Episode 138 – What Are Bonds and Why Do They Matter in Retirement Planning?

When most people think about investing, they immediately think about stocks. The daily market headlines focus on the Dow Jones, the S&P 500, and the Nasdaq. Rarely do you hear anyone talking about bonds.

But bonds quietly play one of the most important roles in the global financial system—and in many retirement portfolios.

In Episode 138 of the Last Paycheck, advisors Rob Hoxton and Archie Hoxton explore some surprising facts about bonds, how they work, and why they matter for investors approaching retirement.

While bonds may not be the most exciting investment topic, understanding them can help you make smarter decisions about portfolio stability, income, and diversification.

What is a bond?

One feature that makes bonds unique is that they are tradable.

This means investors can buy and sell bonds in secondary markets before they mature.

A good analogy is a mortgage. Sometimes your mortgage is sold to another bank after you take it out. Bonds operate in a similar way, except anyone in the market can trade them.

Because bonds can be bought and sold, their prices fluctuate based on several factors, including:

  • Interest rates
  • Credit quality of the issuer
  • Supply and demand in the market

This trading activity adds complexity to bonds but also provides liquidity.

The Bond Market Is Larger Than the Stock Market

One of the most surprising facts discussed in this episode is the sheer size of the bond market.

Globally:

  • The stock market is valued at roughly $126–$127 trillion
  • The bond market is about $145 trillion

In other words, the bond market is significantly larger than the stock market.

The United States alone accounts for roughly $58 trillion of global bond issuance across government, corporate, and municipal bonds.

This scale reflects how bonds are used to fund major economic activity.

Governments issue bonds to finance spending. Municipalities issue bonds to build infrastructure like hospitals, schools, and public facilities. Corporations issue bonds to finance expansion, factories, and research.

In many ways, the bond market is the financial system’s plumbing.

Credit Quality Matters

Because bonds are loans, the ability of the borrower to repay is extremely important.

If a borrower has strong financial stability, investors are willing to accept lower interest rates. If the borrower has a higher risk of default, investors demand higher interest rates as compensation for that risk.

This is why bonds are often categorized by credit quality.

High-quality bonds, such as U.S. Treasury bonds, tend to offer lower yields but higher security. Lower-rated bonds may offer higher yields but carry greater risk.

Why Bonds Matter in Retirement Portfolios

Bonds are often included in retirement portfolios for two primary reasons:

1. Lower Volatility

Bonds typically fluctuate less than stocks.

When stocks experience sharp declines, bonds often move differently, helping smooth overall portfolio volatility.

2. Income Generation

Bonds provide predictable interest payments, which can help support income needs during retirement.

For retirees who rely on their portfolios to fund living expenses, this stability and income stream can be extremely valuable.

Bonds Aren’t Risk-Free

Although bonds are generally considered more stable than stocks, they are not risk-free.

For example, in 2022 the Federal Reserve raised interest rates aggressively to combat inflation. This caused one of the worst bear markets for bonds in more than a century.

While bonds still declined less than stocks in many cases, the episode serves as a reminder that bonds can experience losses.

Diversification and thoughtful portfolio construction remain important.

When Bonds Move Differently Than Stocks

One of the benefits of bonds is that they sometimes behave differently than stocks.

For example:

  • During the 2008 financial crisis, government bonds increased in value while stocks fell sharply.
  • During the dot-com crash of the early 2000s, bonds helped offset stock market volatility.

However, this relationship is not guaranteed. In certain environments—such as 2022—stocks and bonds can both decline.

Understanding this relationship is a key part of portfolio design.

The Strange Case of Negative-Yield Bonds

One of the most unusual bond market events occurred in 2020 during the COVID economic shutdown.

At that time:

  • Interest rates were pushed extremely low.
  • Investors flooded into bonds seeking safety.

As demand surged, the prices of many bonds rose so high that their yield to maturity became negative.

In practical terms, this meant that investors buying those bonds were guaranteed to lose money if they held them to maturity.

