How an Annuity Ladder Can Help You Create Increasing Income

What Is an Annuity Ladder?

An annuity ladder is a strategy where you purchase multiple annuities at different times (or with different start dates), rather than committing all your money to a single annuity.

For example:

• Buy one annuity now that starts paying immediately.

• Buy another in five years that starts later.

• Buy a third ten years from now with even higher payouts.

Each rung of the ladder has its own start date and payout rate, which creates a staggered—and often rising—stream of income.

How an Annuity Ladder Increases Income Over Time

1. Later annuities pay significantly more

Insurance companies reward you for deferring payouts—meaning the older you are when payments begin, the higher the guaranteed income.

By laddering purchases:

• Early annuities give you income now.

• Later annuities give you substantially higher payments because the payout rates grow with age and shortening life expectancy.

This naturally creates an increasing income stream.

2. Helps counter inflation, even without buying inflation riders

Inflation riders on annuities can be expensive. Instead of paying for a rider, a ladder can mimic inflation protection.

As each new “rung” starts paying out:

• Your income jumps.

• These jumps occur during times you may need more money (later retirement years when healthcare and longevity costs grow).

This step-up effect can offset inflation’s impact without relying on costly contract add-ons.

3. Reduces interest rate risk

Interest rates significantly influence annuity payouts. When rates are low, locking in an entire lump sum could mean locking in permanently lower income.

A ladder helps by:

• Allowing you to buy in different interest-rate environments.

• Creating opportunities to lock in higher payouts if rates rise in the future.

• Reducing the risk of committing all your money during a bad rate environment.

Diversifying over time smooths out interest-rate timing risk.

4. Provides flexibility and liquidity along the way

Instead of putting a large lump sum into an irreversible contract, laddering allows you to:

• Keep some money accessible for emergencies or investments.

• Adjust the ladder as your needs or market conditions change.

• Add or skip purchases based on your financial situation.

You're in control of how aggressively or slowly you build the ladder.

5. Offers psychological comfort and planning precision

A growing income stream is reassuring, especially in later years. A ladder can help you:

• Know exactly when pay increases will occur.

• Plan spending more confidently.

• Reduce anxiety about outliving your assets.

This predictability is a major reason many retirees choose to ladder.

Example of How a Ladder Creates Increasing Income

Or.. Imagine a retiree with $300,000 to allocate:

• Year 0: Invest $100k → Immediate annuity pays ~$6,000 per year.

• Year 5: Invest $100k → Deferred annuity starts paying ~$8,500 per year.

• Year 10: Invest $100k → Deferred annuity begins paying ~$12,000 per year.

Income timeline:

• Years 0–4: $6,000 per year

• Years 5–9: ~$14,500 per year

• Years 10+: ~$26,500 per year

This creates a natural income increase without complex riders or market risk.