The Liquidity Ladder

Match each layer of your money to when you will need it — cash for now, growth for later. (A simple liquidity ladder.)

Liquidity is simply how quickly you can turn an asset into spendable cash without taking a loss. In retirement you want the right amount of it: enough that a market fall never forces a bad sale, but not so much that inflation quietly erodes years of idle cash.

A liquidity ladder arranges your money by time horizon. The first rung is cash — an emergency buffer plus this year's spending. The next rung, for money needed in one to three years, sits in short-term bonds and Treasury bills. The middle rung, three to ten years out, holds a balanced mix. The far rung, ten years and beyond, is invested for growth.

As time passes, money steps down the ladder: the growth rung feeds the balanced rung, which feeds the cash rung. Done steadily, you are never a forced seller in a downturn, and never sitting on decades of spending in cash earning too little.

Illustrative example: rungs by time horizon

The chart shows the rungs laid out by when each pool is needed. The ladder turns a vague worry — "how much cash should I be holding?" — into a clear, layered answer you can maintain year after year.