (03:25):
K. So they must have read my book, and what they want is
structured income with a smallreservoir. So just to translate
what that means is structuredincome, they want no ambiguity
on the first couple of years sothat when they wanna retire,
they know they're gonna walkright onto the first year is
principal protected income. Thesecond year is principal
protected income. The thirdyear, it's a nice transition
(03:47):
into retirement, but there'sstill assets in the market.
There's still assets and growth.You're still able to offset
inflation. You're not asconcerned about market risk and
so on. It's a very balancedapproach. The way that I have
seen more people resonate withthat usually have no idea this
option even exists is calledperiod certain annuitization.
(04:07):
Okay. K? So let me explain whatthat is. So most people seem to
believe that when you buy anannuity, you turn on lifetime
income. That's not actually howit works.
Lifetime income is, from what Iunderstand, a relatively new
concept that the insurancecompanies have offered. And if
you think I'm pitching lifetimeincome right now, sorry to
inform you, I actually wrote theentire book, how to retire on
(04:29):
time, to protest or try to talkpeople out of doing that. K? I
don't think it's financially inpeople's best interest,
personally speaking. Now I haveclients that ask for it.
That's fine. I understand theemotional side of the comfort of
lifetime income, but peopletypically associate annuities
with a lifetime contract withlifetime income. Annuities have
(04:51):
been around since, I believe,somewhere between the seventeen
hundreds and eighteen hundreds.
David (04:56):
Really?
Mike (04:57):
They've been around for a very, very long time, but the
original version of an annuityis under the term annuitization,
which is where you receivepayments for a certain period of
time. That's the old schooldefinition. Why do I bring this
up? People typically areconcerned about lifetime income
because they want control overtheir money, but they want some
(05:19):
structured payments for someperiods of time. So what you
could do and read the contracts,do your due diligence, but you
could buy certain annuities thatoffer the period certain
annuitization option.
And so let's say, David, you'veyou've got a couple million
dollars.
David (05:37):
Oh, I like where this is going already.
Mike (05:39):
I love this. Yeah. Yeah. Congratulations. Merry But
you're working, and you stillenjoy working.
You don't know exactly when youwanna work. That's a difficult
situation when it comes to howdo you line up your your
treasury letter or your bondletter or your CD letter,
because you don't really knowwhat's gonna work. So what you
could do is you could put someassets into an annuity knowing
(06:01):
that at any given moment, youcould turn on annuitization for
a period of certain time, and itcould be five years, seven
years, or ten years. K? I likethe five year option because I
like more flexibility in theportfolio personally, but
everyone's gonna be different.
But the idea is the day you havethat last day, you're like, I'm
done with this. I am sick ofthese people. I used to love
them, but this things havereally changed. The culture has
(06:23):
shifted, and I don't recognizethe company anymore. I don't
need to do this anymore.
I'm ready. What if that momenthappens when the markets crash?
What would happen? This is wherebuying an annuity within five
years, two to five years of whatyou wanna retire. You don't buy
them ten years or twenty yearsbefore you wanna retire.
You buy it when you're nearretirement, and that moment that
(06:43):
you're ready to turn on income,you turn on the income. You
gotta know how much income youneed, but you'll take either
half the majority or all of theincome you need in retirement,
and you turned on annuitizationfor about five years. So in that
moment, because it's dynamic,you can turn it on whenever you
want. The first five years ofretirement are completely
guaranteed, like a CD ladderthat can start whenever you say
(07:07):
it starts. So the asset or theannuity would have growth
potential.
Markets go up. You're makingmoney. You're not gonna get rich
off of this, but hopefully itgrows better than it would a
bond or CD ladder would. Has nodownside risk, and it turns on
the day you wanna retirewhenever that day is. It's a way
that people can transition toretirement while still keeping
(07:28):
the majority of their assets inthe market for growth, for
future flexibility, to offsetinflation, and so on.
Is this right for everyone? No.Sometimes the treasury ladder is
gonna make sense. Sometimes theCD ladder is gonna make sense.
Sometimes buying a smallerannuity, knowing that it's gonna
(07:48):
cover the first five years ofsome or all of the income,
depending on what your planlooks like, could be a right
option for it depends on whatyou want.
So I don't want this to soundlike a product pitch. I hope
everyone that's listening andunderstands, I am defining a
tool as it is. You would neveruse a hammer to cut wood. No.
But you would use a hammer ifyou need to put some nails into
(08:10):
a wall or whatever that is.
You would use a saw to cut wood.I'm not a contractor, but you
get the idea. Right. This is atool being defined for a very
specific purpose if that makessense. But the idea is you need
to live your best life.
Sometimes that means you keepworking. But when that day
(08:30):
comes, are you going to beprevented from retiring on time?
Even though you could haveafforded it, but maybe the
markets turned or somethinghappened, are you prepared for
that that dynamic evolution ofthe markets of your lifestyle
and so on? I found most peopleseem to have a plan for when the
markets go up, but there's verylittle downside protection. So
(08:53):
there's not really much of aplan for when the markets go
down.
They might say, well, but we'vegot these bond funds over here.
Bond funds can lose money. Ifthe markets crash, Iran has that
scare and things go the way wedon't want them to go, and they
clog up in oil, inflation'sgonna get out of control. And if
inflation gets out of control,even when the markets are
crashing, then they're gonnajack up interest rates. And if
(09:13):
they jack up interest rates,then the bond funds are gonna
lose money.
If bond funds lose money and theequities, your stocks lose
money. Is that really a a soundretirement plan? No. It's not.
Yeah.
So the idea that, oh, we havethese bond funds. They're less
risky. That's not a plan, in myopinion. That is how to sell
someone a stock and bond fundportfolio to either charge them
(09:33):
a percentage of fees to keepthem all in something they can
charge you on, or they can getback in commissions because they
gave you bond funds instead ofbonds. I mean, just just
understand the nuance of thesesituations.
Is it possible that the day youwanna retire, you can walk in a
retirement and take income froma principal protected source
regardless of what markets aredoing? Most people that come in
(09:55):
the office, they can't say theyknow how to do that, and it's
explained away by their currentadviser. So I really wanna push
hard and say, yes, there's morethan one option. The bond or
treasury ladder or CD ladder isan option if you know exactly
when you wanna retire. And ifyou don't, you wanna keep things
open, it may not be appropriatefor you.
It just depends. But this is thekind of conversation I think
(10:16):
people need to have individuallywith someone that understands
how to do comprehensive andholistic retirement planning.
That's all the time we've gotfor the show today. If you
enjoyed the show, considersubscribing to it wherever you
get your podcast. Just searchfor how to retire on time.
Discover if your portfolio isbuilt to weather flat market
cycles or if you're missing taxminimization opportunities that
(10:38):
you may not even know exist.Explore strategies that may be
able to help you lower youroverall risk while potentially
increasing your overall growthand lifestyle flexibility. This
is not your ordinary financialanalysis. Learn more about Your
Wealth Analysis and what itcould do for you regardless of
your age, asset, or targetretirement date. Go to
www.yourwealthanalysis.com todayto learn more and get started.
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