An annuity ladder is a strategy in which you split your money across multiple annuities with different term lengths or start dates, rather than putting everything into a single contract. This approach protects you from locking in at the wrong interest rate, gives you regular access to your money as each annuity matures, and lets you adjust your strategy as rates and retirement needs change over time.
You’ve saved a solid chunk of money for retirement. Now comes the hard part: what do you actually do with it?
Putting all of it into a single annuity feels risky. What if rates go up next year? What if you need some of that money sooner than expected? And locking everything up for 7 or 10 years at one rate doesn’t sit right with most people we talk to.
That’s where annuity laddering comes in. It’s the same concept as a CD ladder, but with better rates and tax-deferred growth. After 30+ years of helping clients build retirement income plans, we’ve found that laddering is one of the smartest ways to balance safety, growth, and flexibility. Let’s walk through how it works.
What Is an Annuity Ladder?
An annuity ladder is simple. Instead of buying one annuity with all your money, you split it across multiple annuities with different maturity dates. Think of it like building a staircase. Each step matures at a different time, giving you regular decision points along the way.
If you’ve ever laddered CDs at your bank, you already understand the concept. The difference? Annuities typically offer higher guaranteed rates than CDs, and your interest grows tax-deferred until you withdraw it. That tax deferral lets your money compound faster because you’re not paying taxes on the gains each year.
Here’s the core idea: when one rung of your ladder matures, you decide what to do with it. You can reinvest at whatever rate is available, take the money as income, or reposition into a different type of annuity. You’re never stuck with a decision you made years ago when conditions were different.
Why Ladder Annuities Instead of Buying One?
We get this question all the time. If you can lock in a good rate today, why bother splitting things up?
Interest rate timing is unpredictable. Nobody knows where rates will be in two years. If you put $300,000 into a single 7-year MYGA and rates jump a full point next year, you’ve missed out on better returns for the remaining six years. Laddering gives you multiple entry points so you’re not betting everything on today’s rate environment.
You keep access to your money. With a ladder, something is always close to maturing. If you need funds for an unexpected expense or a new opportunity, you won’t be stuck paying surrender charges to access your cash. That built-in liquidity is a big deal for retirees.
Your needs will change. What makes sense at 62 might not make sense at 70. Maybe you’ll want guaranteed income later. Maybe you’ll want to reposition into a different product. A ladder gives you natural checkpoints to reassess without penalty.
It’s a built-in inflation hedge. When you ladder income annuities with staggered start dates, each new income stream that kicks in acts like a raise. You’re not relying on one payment amount for 30 years of retirement.
Three Ways to Ladder Annuities
There’s no single right way to build a ladder. We typically recommend one of three approaches depending on your goals.
Ladder by Term Length (MYGA Ladder)
This is the most common approach and the easiest to understand. You buy multiple multi-year guaranteed annuities (MYGAs) with different term lengths.
A MYGA works like a CD. You deposit a lump sum, the insurance company guarantees a fixed interest rate for a set number of years, and you get your money back at maturity. No fees, no moving parts.
As of early 2026, 5-year MYGAs from A-rated carriers are paying in the range of 5.65% to 6.30%, which is significantly higher than what most bank CDs offer for the same term. Three-year rates are competitive too, and 7-year terms can lock in strong rates for longer periods.
A MYGA ladder spreads your money across short, medium, and long terms. As each one matures, you can reinvest at current rates or take the money. If rates have gone up, great. You’re locking in better returns on that portion. If rates have dropped, only a fraction of your money is affected.
Ladder by Income Start Date
This approach works best for people who want guaranteed lifetime income but don’t need it all at once.
Instead of buying one single premium immediate annuity (SPIA) and starting income right away, you purchase multiple income annuities with staggered start dates. For example, you might start one income stream at age 65, another at age 70, and a third at age 75.
Each new stream that activates gives you a “retirement raise.” The payments on later-starting annuities are higher because you’re older when they begin, which means the insurance company’s payout calculations work in your favor. This approach helps combat inflation naturally without paying extra for a cost-of-living rider.
You can also mix SPIAs with deferred income annuities or even a qualified longevity annuity contract (QLAC) if you want income that kicks in much later, say at age 80 or 85, to protect against outliving your savings.
Ladder by Product Type (Blended Ladder)
This is the most sophisticated approach. You use different types of annuities for different jobs within your ladder.
Here’s how it might look:
Short-term rung (0-5 years): A MYGA for safe, guaranteed growth with predictable maturity. This is your stability anchor.
Mid-term rung (5-10 years): A fixed index annuity for index-linked growth potential with downside protection. You won’t lose principal, but you have the chance to earn more than a fixed rate if the market performs well.
Long-term rung (10+ years): A deferred income annuity or QLAC for guaranteed lifetime income that starts later. This covers your longevity risk.
Each product type does something different, and together they create a more resilient retirement income plan than any single product could on its own.
MYGA Ladder Example: $300,000 Strategy
Let’s make this concrete. Say you have $300,000 you want to put into safe, guaranteed products. Here’s how a MYGA ladder might look:
| Rung | Amount | Term | What Happens at Maturity |
|---|---|---|---|
| Rung 1 | $100,000 | 3-year MYGA | Matures first. Reinvest at new rates, take income, or reposition. |
| Rung 2 | $100,000 | 5-year MYGA | Matures two years later. Same options available. |
| Rung 3 | $100,000 | 7-year MYGA | Longest term, typically the highest rate. |
When Rung 1 matures in three years, you have options. If rates are higher, you can lock in a new 7-year MYGA and extend your ladder. If you need income, take it. If your situation has changed, you can reposition into an income annuity or a fixed index annuity using a 1035 exchange, which lets you move between annuity contracts without triggering a tax event.
