Michael Gold Shares How a Bond Ladder Can Protect Income During Market Swings

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The 10-year Treasury yield climbed to 5.36% on Oct. 7, its highest level since 2002. The Federal Reserve raised its benchmark rate in September, and consumer prices rose 3.4% over the year through August. Stocks have mostly shrugged it off, with the S&P 500 hovering near record levels. Wealthy families who live off their portfolios are left with a practical question. Where does next year’s income come from if either market breaks?

Michael Gold, founder and CEO of Gold Family Wealth in Westport, Connecticut, starts with a familiar fixed income tool. He builds a bond ladder so a family’s living expenses don’t depend on selling stocks during a downturn. “U.S. Treasuries are the gold standard in credit quality, liquidity, and safety,” he writes in his forthcoming book, The Goldprint. “They’ll anchor your portfolio through economic cycles.”

How the Ladder Works

A bond ladder staggers maturities across a range of dates. Gold’s example sets bonds to mature in one year, five years and 30 years. Something is always coming due, and the proceeds can roll into new bonds at whatever rates prevail at the time. The Goldprint credits the structure with three outcomes at once: a steady stream of income, less worry about where rates sit on any given day, and room to adapt when rates move.

Room to adapt counts for more when yields climb. The Treasury Department’s daily yield curve on Oct. 9 showed the one-year rate at 4.47% and the 30-year bond at 5.60%. PIMCO notes that ladders can be particularly advantageous in rising rate environments, since maturing proceeds get reinvested at the new rates.

For a family holding just under $50 million after selling a business, Gold earmarks 20%, or $10 million, for Treasuries and high-quality fixed income designed to produce about $480,000 a year for living expenses, before taxes. The math implies a yield of roughly 4.8%, which sits inside the range of today’s Treasury curve. “The $10 million doesn’t get whittled down,” he writes. “That’s the goal, and doable if carefully planned for.”

Treasury Inflation-Protected Securities round out the mix, with a face value pegged to the Consumer Price Index so principal rises with inflation. Gold also adds tax-exempt municipal bonds from A-rated issuers, whose interest is often excluded from federal income tax. Families in higher brackets gain the most, since tax drag can “chip away a big chunk of your wealth” over a number of years, he writes.

The Price of Selling at the Bottom

The S&P 500 fell 57% from its October 2007 peak to its trough in March 2009, and plenty of investors sold somewhere along the way. Michael Gold has told the story of one of them in a behavioral finance video and in his book.

Jason, a friend’s father-in-law, ran his business for decades and sold it in 2005 for a little over $5 million, enough for a comfortable retirement. When he opened his statement in December 2008, about half of it was gone. He threw in the towel. He sold before the bottom and sat in cash.

Gold reviewed the portfolio in 2010 and found the structure sound. “It was going to achieve what he needed to achieve,” he says in the video. “His behavior did him in.” Jason, then around 70, went back to work part time to maintain his lifestyle.

A ladder is built for that moment. When bills are covered by maturing bonds and coupon payments, the equity portfolio gets time to recover. Gold writes that a sudden drop in income can force a family “to then unload some other asset, which could cut into your basis.” Disciplined investors, he says in the video, are “not digging up what they planted every time it rains.”

Income Comes First

Gold and co-author Jerry D. Prince describe the larger shift in Radical Ownership, a Gold Family Wealth white paper. Wealth creation and wealth stewardship “are different disciplines,” they write. Eventually the owner’s question becomes, “How do I make sure the wealth I created produces the freedom, security, opportunity, and impact I want?”

Income is funded first at Gold’s Westport practice. Equities can ride out volatility only if living expenses are already covered, and that coverage has to be arranged before panic sets in. The Westport advisor applies the same discipline to market noise. “It’s not our job from the investment standpoint to make people feel good because they saw something on CNBC. Our job is to invest accordingly based on whatever outcomes or results that they need,” Michael Gold says (Interview).

Yields near 24-year highs give families heading into 2027 a chance to lock in that schedule. “In this way, you navigate market volatility with greater confidence,” Gold writes. “You always have some access to your capital.”

Investment advisory services offered through CWM, LLC, an SEC Registered Investment Advisor.