How to Make Time Segmentation Work in Practice: Three Options for Extending a Bond Ladder

For time segmentation to work, there must be a clear procedure for how to extend the bond ladder. Unfortunately, with its varied implementation, that procedure is often overlooked. I will examine the potential for time segmentation by considering three different ways to implement it.

In Part 1, I provided the case for time segmentation strategies provided by their advocates, as well as how it fits into the spectrum of retirement-income approaches. I will consider three practical ways to extend bond ladders and put them to a quantitative test in Part 3.

Taxonomy of retirement income bond ladders

When it comes to retirement income bond ladders, Joe Tomlinson created an excellent taxonomy of different types in his November 2014 article in Advisor Perspectives. His list inspired me to create the more extended version shown in Table 1.

Table 1

Taxonomy of retirement income bond ladders

Types of Bond Ladders

Potential Use

One-Time Ladders


Fixed Short Term

Build a Social Security Delay Bridge


Fixed Medium Term

Twenty-Year Bond Ladder followed by Deferred Income Annuity to cover remainder of lifetime


Fixed Long Term

Thirty Year Bond Ladder as Source of "Lifetime" Retirement Income

Rolling Ladders



Each year purchase a new bond to extend the horizon by one more year as bond matures, keeping ladder length constant over time



Allow ladder length to fluctuate based on market performance. For example, extend ladder by more when the stock market has performed well or market valuations are high. But let the ladder length decrease without extension after poor market performance or low market valuations



Conduct a capital needs analysis for how much wealth should remain in each year of retirement to meet goals. Extend ladder when actual wealth exceeds the requirement. Let ladder length decrease when actual wealth is falling short.