Bond Ladder Income Calculator
Design a bond ladder: split a lump sum across equal rungs and see the annual interest income, the size of each rung and how much matures each year.
How it works
Rung size = total ÷ rungs · Annual income = total × coupon · One rung matures each period
A bond ladder buys equal slices of bonds that mature in consecutive years, so a portion of your money comes due on a regular schedule. When each rung matures you reinvest it at the longest maturity, keeping the ladder rolling. This smooths out interest-rate risk: you never lock the whole sum in at one rate, and rising rates get captured as rungs mature and get replaced.
Worked example
Put $100,000 into a 5-rung ladder averaging a 4.5% coupon. Each rung is $20,000, maturing in years 1 through 5, and the whole ladder throws off about $4,500 a year — roughly $375 a month. As the year-1 bond matures, its $20,000 buys a new 5-year bond at whatever rate then prevails.
Frequently asked questions
Why ladder instead of buying one long bond?
A ladder spreads reinvestment across many years, so you are never fully exposed to the rate on a single day. If rates rise, maturing rungs are reinvested higher; if they fall, your longer rungs still carry the old higher coupons.
What happens when a rung matures?
You typically reinvest the returned principal into a new bond at the top of the ladder, keeping the structure intact. Alternatively you can spend the principal if you built the ladder to fund a series of expenses.
Is the coupon income taxable?
Interest from most bonds is taxable as ordinary income, though Treasuries are state-tax-free and municipal bonds are often federally exempt. Check the tax-equivalent yield tool when comparing across bond types.
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Educational estimate, not investment advice. Markets involve risk of loss and future returns are never guaranteed.