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    Annuity Ladder

    What is an Annuity Ladder?

    An annuity ladder is an investment technique in which an investor purchases multiple annuities with different maturity dates . In this annuity ladder guide I’ll cover:

    • What an annuity ladder is
    • Why you should consider it as part of an overall retirement plan
    • how to implement them
    • 10 Year Annuity Ladder Example Step by Step

    Why You Should Consider An Annuity Ladder

    Interest rates in the United States remain near all-time lows. CD rates are the worst they’ve ever been (not sure if this is a fact but they are the worst I’ve seen) high-grade corporate bonds rates are low. 10-year U.S. Treasuries are up .74% since January 4th of this year but that puts them at a “whopping” 1.67%. 

    Many of our prospective clients find us online when they are shopping for the best CD or annuity rates. I hear a lot of people say they have been waiting for rates to go up. I agree interest rates are low, annuity rates included, but there is a cost of waiting. An annuity ladder can be a good solution for you if you are looking for a safe retirement savings vehicle that provides protection for your principal.


    An annuity ladder provides multiple benefits, the primary is it helps you to minimize interest rate risk by purchasing multiple annuities with durations one year apart from each other. I have been using a 5-year annuity ladder which means each year 1/5th of the investment matures and becomes liquid.


    A couple of benefits of the liquidity provided by an annuity ladder are:

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    A. You can reinvest in another annuity at the potentially higher new money rates

    B. Option to Invest in Equities if there is a drop in the market

    C. You will eventually have five 5-year annuities with one coming due each year (after the initial 2,3,4,5, 6-year annuities mature. Longer term annuities typically pay a higher rate of return so this is a good thing.

    How to Create an Annuity Ladder

    You create an annuity ladder by purchasing multiple annuities with a contract term one year apart. Annuities can be laddered for as long as you’d like – I typically create a 5-year annuity.  When deciding how long to make an annuity ladder you should consider that it will determine the term of the final annuity and each annuity after it.


    The table shows a $500,000 5-year annuity ladder using current annuity rates at the time this was written. The First row indicates the term of the annuity, the second row is the 

    Table 1: 5 year annuity ladder example


    Laddering refers to the process of strategically purchasing a series of investments of different maturities to produce the desired outcome; most often used in relation to retirement income planning.  While it’s always in your best interest to work with a financial advisor when planning for retirement, this guide will walk you through ways you can implement annuity laddering into your retirement portfolio on your own.

    Bond Laddering

    According to Investopedia, “a bond ladder is a multi-maturity investment strategy that diversifies bond holdings within a portfolio. By staggering maturity dates, you won’t be locked into one bond for a long duration. Bond ladders allow investors to adjust cash flows according to their financial situation.”

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