Advisers looking at ways to lock in retirement income for clients are dusting off an old strategy -- bond laddering -- which had fallen from favor in the past few years but is looking increasingly attractive, now that the global economy is slowing and the bull market shows signs of age.

“Bond ladders are appropriate for clients that have a goal to mitigate interest rate risk,” says Kevin Lynar, a senior adviser at Rowe Lynar & Associates in Fort Lauderdale, Fla., which is part of Wells Fargo Advisors Financial Network. “In periods of modest interest rate increases or decreases [as we have experienced in the past several years], a bond ladder can be effective and may potentially outperform other strategies such as only short-term bond investing.”

A bond ladder is basically a portfolio of relatively small fixed-income securities, which could be anything from U.S. Treasuries to corporates or lower-grade bonds, arranged so that they have substantially different maturity dates. The idea behind this is to minimize interest rate risk, while maintaining liquidity.

At regular intervals, bonds can be sold and the funds reinvested in a new one. That way, if interest rates have moved up, the investor substitutes a higher rate bond, while if rates fall, the investor can hold on to the bond with the higher rate.

“We are seeing more interest in bond laddering,” says Stephen Johnson, an independent Raymond James adviser based in Draper, Utah.

His firm likes a fund manager who uses a tax-exempt laddering strategy that has been generating a return of 3.9% to 4% on a current basis, buying 5% bonds at a premium.

“That’s a pretty good return in this interest rate environment, with the current yield on a 10-year Treasury at 1.9%,” Johnson says.

Although the tax-free ladder strategy is geared toward clients in higher tax brackets, bond laddering is also available to investors with lower incomes and assets, he says.

“With a lower tax bracket, clients can go with lower-quality taxable government bonds,” Johnson says.

In such cases, he likes clients to own actual bonds instead of shares in a bond ladder fund, because funds can become illiquid during a crisis if lots of investors try to cash out at once.

“If you own 30 bonds, you have your own ladder and you can just wait and hold them each to maturity,” Johnson says.