This unusual situation occurred because fear and liquidity needs drove investors toward the perceived safety of bonds, even at a negative return.

Some Bonds Last 100 Years

Most bonds have maturities between a few months and 30 years.

But there are some extraordinary exceptions.

Certain countries—including Austria, Mexico, Argentina, and Ireland—have issued century bonds, which mature in 100 years.

These bonds are typically purchased by large institutional investors such as pension funds or sovereign wealth funds that have extremely long investment horizons.

A Bond That Has Been Paying Interest Since 1624

Perhaps the most remarkable bond mentioned in the episode was issued in 1624 by the Dutch Water Authority.

The bond was created to fund repairs to dikes and was issued in perpetuity, meaning it never matures.

More than 400 years later, the bond is still technically paying interest—about €15 per year.

It is one of the longest-running financial instruments in existence.

Why Bonds Deserve More Attention

While bonds may not dominate financial headlines, they are a critical part of the financial system.

They help fund governments, corporations, and infrastructure. They provide income for investors. And they play a key role in building balanced retirement portfolios.

For anyone approaching retirement, understanding how bonds function within a broader financial strategy can help support long-term stability.

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If you are approaching retirement, understanding how your investments are allocated between stocks, bonds, and other assets is critical to maintaining stability and income throughout retirement.

To help you evaluate whether your portfolio is aligned with your goals and risk tolerance, download the Investment Alignment Worksheet.

Download worksheet

This worksheet will guide you through reviewing your current allocation and identifying whether your investments are positioned to support your long-term retirement plan.

If you would like help evaluating your portfolio strategy, you can also schedule a conversation with the team at Hoxton Planning & Management.

Certified Financial Planner Board of Standards Center for Financial Planning, Inc. owns and licenses the certification marks CFP®, CERTIFIED FINANCIAL PLANNER®, and CFP® (with plaque design) in the United States to Certified Financial Planner Board of Standards, Inc., which authorizes individuals who successfully complete the organization’s initial and ongoing certification requirements to use the certification marks.

Episode 137 – A New Way to Save for Kids: Understanding the TRUMP Account

Insights from Last Paycheck Podcast Episode 137

Grandparents and parents ask the question all the time:

What is the best way to save for my kids or grandkids?

For years, the usual answers were a 529 plan, a UTMA account, or a custodial IRA. Each option has strengths. Each has drawbacks.

In Episode 137 of the Last Paycheck, hosts Archie Hoxton and Jimmy Sutch discuss a new savings vehicle introduced through recent tax law changes often referred to as the “big beautiful bill.” These new accounts, commonly called TRUMP accounts, blend features of several existing options and create some intriguing long-term planning opportunities.

While details are still being finalized and implementation is expected to begin in mid-2026, the planning implications are significant enough that families should start paying attention now.

Why Traditional Options Leave Gaps

Before understanding what makes these new accounts unique, it helps to revisit the limitations of existing tools.

UTMA accounts allow adults to invest for minors, but when the child reaches the age of majority, typically 18 or 21 depending on the state, full control transfers automatically. For many families, handing a large sum of money to a young adult with no restrictions can be uncomfortable.

529 plans offer strong tax advantages for education, but they come with usage restrictions. Funds must be used for qualified education expenses or face penalties. Families often hesitate to overfund these accounts if the child’s future educational path is uncertain.

Custodial IRAs can be powerful, especially Roth IRAs for young earners, but they require earned income. Not every child has a job early enough to maximize the opportunity.

Each tool works well in specific circumstances. None offers broad flexibility without tradeoffs.

What Makes the TRUMP Account Different

The new TRUMP account attempts to combine flexibility with long-term tax advantages.

Eligibility is broad. Any child under 18 may have an account opened on their behalf. Additionally, children born between 2025 and 2028 may receive a $1,000 federal grant to fund the account at inception. Some employers and private organizations are also considering matching or supplemental contributions.

Annual contributions are capped at $5,000 per child. That limit is scheduled to adjust for inflation beginning in 2028.

