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Long Ladders

Long TIPS bond ladders demonstrate the challenge of matching liabilities in the more distant future, say, funding the last half of a 30-year retirement.

This is one of the toughest pieces of retirement funding to figure out for several reasons. First, we don't know if we will still be alive when it begins, which is a major reason people don't like annuities. Retirees who don't live beyond their life expectancy won't get much benefit from an annuity.

Or, we might live that 15 years and then some, possibly outliving a bond ladder and wishing we had purchased the annuity. Inflation has a much greater impact on more distant years of spending, and even when inflation protection can be purchased it is quite expensive.

In short, the further into the future we plan, the more uncertainty we must deal with. Life annuities remove the uncertainty of living a very long time… Read More …