Why this planner exists
Most retirement planning tools begin with your savings, estimate future investment returns, and calculate how much you can safely withdraw in retirement. While useful, this approach overlooks an important distinction: having enough wealth to retire is not the same as having enough secured retirement income.
LadderUp approaches retirement planning differently. It starts with the retirement income you want and determines how to balance investment growth with protecting that income from future market declines.
The objective is to help you retire as early as possible while achieving your desired level of income security.
The Limitation with Traditional Retirement Planning
Traditional retirement planning often revolves around two familiar concepts: the 4% withdrawal rule and a diversified investment portfolio, such as the traditional 60/40 stock-bond allocation.
These approaches provide useful starting points. Withdrawal rules help estimate sustainable spending, while diversification reduces exposure to investment risk. But neither directly determines how much future retirement income has actually been secured.
Even after accumulating sufficient wealth to retire, much of your future income may remain dependent on investment performance. A significant market decline could force you to reduce spending or increase the risk of exhausting your savings.
Traditional asset-allocation rules also have limitations. A 60/40 portfolio or an age-based allocation may be appropriate for some investors, but the optimal allocation depends on individual circumstances, retirement goals, and tolerance for income uncertainty.
Rather than starting with an investment allocation and estimating the retirement it might support, LadderUp starts with your retirement goals and determines the investment strategy needed to achieve them.
Balancing Growth and Income Security
LadderUp builds its retirement strategy around two complementary investments.
Stocks provide growth. They offer the potential to increase your wealth and support higher retirement income, but their future value is uncertain.
Treasury Inflation-Protected Securities (TIPS) secure income. By purchasing individual TIPS with different maturities, investors can construct a bond ladder whose future payments are aligned with retirement expenses. These payments are backed by the U.S. Treasury and adjust with inflation.
Social Security provides another important source of retirement income security.
The challenge is determining when to move money from growth investments into income-securing investments.
Investing too conservatively may sacrifice valuable opportunities for growth. Remaining too aggressive may expose retirement income to unnecessary market risk.
LadderUp evaluates this tradeoff based on your circumstances and retirement objectives, determining how much to invest in stocks versus TIPS and how that allocation should evolve over time.
The result is a personalized investment strategy rather than a predetermined allocation rule.
Measuring Retirement Readiness
LadderUp uses two concepts to evaluate retirement readiness.
Income Capacity: The total annual inflation-adjusted retirement income your investments and Social Security could support. This includes income already secured, plus the additional income you could secure by converting investments exposed to market risk into income-securing assets at current market rates.
Secured Income: The annual income already supported by your TIPS ladder and Social Security benefits that have been claimed.
The relationship between these two measures is called the Security Ratio:
Security Ratio = Secured Income / Income Capacity
For example, suppose your investments and Social Security could support $100,000 in annual retirement income. If $75,000 is already secured through TIPS and Social Security, your Security Ratio is 75%.
Your income capacity is $100,000, but only $75,000 is currently protected from future market declines.
LadderUp considers you ready to retire when two conditions are satisfied: your income capacity is sufficient to support your desired retirement income, and your Security Ratio meets your chosen target.
Someone comfortable with greater investment risk might choose a relatively low Security Ratio, retaining more assets in stocks. Someone who values income stability might require a higher Security Ratio before retiring.
Neither preference is inherently better. The appropriate balance depends on your individual goals.
Growing and Protecting Retirement Income
Retirement planning doesn't end when you retire.
LadderUp continues balancing growth and income security throughout retirement. As investments perform well, the model can convert part of those gains into additional TIPS, securing higher future retirement income.
Once those future payments are secured, subsequent stock market declines do not erase them.
This creates an income ratchet: favorable investment performance can increase secured retirement income while protecting previously secured payments from future market losses.
Over time, the strategy generally shifts toward greater income security as the remaining retirement horizon shortens.
The goal is not simply to accumulate enough wealth to retire. It is to turn that wealth into retirement income while preserving opportunities for additional growth.
Rethinking retirement planning
LadderUp shifts the focus of retirement planning from accumulating a target portfolio balance to securing the retirement income you want.
Rather than asking you to choose a stock–TIPS ladder allocation or withdrawal rule, it uses your desired retirement income and preferences for income security to determine when you can retire and how your investment portfolio should evolve.
By combining the growth potential of stocks with the income security of TIPS ladders and Social Security, the model seeks to balance three important objectives: retiring earlier, protecting retirement income, and preserving opportunities for future income growth.
The result is a retirement strategy built around your goals rather than a generic investment rule.
Continue exploring: Learn how stocks and bonds work together in LadderUp, how the Security Ratio measures retirement readiness, or how LadderUp determines when you can retire.