Larry Kotlikoff (Substack)
TIPS Yields Are Super High and Kevin Esler Has Returned to Help You Build a TIPS Ladder Using tipsladder.com
Why It Matters
With inflation concerns rising, securing a reliable, inflation‑adjusted income stream is crucial for retirees who can no longer rely on wages as a built‑in hedge. The episode shows a practical, low‑cost solution that many Americans can implement now, leveraging unusually high TIPS yields to preserve purchasing power and reduce financial uncertainty.
Key Takeaways
- •TIPS yields hit 2.5% real, near historic highs.
- •tipsladder.com offers free, automated TIPS ladder builder.
- •Using TIPS ladders secures retirement cash flow against inflation.
- •Kevin Esler holds about 30% assets in TIPS, reducing risk.
- •Maxify combines TIPS ladder planning with comprehensive retirement budgeting.
Pulse Analysis
Current Treasury Inflation‑Protected Securities (TIPS) are delivering real yields around 2.5%, with the 30‑year issue at 2.56%—an 80th‑percentile level historically. This high real return reflects a low price for inflation‑indexed income, making TIPS an attractive hedge for retirees worried about purchasing‑power erosion. Because the federal debt default risk remains minimal, investors can consider TIPS a near‑risk‑free component for long‑term cash‑flow planning.
The free web tool tipsladder.com, created by Kevin Esler, automates the construction of a staggered TIPS ladder tailored to a household’s withdrawal schedule. Esler, a former software engineer turned retirement‑risk specialist, built the platform after struggling with cumbersome spreadsheets. Users input desired annual cash needs, and the algorithm selects maturities that lock in today’s real yields, delivering predictable, inflation‑adjusted income without the need for costly advisory services. The tool’s popularity on forums like Bogleheads underscores its practical value for both DIY investors and financial planners.
Integrating a TIPS ladder into broader retirement budgeting is a core feature of Maxify, the economics‑based planning suite developed by Lawrence Kotlikoff. Maxify runs a safety‑first mode assuming a 2% real return from the ladder, then calculates discretionary spending capacity after accounting for fixed expenses, taxes, and Social Security. In the podcast’s case study of a couple in their late fifties, the platform shows how a 30%‑plus allocation to TIPS can fund 21 years of withdrawals, preserving purchasing power while leaving room for controlled market exposure. This combined approach offers retirees a transparent, low‑risk foundation before considering upside‑oriented investments.
Episode Description
Forget what Wall Street says, risky investing is an option, not a starting point when it comes to your financial plan.
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