When planning for retirement, it’s wise to consider whether you should delay claiming Social Security benefits. If you're in good health, waiting until age 70 can significantly increase your guaranteed monthly income for life. But that raises an important question: how do you fund your retirement while you wait?
For many retirees, investing in a bond ladder of Treasury Inflation-Protected Securities (“TIPS”) can be an attractive solution, offering reliable, inflation-protected income generated from bonds guaranteed by the U.S. Government.
Here’s how it works—and why it might make sense for your retirement plan.
Why Deferring Social Security Can Be a Smart Move
Every year you delay claiming Social Security benefit past your full retirement age up to age 70, your benefit grows by about 8% annually. That’s a powerful, guaranteed return—and one that's adjusted for inflation.
Health matters. If you expect to live well into your 80s or beyond, delaying benefits can mean tens of thousands of dollars in additional lifetime income.
That higher guaranteed income can ease the fear of outliving your savings, sometimes referred to as “longevity risk.”
But if you’re going to defer claiming Social Security, you’ll probably want income from somewhere else in the meantime.
Bridging the Gap with a TIPS Bond Ladder
That’s where a TIPS ladder can help.
A TIPS ladder is a structured portfolio of U.S. government bonds that mature at regular intervals. These bonds:
- Pay interest, providing steady cash flow
- Adjust for inflation based on the Consumer Price Index (CPI)
- Return your principal at maturity, fully backed by the U.S. government
By building a TIPS ladder to match your cash flow needs between retirement and the age you plan to claim Social Security, you can create reliable, inflation-adjusted income without worrying about stock market volatility.
Why Advisors and Investors Should Consider TIPS Ladders
For individual investors, a TIPS ladder offers simplicity and reliability. You know exactly how much inflation-protected (sometimes referred to as “real”) income you'll have and when you’ll receive it.
For financial advisors, TIPS ladders are a powerful planning tool:
- A foundation for a disciplined retirement income strategy
- A hedge against inflation risk
- A bridge to maximizing guaranteed Social Security benefits
To learn more about how bond ladders can be safer than bond funds, check out our article Bond Laddering Explained.
Final Thoughts
Delaying Social Security can be one of the most effective ways to strengthen your retirement plan, but it requires careful income planning. A well-designed TIPS bond ladder can give you the cash flow and inflation protection you need to bridge the gap with confidence.
If you're ready to consider a personalized TIPS ladder strategy, check out the LifeX Inflation-Protected 2050 Longevity Income ETF. It’s a TIPS ladder ETF, so you can implement this strategy with a single trade.
If you’d like a different length of bond ladder, explore additional options here.
