I have not done this, but was actually thinking of it a couple of times. Also can be done with CDs if you can find a place offering 5-year CDs. Happy to hear what others have to say on the subject. My wife took early retirement at the end of 2024 when her company offered a buyout and I hope to join her as early as February of 2027 and as late as the first half of 2028. Depends on how heavy the workload is and how soon we can get the house sold after our daughter graduates next June.
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Not a financial expert at all, and not very familiar with bond ladders, but what is the goal? Your post mentioned passive income, but are you also trying to preserve the principal? It sounds like you're looking for a low-risk way to earn a smaller return than say the stock market. Are you trying to beat inflation or match it?
Apologies as I don't really have advice and instead hit you with more questions - this post just intrigued me.
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So, in passive income mean generating an income source most likely for reinvestment to avoid short term capital gains but is there if i need to get my hands on it. protecting the principal would be ideal which would probably be safer in a cd ladder but much lower yield.
i've seen several ishares ETF's that invest in tips and bonds that mature in X years; and if you stacked them right and continually invested in them, that could pay nice dividends on the regular. I'm just looking at other ways to diversify and use the ebbs and flows of the market to my advantage.
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Gotcha. Out of curiosity, what kind of roi are you hoping to achieve here? It's going to be less than the stock market since you are minimizing risk but im interested in what is achievable
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i don't think 6% is out of reach.
i have quite a bit in stocks at the moment. i tend to gravitate towards the high yield dividend stocks. i have quite a bit in a capital stick that pays (paid) a high monthly dividend, however i've lost 1/3 of the principal due to stock price decline. the dividend has also been cut by half since i bought. i'm trying to hold on until my dividends basically wash out my principal loses then take that money and start a bond/cd ladder.
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Bond/CD ladders are a popular strategy when you are passed the high growth phase of financial planning. Typically in the 5ish years before retirement you want to start skewing your profile to have at least a portion be low risk and cash flow generation to avoid relying on the sale of stocks (that could go down) to pay for day to day life. If you have enough of a nest egg, you can pay for your life with very low risk options through CDs/Bonds/Dividends. Objective is to avoid needing to sell at a huge loss to buy food.
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I haven't looked into bond ladders at all as bonds don't have the roi I want for my age. But when you say passive income dies that equal investment income? If not the how do they generate passive income? And wouldn't being in a system that is taxed capital gains better than income tax?
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Fidelity has a bond/CD ladder tool that I use. You set the maturity window limits and number of intervals and then choose from their selection of bonds or CD's for each maturity interval. You can execute the order directly from their interface.
I imagine that other large investment firms have something similar.
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interesting, i use Fidelity for several of my accounts and also Vanguard. I haven't seen that tool on their site (i only use the mobile app). I'll check it out on the laptop.
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You can do this through any of the major brokerages. I have done it with TD Ameritrade (now Schwab) where they have a specific part of the site/app where you can pick between bonds and CDs from a variety of banks and companies with varied durations and interest rates to customize your desired risk profile and cash flow schedule.
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Are you looking for something in a brokerage account, traditional IRA, or Roth IRA? Are you looking for income, or DRIP compounding reinvestment avoiding NAV erosion?
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I like ETF's for their dividends and coverage. Some of the following have limitation on growth, but if you are looking for income the following all have advantages and disadvantages. The following are ranked in descending order for resistance to NAV erosion.
SCHD - Mostly qualified dividends, quarterly dividend payments, yield around 3.3%. ETF of the top 100 dividend paying stocks.
JEPQ - ETF, mostly taxed like ordinary income. Uses Equity Linked Notes and options to generate income. Higher yielding than SCHD and monthly payments.
JEPI - ETF. taxed as ordinary income. Option premium income through equity linked notes. Monthly Payments
SPYI - ETF, more tax efficient than JEPI/JEPQ as it is sometimes return of capital, capital gains, and then income. Hasn't been around as long as the other for longer term results. Has monthly payments, currently yielding around 12%
As you can guess, the yield goes up as potential exposure to NAV erosion and risk goes up.
All advice is worth what you paid for it. I recommend your own research before any investments.
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Comments
I have not done this, but was actually thinking of it a couple of times. Also can be done with CDs if you can find a place offering 5-year CDs. Happy to hear what others have to say on the subject. My wife took early retirement at the end of 2024 when her company offered a buyout and I hope to join her as early as February of 2027 and as late as the first half of 2028. Depends on how heavy the workload is and how soon we can get the house sold after our daughter graduates next June.
In my experience, money monies the same.
