Definition
A portfolio of individual bonds or CDs with staggered maturity dates, so that a portion matures every year or so. As each rung matures, the cash is either spent or reinvested in a new long rung at whatever rate is available then.
Why it matters
A ladder turns interest-rate uncertainty into a schedule: you always have cash arriving soon, you never lock all your money at one rate, and you are not forced to sell a bond at a loss to raise money. Retirees use ladders to cover several years of spending regardless of what stocks do.
Example
A retiree builds a five-rung ladder with $20,000 maturing each year for the next five years, $100,000 in total. When the first $20,000 matures, they spend what they need and roll the rest into a new five-year bond, so the ladder keeps producing a $20,000 rung every year while the rest of the portfolio stays invested.
Put it into practice
Related terms
This definition is educational, not financial, legal, or tax advice. U.S. rules and limits change; verify time-sensitive details with official sources. See our disclaimer.