The beauty of this approach is that every three years or so, you’ve got a decision point. You’re never locked in for the full seven years with all your money. And because each MYGA comes from a different carrier (we recommend diversifying), you’re spreading risk across multiple insurance companies.
Annuity Ladder vs. CD Ladder
Both strategies use the same concept, but annuity ladders have some clear advantages for retirement savings.
Higher rates. MYGAs consistently pay more than CDs with comparable terms. As of early 2026, the gap between top MYGA rates and CD rates is roughly 1.5% to 2% or more for 5-year terms. Over a $300,000 ladder, that difference compounds into real money.
Tax-deferred growth. CD interest gets taxed every year, even if you don’t withdraw it. MYGA interest compounds tax-deferred until you take it out. If you don’t need the income right now, this is a significant advantage.
1035 exchange flexibility. When a MYGA matures, you can move the money into another annuity through a 1035 exchange with no tax consequences. CDs don’t offer anything comparable.
No FDIC, but still protected. Annuities aren’t FDIC insured. They’re backed by the financial strength of the issuing insurance company and protected by your state’s guaranty association. That’s why we only recommend carriers with A.M. Best ratings of A- or higher, and why diversifying across carriers matters.
When CDs make more sense: If you need money within the next two years, a CD or high-yield savings account is probably the better choice. CDs also work well for funds you might need quick access to, since FDIC insurance provides a different kind of safety. For longer time horizons and retirement-specific money, annuity ladders typically win.
Who Should Consider an Annuity Ladder?
Laddering isn’t for everyone, but it’s a strong fit for certain situations. You might want to consider it if:
You’re retired or within 10 years of retirement and have $100,000 or more in safe money that you want to grow without market risk.
You’re rolling over a 401(k) or IRA and don’t want to put everything into one product at one rate. A ladder lets you spread that rollover across multiple terms.
You’re a conservative investor who’s been keeping money in CDs or savings accounts and wants better returns without taking on stock market risk.
You’re worried about interest rate timing. If you’ve been sitting on cash waiting for the “right” rate, a ladder takes that guesswork off the table.
Mistakes to Avoid When Laddering Annuities
We’ve seen a few common mistakes over the years. Here’s what to watch out for:
Using the same carrier for every rung. Diversify across at least two or three A-rated insurance companies. If one carrier runs into financial trouble, you don’t want your entire ladder affected.
Ignoring surrender charges. Make sure you understand when each annuity becomes fully liquid. Most MYGAs allow penalty-free withdrawals of 10% per year, but taking more than that before maturity triggers surrender charges.
Forgetting the 59½ rule. If you’re under 59½ and using non-qualified money (not IRA or 401k funds), you could face a 10% IRS penalty on any gains you withdraw. Make sure your ladder’s maturity dates align with when you can actually access the money penalty-free.
Over-complicating it. Three to five rungs is plenty. We’ve seen people try to build 8 or 10-rung ladders that become impossible to manage. Keep it simple.
Not checking ratings. Always verify the insurance company’s A.M. Best financial strength rating before buying. We stick with A- or better. A slightly lower interest rate from a stronger company is almost always the smarter choice.
Frequently Asked Questions
How much money do I need to start an annuity ladder?
Most MYGAs have minimum deposits between $10,000 and $25,000. To build a meaningful ladder with three rungs, you’d typically want at least $50,000 to $100,000 total. The sweet spot we see most often is $200,000 to $500,000.
Can I ladder annuities inside an IRA?
Yes. You can purchase MYGAs, fixed index annuities, and income annuities within a traditional or Roth IRA. The tax-deferral benefit of the annuity is redundant inside an IRA (since IRAs are already tax-deferred), but the guaranteed rates and principal protection still make MYGAs attractive compared to other conservative IRA options.
What happens when a rung of my annuity ladder matures?
You’ll typically have a 30-day window to decide. You can take a lump sum, roll it into a new annuity using a 1035 exchange, annuitize it for income, or let it auto-renew. We don’t recommend auto-renewal without reviewing your options first, since renewal rates are often lower.
Is an annuity ladder better than a bond ladder?
They serve similar purposes, but annuities offer principal protection that bonds don’t. Bond values fluctuate with interest rates, so you could lose money if you need to sell before maturity. MYGAs guarantee your principal and a fixed rate. Annuity interest also compounds tax-deferred, while bond interest is typically taxed annually.
How do I move money between annuities without paying taxes?
A 1035 exchange lets you transfer funds from one annuity to another without triggering a taxable event. It’s named after Section 1035 of the Internal Revenue Code. We use 1035 exchanges frequently when repositioning maturing rungs of a ladder into new contracts.
Key Takeaways
- An annuity ladder splits your money across multiple annuities with different terms, protecting you from interest rate risk and giving you regular access to your funds.
- MYGA ladders are the simplest approach, offering CD-like simplicity with higher rates and tax-deferred growth.
- You can also ladder by income start date or product type to create staggered retirement income or a blended growth-and-income strategy.
- Diversify across carriers, keep it to 3-5 rungs, and always check A.M. Best ratings before buying.
- A 1035 exchange gives you tax-free flexibility to reposition maturing annuities without triggering a taxable event.
Want help building an annuity ladder that fits your retirement plan? We’ll walk through your specific situation, compare current rates from top-rated carriers, and design a ladder that balances growth, income, and flexibility. No pressure, just an honest conversation about what makes sense for you.
