My TIPS Ladder is Stupidly Smart

My TIPS ladder may have been a stupid idea. A couple of years ago, I made a move that raised a few eyebrows among financially savvy friends. I built a 22-year Treasury Inflation-Protected Securities (TIPS) ladder.

Some said it was unnecessary. Others said it was “too conservative.” A few said it showed paranoia and stupidity. Since they are smarter than I am, they may be right.

But I need to do what makes sense to me, even if it makes little sense to others. Our goals are different. My TIPS ladder wasn’t to help me win; it was to prevent losing. I wasn’t chasing returns. I already had enough.

At this stage of life, my focus isn’t getting rich. Primarily, I want to avoid becoming poor. If I can stay rich, that’s even better. Extra earnings would be icing on the cake. But I can’t afford to let the cake be smashed or destroyed.

The Goal

Not Getting Rich, but Staying Rich

They sound the same. We use the same investment ideas to earn or keep money. Yet, they are different games. The reasons, theory, strategy, and techniques differ.

I think about risk differently now than in my 30s or 40s. At that age, my wealth was based on a robust stream of future earnings.

Aging, medical conditions, and disability slashed my capacity to earn big paychecks. When your human capital (your future earning ability) is nearly gone, your capacity to endure financial risk evaporates.

Referring to the brilliant founders of LTCM:

“To make money they didn’t have and didn’t need, they risked what they did have and did need, and that’s foolish. That’s just plain foolish. Doesn’t make any difference what your IQ is.”

-Warren Buffett

“If you risk something that is important to you for something that is unimportant to you, it just does not make any sense. I don’t care whether the odds are 100 to one that you succeed or 1,000 to one that you succeed.”

-Warren Buffett

Today, my portfolio is roughly in thirds:

• One-third in stocks. Diversified, low-cost, & global.
• One-third in bonds. Munis, bond funds, short-term inflation-protected securities (IPS), and my TIPS ladder.
• One-third in “other.” Real estate, small business, commodities, and alternative holdings.

Is this asset allocation optimal? Absolutely not. Would I recommend others do the same? Likely not. But it works for me. I have growth potential, minimal drawdown risk, and certainty that my terminal wealth will be there when I need it.

I have enough cash and short-term bonds to outlast a bear market or stock crash. Plus, my TIPS ladder produces $75,000 annually, covering my necessities. The essentials that keep the lights on, the fridge full, and my mind at peace.

TIPS Ladder?

A TIPS ladder is a series of Treasury Inflation-Protected Securities that mature each year.
Each TIPS bond pays a fixed real yield, and its principal adjusts with the Consumer Price Index (CPI). That means your money keeps up with inflation.

Some don’t trust the government’s inflation numbers. Fair enough. The CPI isn’t perfect, but it’s the best inflation measure we’ve got. It tracks urban consumer prices, not individual lifestyles. Even if you think real inflation runs a bit higher, TIPS still track price levels far better than nominal bonds or cash.

A ladder from 2025 to 2047 creates inflation-adjusted cash each year for 22 years. No surprises. No effort. No risk. No need to watch CNBC.

Compare that to holding a TIPS mutual fund or ETF, which bundles TIPS of varying maturities and trades them daily. The fund’s market price fluctuates with interest rates, so you can lose money.

Price Risk

Suppose you own a 10-year TIPS bond that pays a 2% real yield. If you hold it to maturity, you’ll earn inflation + 2% each year guaranteed by the U.S. Treasury. No default risk, no inflation erosion.

TIPS are inflation-risk-free, not interest-rate-risk-free. When real yields rise sharply, TIPS funds drop in value. The underlying bonds still pay full inflation-adjusted principal at maturity. If you own individual TIPS and hold them to maturity, you don’t lose.

If you own a TIPS ETF and interest rates rise, the value of the bonds drop. The fund’s share price can fall even though the underlying inflation adjustment is working. That’s exactly what happened in 2022, when real yields spiked faster than inflation expectations.

TIPS funds lost 10–15% that year. Not because TIPS failed, but because bond math did its job. If you build a ladder and hold each bond to maturity, those fluctuations don’t matter.
You get your inflation-adjusted principal and interest exactly as promised.

“A TIPS ladder doesn’t make you rich. It keeps you rich.”

-Wealthy Doc

It eliminates inflation risk and interest-rate risk for the portion of your portfolio you need.

TIPS ETFs and mutual funds offer convenience and liquidity, but they don’t mature. Their prices fluctuate daily with market yields. A ladder, by contrast, gives you known inflation-adjusted cash flows on specific dates. The distinction matters most when you’re drawing income.

Inflation Expectations

Markets reveal inflation expectations. The difference between the nominal Treasury yield and the TIPS yield of the same maturity is the breakeven inflation rate.

