Retirement plans are intended to be confusing by nature. The person or company managing your retirement fund doesn’t necessarily want you to have any access to your money.
I want to empower you with the ability to manage your money the way you’d like, and provide you with a retirement system that pays you a monthly income that keeps on growing.
As you probably expected, I’m here to ruin your fund manager’s day once again by empowering you with the ability to take control of your own financial future and begin building a source of cash flow that provides a luxurious retirement.
There are many useful retirement tools available for you to use, but there’s also a reason why the good tools are always kept secret. It’s because the fund managers wouldn’t have a job anymore if you knew about them.
Don’t fall into the trap of filling the pockets of the greedy elites and their groveling employees. It’s time to take back what’s rightfully yours by learning about a new financial tool that’ll set you up with an income for the rest of your life.
You may or may not have heard the term “Bond Ladder.”
If you have heard of it, it was probably not explained to you in full. Bond ladders are a great tool to use for retirement that are accessible to you at any point in your career.
So, what is a bond ladder and how does it work?
The main idea behind using a bond ladder is to set you up with an income during retirement, while replenishing the fund that your income is being provided by.
It loosely works like this:
You receive your income to cover immediate bills and expenses; the interest from your bonds replenish that cash in full; your stocks then replenish those bonds and you’re living a stress-free life.
This basic model is what we would call a 3-rung bond ladder. This is the system in its most simplified form. We’ll be adding more rungs to the ladder to increase that steady income.
Now, the size of your income depends on multiple factors:
- The amount of rungs in your ladder
- The quality of the rungs in your ladder
- A little bit of patience when climbing the ladder
How many rungs should your ladder have?
Well, that’s entirely up to you. But to decide how many rungs you want/need, you need to understand what each rung represents.
The first rung on your ladder will always be your cash income that we mentioned before. The income is provided by the interest from the bonds in the following rungs.
Each successive rung in your ladder should be a bond with a longer maturity life than the previous one. This is because the bonds that take longer to mature pay out the most. They’re able to pay the bond in the previous rung, while that bond is paying the bond in its previous rung and so on.
So, typically, the more rungs you have, the bigger the income.
As I stated before, the last few rungs in your ladder may be comprised of stocks that have a slower rate of growth, but will still be able to replenish the bonds in the previous rungs.
How stable should your rungs be?
You should shop for your bonds based on their grades or ratings.
The rating system is fairly simple to follow. From strongest to weakest: AAA U.S. Treasury bonds, AAA-AA municipal bonds, AAA-AA corporate bonds, A corporate bonds, BBB bonds, and so on.
I would recommend disregarding any bonds that are rated anywhere below BBB.
Also, as a side note, different bonds with the same ratings may have different interest rates. Your instinct will be to pick the one with the highest yield, but be aware that bonds can be downgraded, and if a bond has an unusually high yield compared to other similar bonds, chances are it’s about to downgrade.
So, you want your rungs to be as stable as they can be by building your bond ladder with high grade bonds only —you wouldn’t want to take the next step and have the rung snap on you, leaving you to recover.
How quickly should you climb the ladder?
The quicker you climb, the higher risk you face.
You want to ascend your bond ladder with every intention of letting each bond mature. That’s why you want the bond maturities to be longer as you ascend the ladder.
The first rung may be 2 years, the second 4 years, the third 6 years, and so on, but you’ll only reach your full potential auto-income by allowing these bonds to mature.
It’s still a retirement fund, not a get-rich-quick system (which never works).
Your retirement, as you understand, is not to be gambled with or rushed through. The bond ladder system is a simple, yet stable tool that can be used to provide you with a comfortable income after you hang your hat and tie up for good.
There’s plentiful information out there if you take the initiative to look for it. Don’t fall victim to the “expert advice” of fund managers. You have the ability to control your retirement income, and only you know what you actually need.