Gyroscopic Investing

I'm thinking of setting up an I-Bond ladder, modeled after CD ladders. I haven't heard this discussed anywhere else, but I'm sure someone else thought of it. The concept is that I buy $2500 of an I-Bond every 3 months. January, April, July, October. That's $10k per year which is the annual contribution limit.

After 5 years, there's no longer an interest penalty. So if I do this for 5+ years, I'll be able to take out $2500 plus interest every quarter. But if I don't need to take the money out, I just let it sit in there and continue to grow tax-deferred. I have the optionality of using it like a ladder, but not the requirement.

This may be an interesting early retirement strategy such that you can then take out $2500 per quarter, which for my personal budget, amounts to about half of what I need to live on. So I supplement with money from another bucket each quarter.

Or maybe you don't plan to retire early and live off this bucket, but you do want to use this for your cash component of the PP. Doing this gives you flexibility to withdraw the money without penalty to rebalance into other 3 assets. But then again, if you can afford it, probably makes sense to put in all $10k in January each year.

There have been tons of threads on I Bonds, but I don't remember anyone mentioning a ladder.  You could do that, but you could also just sell part of the bond when needed.

Another issue is that you might not be so interested in hanging onto today's 0% fixed rate bonds after you're retired, if the fixed rate is substantially higher then.

I (like many others) use I bonds as "Deep cash", meaning they should be no more than 1/3 of the cash allocation.  I haven't really thought of how to spend them down, but I expect I'll very much enjoy figuring that out when the time comes.

I view IBonds as shallow cash once they are 12 months old.  With paper ones I can walk into any bank and redeem them for cash on the spot.  With electronic ones I can use TreasuryDirect and just need to wait for the ACH to clear. 

WRT laddering, it seems to me a lot of work to do quarterly buys for something (inflation + extra interest) that tends to change slowly.  I always just buy my yearly allotment all at once.  Assuming you buy them every year, after a few years one has the equivalent of a ladder going, just coarser granularity.