Let’s use a recent snapshot (rounded figures as of late 2025):

• 10-year Treasury yield: 4.5%
• 10-year TIPS yield: 2.2%
• Breakeven inflation = 4.5 – 2.2 = 2.3%

That 2.3% represents the market’s average expectation for inflation over the next decade. If actual inflation runs higher than that, TIPS outperform nominal Treasuries. If it’s lower, nominal bonds do better.

As Larry Kotlikoff reminds us, TIPS give consumption certainty – the ability to maintain your standard of living regardless of inflation. They’re insurance against an unpredictable variable that can quietly erode wealth.

Why TIPS Looked Unattractive – Until Recently

For much of the 2010s, real yields were near zero or even negative. That meant investors were effectively paying for inflation protection. At those levels, building a long TIPS ladder didn’t make sense. You were locking in low or negative real returns for decades.

But when real yields rose sharply in 2022-2023 – back to 2%+ real – the math changed dramatically. Suddenly, you could guarantee a 2% inflation-adjusted return for decades. That’s historically attractive, especially for retirees and near-retirees who value safety and predictability.

Alan Roth at Advisor Perspectives pointed out that a properly constructed TIPS ladder can serve as a do-it-yourself inflation-protected annuity, without the fees or illiquidity of commercial products. He showed how to build one at TreasuryDirect or a brokerage platform.

TIPS Ladder vs. TIPS Fund

Both tools have their place. Liquid TIPS funds are convenient and reduce inflation risk.
But if your goal is to fund predictable real expenses, a ladder is hard to beat. As Mike Piper of Oblivious Investor says, “Match assets to liabilities.” Your near-term liabilities are real, not nominal. So why fund them with nominal bonds?

Why It Fits My Situation

I don’t have decades of income ahead of me. My “human capital reserve” – future earning ability – is nearly zero. That means my risk capacity is low, even if my risk tolerance remains moderate.

The TIPS ladder provides a spending floor. It ensures that, no matter what the markets do, I can cover two decades of essentials in real, inflation-adjusted dollars.

Beyond that floor, I’m comfortable taking equity and real estate risk for potential upside. That’s how my portfolio remains balanced – roughly one-third in each of stocks, bonds, and “other.”

“When you’ve won the game, stop playing with the money you really need.”

-William Bernstein, MD

That resonates deeply with me. This ladder lets me sleep soundly knowing that my next 22 years of basic spending are locked in.

Lessons from the Experts

• Zvi Bodie, author of Risk Less and Prosper, and father of modern TIPS theory, calls them the only truly safe asset for long-term savers. They guarantee inflation-adjusted purchasing power.
• Larry Kotlikoff highlights how inflation-adjusted income aligns lifetime consumption with real needs – a cornerstone of his “consumption smoothing” model.
• Mike Piper favors TIPS ladders for retirees who want simplicity and predictability over yield chasing.
• William Bernstein reminds investors that “risk capacity” – not risk tolerance – should drive allocation decisions once you’re financially independent.
• Alan Roth shows how to build TIPS ladders efficiently using TreasuryDirect or brokerages, emphasizing that they can serve as a “personal pension.”

These are voices worth heeding. They used their big brains to think deeply about risk, inflation, psychology, and retirement security.

The Bottom Line

My TIPS ladder: It’s a deliberate, disciplined way to lock in what matters – the ability to maintain a standard of living.

Per Nick Maggiulli, I’m three times more likely to slip down the wealth ladder than climb up. (25% chance of falling versus 8% chance of rising). My no-cost, riskless ladder insures against my biggest financial risk. It buys me the most valuable asset of all – peace of mind.

DIY TIPS Ladder

To protect your future spending, here’s a roadmap. You don’t need a PhD in finance. Just patience and clarity about your real expenses.

1. Decide How Many Years You Want Covered
   Think of this as your inflation-protected paycheck.
   Most retirees build ladders to cover 10-30 years.
2. Estimate Your Annual Spending Floor
   Identify your “must-pay” expenses: housing, insurance, food, healthcare, taxes.
   For me, that came to about $75,000 per year. I locked in that base.
3. Buy One TIPS Maturing Each Year
   Purchase individual TIPS bonds with maturity dates matching each year of spending. Continue to your chosen horizon. You can buy TIPS at TreasuryDirect.gov or through brokerages like Fidelity, Schwab, or Vanguard.
4. Choose the Right Account
   Because TIPS accrue taxable inflation adjustments each year (“phantom income”), it’s best to hold them in tax-advantaged accounts – IRAs or 401(k)s.
5. Hold to Maturity
   Ignore the daily noise. Don’t worry if “bond prices fall.”
   If you hold to maturity, your inflation-adjusted principal is guaranteed.
   You’ll receive the full real value plus CPI-linked interest.
6. Reinvest or Spend as Bonds Mature
   When a bond matures, use the proceeds for that year’s expenses.
   If you don’t need the cash, reinvest.

Was I being dumb to build a 22-year TIPS ladder?
Not at all. IMHO.

What do you think? Agree? Disagree? Let me know!