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What it calculates: Amount per Rung, Total Annual Income, Income per Rung, Rungs.
Updated 5 June 2026 · Transparent assumptions
$100,000 split into five $20,000 maturities, one coming due each year
A ladder divides the money across bonds maturing in consecutive years: $20,000 each at one through five years. At a 4% average yield the ladder produces $4,000 a year, $800 from each rung. Every year one rung matures and is reinvested at the far end, keeping the structure intact.
The result is a portfolio with a stable average maturity and a predictable annual cash event. It is the simplest fixed-income structure that solves for two things at once — regular liquidity and reinvestment spread across time — without requiring any view on where rates are heading.
Putting everything into one maturity bets the whole portfolio on one rate
$100,000 into a single five-year bond locks in today’s rate on all of it and returns everything at once, to be reinvested at whatever rate exists then. If that date happens to fall at a low point, the entire portfolio re-prices at the bottom.
A ladder never reinvests more than a fifth at any one rate. Rates rising means each maturing rung goes back in higher; rates falling means only one rung is affected each year. It does not maximise return — it removes the timing risk, which for money that must last is usually worth more.
Which is why it is less rate-sensitive than it looks
With rungs at one through five years, the average maturity is three years and the duration shorter still. A five-year ladder therefore carries materially less interest-rate risk than a five-year bond of the same size, while yielding somewhere between the short and long rates.
That is the trade a ladder makes explicit: a bullet portfolio at the long end yields more and swings more, a very short ladder is stable and yields less. Choosing the number of rungs and the spacing is choosing where on that line to sit.
One yield across every rung, and no credit differences
A single average yield is applied to every rung, which is a simplification: in a normal upward-sloping curve the long rungs yield more than the short ones, and in an inverted curve the reverse. The average is a reasonable summary and will not match any individual bond.
Credit quality, call provisions and the cost of buying small lots of individual bonds are all outside the model. For modest amounts, a series of target-maturity bond funds or CDs often builds the same structure more cheaply than buying individual issues.
Sources & References
Figures on this page are checked against primary, authoritative sources. Links open in a new tab.
Bond YieldYield to maturity, current yield, and annual coupon income from price, face value, and coupon rate.
InvestmentProject lump-sum and regular-contribution growth, plan a goal, and solve future vs present value, with fees and inflation.
Regular InvestmentProject how regular monthly contributions grow over time — SIP-style investing, dollar-cost averaging, inflation-adjusted value, and long-term goals.
Retirement WithdrawalEstimate how long savings last under regular withdrawals (SWP) — drawdown, safe withdrawal rate, inflation, and a year-by-year schedule.
Returns are assumptions, not guarantees. Actual results may vary because of market performance, taxes, fees, inflation, and timing. This is an educational projection, not investment advice.
Published the calculator with its formula, worked example, assumptions, limitations and a bespoke guide, and added an automated formula test suite covering it.
Tested that the capital divides evenly across the rungs and that annual income and per-rung income reconcile to the total at the average yield.
Tested that changing the number of rungs redistributes the same capital without changing total annual income.
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