TIPS Income Ladder
Estimate the capital needed to cover an annual spending gap in inflation-adjusted dollars, with a payment for each year you choose.
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Income floor
All three amounts are in today's dollars, before tax. A level pension loses buying power and should not be counted as fully inflation-adjusted income.
Timing and yields
The 2% example is a planning assumption. Enter a real yield from current TIPS pricing. Changing inflation changes projected dollar payments, not the real capital estimate.
Inflation-protected floor
Payments by year
| Age | Today's dollars | Projected dollars | Estimated cost today |
|---|---|---|---|
| 66 | $30,000 | $30,750 | $29,412 |
| 67 | $30,000 | $31,519 | $28,835 |
| 68 | $30,000 | $32,307 | $28,270 |
| 69 | $30,000 | $33,114 | $27,715 |
| 70 | $30,000 | $33,942 | $27,172 |
| 71 | $30,000 | $34,791 | $26,639 |
| 72 | $30,000 | $35,661 | $26,117 |
| 73 | $30,000 | $36,552 | $25,605 |
| 74 | $30,000 | $37,466 | $25,103 |
| 75 | $30,000 | $38,403 | $24,610 |
| 76 | $30,000 | $39,363 | $24,128 |
| 77 | $30,000 | $40,347 | $23,655 |
| 78 | $30,000 | $41,355 | $23,191 |
| 79 | $30,000 | $42,389 | $22,736 |
| 80 | $30,000 | $43,449 | $22,290 |
| 81 | $30,000 | $44,535 | $21,853 |
| 82 | $30,000 | $45,649 | $21,425 |
| 83 | $30,000 | $46,790 | $21,005 |
| 84 | $30,000 | $47,960 | $20,593 |
| 85 | $30,000 | $49,158 | $20,189 |
| 86 | $30,000 | $50,387 | $19,793 |
| 87 | $30,000 | $51,647 | $19,405 |
| 88 | $30,000 | $52,938 | $19,025 |
| 89 | $30,000 | $54,262 | $18,652 |
| 90 | $30,000 | $55,618 | $18,286 |
| 91 | $30,000 | $57,009 | $17,927 |
| 92 | $30,000 | $58,434 | $17,576 |
| 93 | $30,000 | $59,895 | $17,231 |
| 94 | $30,000 | $61,392 | $16,893 |
| 95 | $30,000 | $62,927 | $16,562 |
How it works
Each annual real payment is discounted at the same effective annual real yield. The first payment is at least one year from today. This is a cash-flow matching estimate; it is not a list of bonds to buy. Actual construction needs available maturities, coupon cash flows, accrued interest, prices and reinvestment assumptions. Treasury issues TIPS with 5-, 10- and 30-year original terms; longer ladders need future purchases.
TIPS principal follows CPI and interest is paid twice a year. The maturity floor protects original principal, not a secondary-market purchase premium. Selling early exposes you to market prices. Income stops after the last rung, even if you live longer.
The estimate excludes tax and fees. In a taxable account, interest and positive inflation adjustments are federally taxable as they accrue; cash may be needed for tax before maturity. Treasury income is exempt from state and local income tax. A retirement account changes tax timing.
Projection
How it works›
Model and assumptions. Discounts each desired inflation-adjusted payment at the entered real yield to estimate capital needed today. The resulting cash-flow ladder does not identify or price individual securities; purchase premiums, taxes and actual market quotes are omitted.TreasuryDirect: TIPSOpenStax: annuity formulas