When most investors think about retirement planning, they naturally focus on growing assets. But as clients move closer to retirement—or enter retirement entirely—the conversation often shifts from accumulation to income.

How much can I safely spend?

Will inflation erode my purchasing power?

How do I create predictable income without taking unnecessary market risk?

Those questions were at the center of a recent Financial Experts Network webinar featuring financial planner and economist Jay Avilafia, founder of Lyon Financial Planning. During the session, Avilafia walked advisors through the practical process of building a Treasury Inflation-Protected Securities (TIPS) ladder and demonstrated how these strategies can be used to create inflation-adjusted income streams for retirees and pre-retirees.

More importantly, he showed how advisors can use TIPS ladders to solve real-world planning challenges.

What Exactly Is a TIPS Ladder?

A TIPS ladder is a portfolio of individual Treasury Inflation-Protected Securities with staggered maturity dates designed to provide a predictable stream of future income.

Unlike traditional bonds, TIPS are designed to adjust for inflation. Their principal value rises with inflation and, because interest payments are calculated based on that adjusted principal, income generally rises as well.

By purchasing multiple TIPS that mature in different years, advisors can effectively create a series of future "paychecks" for clients.

As Avilafia explained during the webinar, the goal isn't simply investing in bonds—it's purchasing future spending power.

That's an important distinction.

Rather than focusing solely on portfolio performance, a TIPS ladder focuses on matching future assets with future spending needs.

Case Study #1: Creating a Retirement Income Floor

The first case study involved a recently retired 65-year-old client seeking:

• $80,000 of annual inflation-adjusted income
• A 20-year retirement horizon
• Immediate income needs

Using current TIPS yields, Avilafia demonstrated how a ladder could be constructed to provide that income stream while largely eliminating several risks retirees often face.

Most notably, a properly designed TIPS ladder can reduce:

• Sequence-of-returns risk
• Market volatility risk
• Interest rate risk (when bonds are held to maturity)

For retirees who value certainty and stability, this approach can create a dependable income floor that works alongside Social Security, pensions, and investment portfolios.

Why Inflation Protection Matters More Than Ever

One of the webinar's most important themes was the risk inflation poses to retirees.

Inflation may not dominate headlines every year, but over a 20- or 30-year retirement, even moderate inflation can significantly reduce purchasing power.

That's what makes TIPS unique.

Unlike traditional bonds, which provide fixed nominal payments, TIPS are specifically designed to preserve purchasing power over time.

For retirees relying on portfolio income, that distinction can be meaningful.

Case Study #2: The Social Security Bridge Strategy

One of the most practical applications discussed involved clients who plan to delay Social Security benefits.

Many retirees understand that delaying Social Security can increase lifetime benefits, but doing so creates an income gap between retirement and age 70.

A TIPS ladder can help bridge that gap.

In the webinar example, a client needed approximately $120,000 annually for several years before Social Security benefits began.

Rather than relying entirely on market-based withdrawals, the ladder provided a dedicated source of inflation-adjusted income during those bridge years.

This approach can create additional flexibility while helping retirees feel more comfortable delaying Social Security.

A Powerful Partner for Roth Conversion Planning

The Social Security bridge discussion naturally led to another advanced planning strategy: Roth conversions.

Many retirees experience unusually low taxable income after leaving the workforce but before Required Minimum Distributions and Social Security benefits begin.

Those years often create an attractive opportunity to convert traditional IRA assets into Roth accounts.

But there's a challenge.

Taxes still need to be paid.

Avilafia discussed how advisors can use TIPS ladders to help fund those tax obligations, creating a predictable source of liquidity during conversion years.

For clients executing large multi-year Roth conversion strategies, this can become a valuable planning tool.

The Surprising Tax Issue Advisors Need to Understand

One topic that generated significant discussion during the webinar was something known as phantom income.

TIPS principal adjusts with inflation.

The IRS generally treats those inflation adjustments as taxable income each year—even though investors do not actually receive the money until the bond matures.

That means clients holding TIPS in taxable brokerage accounts may owe taxes on income they haven't yet received in cash.

Because of this, many advisors prefer holding TIPS inside:

• Traditional IRAs
• Roth IRAs
• Qualified retirement plans

However, as Avilafia noted, taxable accounts may still make sense in certain situations, particularly when clients need liquidity for bridge income or tax planning strategies.

The key is understanding the tradeoffs.

Case Study #3: A Rolling TIPS Ladder for Accumulators

The third case study shifted away from retirees and focused on younger investors still building wealth.

The concept was simple:

Instead of purchasing a TIPS fund, build a ladder and continually reinvest maturing bonds into new longer-term TIPS.

This creates what Avilafia referred to as a rolling ladder.

The strategy allows investors to:

• Lock in real yields
• Preserve purchasing power
• Maintain control over maturity dates
• Reduce interest rate uncertainty

While it requires more maintenance than simply buying a mutual fund or ETF, some clients appreciate the transparency and control that individual bonds provide.

Individual TIPS vs. TIPS Funds

One of the webinar's most useful discussions centered on the difference between owning individual TIPS and owning a TIPS fund.

Many investors assume they're interchangeable.

They're not.

With individual TIPS:

• Maturity dates are known.
• Real yields are known.
• Bonds can be held to maturity.

With TIPS funds:

• Bonds are continuously bought and sold.
• Duration remains relatively constant.
• Interest rate exposure never fully disappears.

Neither approach is inherently better.

However, for clients seeking a predictable future spending stream, individual bonds often provide greater certainty.

Final Thoughts

TIPS ladders may not be the most exciting topic in financial planning.

As Avilafia joked during the webinar, they certainly aren't the "sexiest" investment strategy.

But they solve a very real problem.

Retirees and pre-retirees need dependable income.

They need inflation protection.

And they need strategies that allow them to spend with confidence regardless of what markets do next.

For the right client, a well-constructed TIPS ladder can help provide exactly that.

In a planning environment increasingly focused on managing uncertainty, that kind of predictability may be more valuable than ever.

Five Questions Advisors Frequently Ask About TIPS Ladders

Q1: What is the biggest advantage of a TIPS ladder?

A: A TIPS ladder allows clients to create a predictable stream of inflation-adjusted income while reducing exposure to market volatility and interest rate risk when bonds are held to maturity.

Q2: Why would someone choose a TIPS ladder instead of a bond fund?

A: Individual TIPS provide known maturity dates, known real yields, and greater control over future cash flows. Bond funds offer simplicity but maintain ongoing interest rate exposure.

Q3: Can a TIPS ladder help clients delay Social Security?

A: Yes. A Social Security bridge ladder can provide temporary income during the years between retirement and age 70, helping clients maximize future Social Security benefits.

Q4: What is phantom income and why does it matter?

A: Phantom income occurs because inflation adjustments to TIPS principal are generally taxable each year, even though investors do not receive those funds until maturity. This can create tax-planning considerations when holding TIPS in taxable accounts.

Q5: Are TIPS ladders appropriate for younger investors?

A: Potentially. A rolling TIPS ladder can serve as part of a long-term fixed-income allocation for investors who value inflation protection and control over bond maturities.