Annual income from a 5-rung bond ladder with user-entered values and yields.

A 50,000 ladder with 10,000 in each of 5 rungs yielding 3%, 3.5%, 4%, 4.2%, 4.5% pays 1,920 a year — a 3.84% weighted yield. Each year one rung matures, freeing 10,000 to reinvest in a new 5-year bond at whatever rate is available then. Income is stable, principal is accessible in stages.

What the result means

Primary is total annual income from the ladder. Secondary shows weighted yield, total principal, and a summary across rungs. The ladder smooths interest rate risk — as rates change, only one rung per year gets reinvested.

Why bond ladders

Predictable income. Partial interest rate protection (unlike single-maturity bonds which concentrate all reinvestment risk in one year). Principal access in stages. Popular with retirees or investors with known future cash needs.

Quick example

With rung 1 face value of 10,000 and rung 1 yield of 3% (plus rung 2 face value of 10,000 and rung 2 yield of 3.5%), the result is 1,920.00. Change any figure and watch the output shift — it's often more useful to see the pattern than to memorise the formula.

Which inputs matter most

You enter Rung 1 Face Value, Rung 1 Yield, Rung 2 Face Value, Rung 2 Yield, and Rung 3 Face Value. Not every input has equal weight. Flip one at a time toward extreme values to feel which ones move the needle most for your situation.

What's happening under the hood

Total annual income is the sum of each rung's face value times yield. Weighted yield is income divided by total face value. The formula is listed in full below. If the number looks off, you can retrace the calculation by hand — that's the point of showing the working.

Where this fits in planning

This is a "what-if" tool, not a forecast. Use it to test ideas before committing: what happens if the rate is 2% lower than hoped, what happens if you add five more years. The value is in the scenarios you run, not the single answer you get from the defaults.

What this doesn't capture

Steady-rate math ignores real-world volatility. Actual returns are lumpy; sequence-of-returns risk matters most in drawdown; fees and taxes drag on compound growth; and behaviour changes in drawdowns can reduce outcomes below the projection. Treat the number as one scenario, not a forecast.