An annuity ladder splits your savings across several annuities instead of one.
Each one matures at a different time. That protects you from locking in at the wrong rate,
keeps money coming free on a schedule, and lets you adjust as life changes.
What Is an Annuity Ladder?
Think of a staircase. Each step is its own annuity, and each step matures at a different time.
When a step matures, you get a decision point: reinvest at today's rates, take the money as income,
or move it somewhere better.
If you have ever laddered CDs at your bank, you already understand this. The difference:
annuities usually pay higher guaranteed rates than CDs, and your interest grows
tax-deferred until you take it out.
Here is the whole idea in one picture. Each blue step is $100,000. The darker the blue, the longer the term.
A $300,000 ladder split into three $100,000 rungs with 3, 5, and 7-year terms.
Why Not Just Buy One Annuity?
We hear this question all the time. If today's rate looks good, why split things up?
Four reasons:
Reason 1
Nobody can time interest rates
If you put everything into one 7-year contract and rates jump next year, you missed out
for six more years. A ladder gives you several entry points.
Reason 2
You keep access to your money
Something is always close to maturing. If life throws you a surprise expense,
you are not stuck paying surrender charges to reach your cash.
Reason 3
Your needs will change
What makes sense at 62 may not make sense at 70. A ladder builds in natural
checkpoints to re-decide, without penalty.
Reason 4
A built-in inflation hedge
Ladder income start dates and each new stream that kicks in works like a raise.
You are not living on one flat payment for 30 years.
Three Ways to Build the Ladder
There is no single right way. We usually recommend one of three approaches,
depending on what the money is for.
Most common
1. Ladder by term length
Buy several MYGAs (fixed-rate annuities that work like CDs) with different terms:
3, 5, and 7 years. Simple, guaranteed, no moving parts.
As of early 2026, 5-year MYGAs from A-rated carriers pay about
5.65% to 6.30%, well above most bank CDs.
For lifetime income
2. Ladder by income start date
Start one income stream at 65, another at 70, a third at 75.
Each new stream is a "retirement raise," and later streams pay more
because you are older when they begin.
Most complete
3. Blend product types
Give each rung a different job. Years 0 to 5: a MYGA for safe, predictable growth.
Years 5 to 10: a fixed index annuity for growth potential with zero market loss.
Years 10+: deferred income that covers the risk of a very long life.
Together they do what no single product can.
A Real Example: $300,000, Three Rungs
Say you have $300,000 you want in safe, guaranteed products. Here is the ladder we
would sketch first:
RUNG 1 · matures first
$100,000
3-year MYGA
At maturity: reinvest at new rates, take income, or reposition.
RUNG 2 · two years later
$100,000
5-year MYGA
Same menu of options when it matures.
RUNG 3 · longest term
$100,000
7-year MYGA
Longest lock, typically the highest rate.
The key move: when Rung 1 matures in year three, you are back in the driver's seat.
Rates up? Lock a new 7-year and extend the ladder. Need income? Take it.
Situation changed? A 1035 exchange moves the money into a different annuity
with no tax bill.
And because each rung comes from a different carrier (we recommend it),
your risk is spread across multiple insurance companies, not parked with one.
Annuity Ladder vs. CD Ladder
Same concept, different tools. Here is the honest comparison:
In the chart below, the blue bar is a 5-year MYGA and the gray bar is a typical 5-year bank CD.
On a $300,000 ladder, a 1.5 to 2 point gap compounds into real money.
What matters
Annuity ladder
CD ladder
Rates
Higher for comparable terms
Lower
Taxes on growth
Deferred until withdrawal
Taxed every year
Move money at maturity
Tax-free via 1035 exchange
No equivalent
Protection
Carrier strength + state guaranty assn.
FDIC insured
When CDs win: money you need within the next two years belongs in a CD or
high-yield savings, not an annuity. For longer horizons and retirement money,
the ladder typically wins.
Is a Ladder Right for You?
Laddering is not for everyone. It tends to fit if any of these sound like you:
You are retired, or within 10 years of it, with $100,000 or more in safe money you want to grow without market risk.
You are rolling over a 401(k) or IRA and do not want everything in one product at one rate.
You have been parking money in CDs or savings and want better returns without stock market risk.
You have been sitting on cash waiting for the "right" rate. A ladder ends the guessing game.
Five Mistakes to Avoid
Every rung with the same carrier. Spread across two or three A-rated companies.
Ignoring surrender charges. Know when each contract becomes fully liquid. Most MYGAs allow 10% per year penalty-free.
Forgetting the 59½ rule. Non-IRA money withdrawn early can trigger a 10% IRS penalty on gains. Line your maturities up with your age.
Over-complicating it. Three to five rungs is plenty. Ten-rung ladders become unmanageable.
Skipping the ratings check. A.M. Best A- or better, always. A slightly lower rate from a stronger company is usually the smarter buy.
Common Questions
How much do I need to start?
Most MYGAs take $10,000 to $25,000 minimum. A meaningful three-rung
ladder usually starts around $50,000 to $100,000. The sweet spot we see most often is
$200,000 to $500,000.
Can I build a ladder inside my IRA?
Yes. MYGAs, fixed index annuities, and income annuities all work inside
a traditional or Roth IRA. The guaranteed rates and principal protection still stand out
against other conservative IRA options.
What happens when a rung matures?
You typically get a 30-day window to choose: take the cash, roll into a
new annuity tax-free (1035 exchange), turn it into income, or let it renew. We do not
recommend auto-renewal without a review, since renewal rates are often lower.
Is this better than a bond ladder?
Similar purpose, different protection. Bond values swing with interest
rates, so selling early can mean losses. MYGAs guarantee your principal and your rate, and
grow tax-deferred.
How do I move money between annuities without taxes?
A 1035 exchange (named for the IRS code section) transfers funds from
one annuity to another with no taxable event. We use them regularly when repositioning
maturing rungs.
Key Takeaways
Split, don't lump. Several annuities with staggered maturities beat one big contract.
MYGA ladders are the simplest start: CD-like simplicity, higher rates, tax-deferred growth.
Ladder income start dates for staggered "retirement raises" that fight inflation.
Diversify carriers, keep it to 3 to 5 rungs, and check A.M. Best ratings every time.
1035 exchanges give you tax-free flexibility every time a rung matures.
Want a ladder built for your numbers?
We will walk through your situation, compare live rates from top-rated carriers,
and design a ladder that balances growth, income, and flexibility.
No pressure. Just an honest conversation.
BA in Finance, Auburn University. Chartered Life Underwriter, The American College.
Top of the Table member, Million Dollar Round Table. 30 years in insurance and
retirement income planning. President of Ogletree Financial, serving thousands of
policyholders nationwide.
Call: 800-712-8519