Only if you bury it in mason jars.
And on certain nights, when the moon was just right, you can dig it up out of the ground.
Just watch out for those white trash Crayton boys.
From The Legend of Wooley Swamp for those not familiar
https://www.bing.com/videos/riverview/relatedvideo?q=the+legend+of+woole...
CDB, rest in peace Charlie
I follow a financial guy on WSJ and he wrote an article recently on TIPS ladders. Haven't set it up myself but here's the article (believe it's behind a paywall) - https://www.wsj.com/finance/investing/the-investment-that-can-shield-you...
Here's the actual website he used to build a TIPS Ladder (no paywall on this one) https://www.tipsladder.com/
Not a financial expert at all, and not very familiar with bond ladders, but what is the goal? Your post mentioned passive income, but are you also trying to preserve the principal? It sounds like you're looking for a low-risk way to earn a smaller return than say the stock market. Are you trying to beat inflation or match it?
Apologies as I don't really have advice and instead hit you with more questions - this post just intrigued me.
So, in passive income mean generating an income source most likely for reinvestment to avoid short term capital gains but is there if i need to get my hands on it. protecting the principal would be ideal which would probably be safer in a cd ladder but much lower yield.
i've seen several ishares ETF's that invest in tips and bonds that mature in X years; and if you stacked them right and continually invested in them, that could pay nice dividends on the regular. I'm just looking at other ways to diversify and use the ebbs and flows of the market to my advantage.
Gotcha. Out of curiosity, what kind of roi are you hoping to achieve here? It's going to be less than the stock market since you are minimizing risk but im interested in what is achievable
i don't think 6% is out of reach.
i have quite a bit in stocks at the moment. i tend to gravitate towards the high yield dividend stocks. i have quite a bit in a capital stick that pays (paid) a high monthly dividend, however i've lost 1/3 of the principal due to stock price decline. the dividend has also been cut by half since i bought. i'm trying to hold on until my dividends basically wash out my principal loses then take that money and start a bond/cd ladder.
Bond/CD ladders are a popular strategy when you are passed the high growth phase of financial planning. Typically in the 5ish years before retirement you want to start skewing your profile to have at least a portion be low risk and cash flow generation to avoid relying on the sale of stocks (that could go down) to pay for day to day life. If you have enough of a nest egg, you can pay for your life with very low risk options through CDs/Bonds/Dividends. Objective is to avoid needing to sell at a huge loss to buy food.
I haven't looked into bond ladders at all as bonds don't have the roi I want for my age. But when you say passive income dies that equal investment income? If not the how do they generate passive income? And wouldn't being in a system that is taxed capital gains better than income tax?
Fidelity has a bond/CD ladder tool that I use. You set the maturity window limits and number of intervals and then choose from their selection of bonds or CD's for each maturity interval. You can execute the order directly from their interface.
I imagine that other large investment firms have something similar.
interesting, i use Fidelity for several of my accounts and also Vanguard. I haven't seen that tool on their site (i only use the mobile app). I'll check it out on the laptop.
Fidelity is a great tool and I've done something similar with CDs through Alliant where I bank, I'm assuming many other places would offer the same.
You can do this through any of the major brokerages. I have done it with TD Ameritrade (now Schwab) where they have a specific part of the site/app where you can pick between bonds and CDs from a variety of banks and companies with varied durations and interest rates to customize your desired risk profile and cash flow schedule.
Are you looking for something in a brokerage account, traditional IRA, or Roth IRA? Are you looking for income, or DRIP compounding reinvestment avoiding NAV erosion?
mostly brokerage just in case i need to access the money on a liquidity basis
I like ETF's for their dividends and coverage. Some of the following have limitation on growth, but if you are looking for income the following all have advantages and disadvantages. The following are ranked in descending order for resistance to NAV erosion.
SCHD - Mostly qualified dividends, quarterly dividend payments, yield around 3.3%. ETF of the top 100 dividend paying stocks.
JEPQ - ETF, mostly taxed like ordinary income. Uses Equity Linked Notes and options to generate income. Higher yielding than SCHD and monthly payments.
JEPI - ETF. taxed as ordinary income. Option premium income through equity linked notes. Monthly Payments
SPYI - ETF, more tax efficient than JEPI/JEPQ as it is sometimes return of capital, capital gains, and then income. Hasn't been around as long as the other for longer term results. Has monthly payments, currently yielding around 12%
As you can guess, the yield goes up as potential exposure to NAV erosion and risk goes up.
All advice is worth what you paid for it. I recommend your own research before any investments.