TIPS Ladder Tool

Here is the TIPS ladder methodology:

• One holding per year. Each year’s rung is funded with the 5-year TIPS maturing the previous October, the 10-year TIPS maturing in January, or the 30-year TIPS maturing in February. We prefer the shortest-maturity TIPS possible to fund the rung so inflation-adjusted principal stays closest to the original face value, offering greater protection if there is an extreme deflation event. For 2028 to 2037, a TIPS ETF that matures the October before can fund the rung instead.
• Level real income. Each year’s target is met from the maturing bond or ETF plus the interest paid that year by the holdings maturing later. The ladder is solved from the last year backward, so early rungs are smaller than the target amount. Individual TIPS are rounded up to whole $1,000 face units. ETF amounts are shown in dollars and are not rounded.
• 2037 to 2039. No TIPS mature in those years. They are funded with extra January 2036 TIPS; hold the proceeds in Treasury bills until needed. With ETFs, 2037 can instead be funded with the October 2036 iBonds ETF. Treasury issues a new 10-year TIPS each January, so these gap years fill in by 2029, and the list of bonds is refreshed as new issues appear.
• Prices and yields. Each bond is priced from Treasury’s FedInvest price list for the prior business day, the same daily prices Treasury uses for federal accounts. Cost is that price plus accrued interest, times the bond’s inflation index ratio. Real yield is the yield to maturity implied by the price. ETFs are valued from the TIPS they hold, and their yields are shown after the fund fee. Prices move during the day and broker offers include a markup, so expect small differences at your broker.
• Buying the TIPS. Each dealer offer on the secondary market carries its own minimum quantity, and some brokers show few offers for small orders. Fidelity and Schwab list many TIPS offers with a one-bond minimum. New issues can be bought at auction in $1,000 increments at most brokers, or $100 at TreasuryDirect.
• TIPS ETFs. For years 2028 to 2037, an iShares iBonds Term TIPS ETF can stand in for the individual bond. Each fund holds the TIPS maturing in one year and pays out its assets on October 15 of that year, funding the next year. ETFs are easier to buy, with no block sizes, but charge 0.10% a year, and the share price can differ slightly from the value of the bonds the fund holds. Use the How to buy buttons to compare.
• Where to hold it. In a regular IRA or taxable account. Note: with individual TIPS, the annual inflation adjustment to principal is taxed as income before you receive it. The ETFs pay that adjustment out in cash, so in a taxable account the income and the tax arrive together.