Annuity Laddering Calculator

What Is an Annuity Ladder?

An annuity ladder is a strategy of splitting a single large annuity purchase into multiple smaller annuities purchased over consecutive years, rather than buying one large annuity all at once. The ladder applies to two main annuity types: Single Premium Immediate Annuities (SPIAs) that begin lifetime income at purchase, and Multi-Year Guaranteed Annuities (MYGAs) that guarantee a fixed yield over a specific period (typically 3-10 years), similar to a CD with potential tax deferral. By laddering, you avoid locking in 100% of your annuity capital at one moment's interest rate environment, dollar-cost-average across rate cycles, and create a sequence of staggered maturities (for MYGAs) or income streams (for SPIAs). Per SEC investor education on annuities, the ladder approach is a recognized risk-mitigation technique used by retirement-income planners.

SPIA Ladder vs MYGA Ladder — Different Goals

The two ladder types serve different objectives. SPIA Ladder: each rung locks in a portion of guaranteed lifetime income. As you age, SPIA payout rates rise (a 70yo gets a higher payout than a 65yo for the same dollar premium), so a ladder buying at 65, 67, 69, 71, 73 captures progressively higher rates. The 5-year ladder ends with $X of total guaranteed lifetime income, with the average payout rate higher than buying everything at 65. MYGA Ladder: similar to a CD ladder. Buy a 5-year MYGA each year for 5 years; in year 6, the first MYGA matures and you reinvest at then-current rates. This creates 20% liquidity per year and continuous reinvestment at fresh market rates — very valuable in rising-rate environments where buying a single 10-year MYGA today would lock in a low rate. Per NAIC consumer guidance on annuities, both approaches reduce timing risk and improve overall yield realization.

The 20-30% Annuity Allocation Rule

Most retirement income researchers (Wade Pfau, David Babbel, Moshe Milevsky) suggest annuitizing 20-30% of total retirement assets, not 100%. Annuities exchange liquidity for guaranteed income — too little annuitization leaves you exposed to longevity and market risk; too much annuitization eliminates flexibility for emergencies, large one-time expenses, or estate planning. A typical retiree with $1M in retirement savings might allocate $200-300K to a SPIA ladder, leaving $700-800K in market-invested portfolios. The annuity portion provides Social-Security-like guaranteed income that lets you spend more aggressively from the market portfolio without fearing running out. Pfau's research using Kitces' financial planning archive shows that 25-35% annuitized portfolios produce higher total spending in worst-case scenarios than 100% market-invested portfolios using the same starting balance.

Insurer Diversification — A Critical Detail

Annuities are not FDIC-insured — they're backed by the insurance company's claims-paying ability and your state's life insurance guaranty association, which typically covers $100,000-$300,000 per insurer per state for annuity benefits. For ladders over $300,000, spread purchases across multiple A-rated insurers to stay within state guaranty limits per insurer. A typical 5-rung $500K ladder would buy from 3-5 different insurers, all rated A or higher (A.M. Best, Standard & Poor's, Moody's, or Fitch). Concentration in one issuer creates uninsured single-point-of-failure risk for amounts above the state guaranty limit. Free A-rated insurer comparisons are available via ImmediateAnnuities.com and similar quote services. Last updated May 2026. Source: Federal Reserve retirement income research.