At 58 and Wary of Annuities? Here Are Retirement Income Options
A TIPS ladder can provide inflation-protected, dependable retirement income for those unwilling to buy annuities, financial planners say.
Investors approaching retirement who distrust annuities still have structured options for generating reliable income, according to financial planning guidance published by MarketWatch. A Treasury Inflation-Protected Securities ladder — commonly called a TIPS ladder — is frequently cited as an alternative that can replicate the predictability that annuities offer without the contractual obligations and fees many retirees find objectionable.
A TIPS ladder works by staggering the purchase of government bonds that mature at different intervals, aligning payouts with anticipated spending needs year by year. Because TIPS principal adjusts with the Consumer Price Index, the strategy provides a built-in hedge against inflation — a core concern for anyone funding a retirement that could span two or three decades. That inflation-protection feature distinguishes TIPS ladders from conventional bond ladders, which carry purchasing-power risk over time.
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For a 58-year-old looking to gradually shift a portfolio toward lower risk, constructing a TIPS ladder can serve a dual purpose: reducing equity exposure while locking in real, inflation-adjusted returns backed by the full faith and credit of the U.S. government. Financial planners generally view the approach as conservative but effective for covering essential baseline expenses in retirement.
The strategy does carry trade-offs. TIPS purchased on the secondary market can be sensitive to real interest rate movements, meaning timing and cost basis matter. Additionally, the inflation adjustments to TIPS principal are taxable in the year they occur — even if the investor has not received the cash — a quirk sometimes called "phantom income" that can complicate tax planning for pre-retirees. Understanding these nuances is critical before committing a significant portion of savings to the approach.
For retirees and near-retirees weighing their options, the broader takeaway is that annuities are not the only path to income certainty. Continue reading at MarketWatch.com