Unlike a traditional IRA, contributions are made with after-tax dollars. That means the parent or grandparent has already paid taxes on the money contributed.

Here is where the structure becomes particularly interesting.

The Tax Treatment

At age 18, the account converts into an IRA-style account. Contributions are not taxed again when withdrawn because taxes were already paid upfront. However, the earnings inside the account are taxed as ordinary income when withdrawn.

In effect, the structure resembles a non-deductible IRA. You contribute after-tax dollars, earnings grow tax-deferred, and earnings are taxable upon distribution.

There is an additional nuance. Employers may be permitted to contribute up to $2,500 on a pre-tax basis, and charitable or governmental entities may also contribute. If pre-tax dollars are included, careful recordkeeping becomes essential because those contributions and their associated earnings would be fully taxable upon withdrawal.

A Powerful Roth Strategy Opportunity

One of the most compelling planning ideas discussed in the episode involves Roth conversions.

Imagine a child reaches age 18 with a meaningful balance in this account. During college years, when income may be minimal or even zero, there may be an opportunity to convert portions of the account to a Roth IRA at very low tax rates.

For example, if a child has $100,000 in contributions and $100,000 in earnings, and little to no taxable income, strategic annual conversions during low-income years could result in minimal taxes paid on those earnings.

The result could be a fully funded Roth IRA by the early twenties. With decades of compounding ahead, the long-term impact could be extraordinary.

This is not automatic. It requires careful planning and tax coordination. But the opportunity is there.

It Does Not Replace Other Tools

Importantly, contributions to a TRUMP account do not reduce eligibility for other vehicles.

A family could fund a 529 for education, a custodial Roth IRA for earned income, and a TRAP account for broader long-term growth. Each serves a different purpose.

This flexibility is what makes the new account particularly attractive. It expands the planning toolkit rather than replacing existing options.

Implementation Timeline

While enthusiasm is high, families should understand that funding is not expected to begin until mid-2026. Financial institutions will need time to build infrastructure and finalize administrative procedures.

That said, proactive families can begin thinking through how this account might fit into a broader generational wealth strategy.

The Bigger Planning Conversation

At its core, this discussion is not simply about a new account. It is about giving the next generation a head start.

When children begin adulthood with retirement savings already in place, financial flexibility increases. They may be able to allocate more of their own income toward buying a home, building a business, or pursuing opportunities without sacrificing long-term retirement security.

Tax-advantaged compounding is one of the most powerful forces in wealth creation. Starting early magnifies that power.

Your Next Step

If you are considering saving for children or grandchildren, this is the right time to evaluate how all available tools work together.

Hoxton Planning & Management can help you determine whether a TRUMP account, a 529 plan, a custodial Roth IRA, or a coordinated strategy across multiple accounts best fits your family’s goals.

Schedule a conversation to explore how this new savings vehicle could integrate into your broader financial plan.

Early planning creates long-term advantage.

Certified Financial Planner Board of Standards Center for Financial Planning, Inc. owns and licenses the certification marks CFP®, CERTIFIED FINANCIAL PLANNER®, and CFP® (with plaque design) in the United States to Certified Financial Planner Board of Standards, Inc., which authorizes individuals who successfully complete the organization’s initial and ongoing certification requirements to use the certification marks.

Episode 136 – The Risk of Not Taking Risk: Why Completely De-Risking Your Portfolio Can Backfire

Insights from Last Paycheck Podcast Episode 136

Periods of global uncertainty have a way of rattling even the most disciplined investors. Geopolitical tension, market volatility, and unsettling headlines often spark the same question, especially among retirees.

Should I just get out of the market and play it safe?

In Episode 136 of the Last Paycheck, CFP professionals Archie Hoxton and Rob Hoxton tackle this question head-on. Their conclusion may surprise some listeners. While reducing risk feels comforting in the moment, completely de-risking an investment portfolio can introduce a different set of dangers, often more damaging and far less visible.

This episode focuses on what they call the risk of not taking risk.

Why the Desire to De-Risk Feels So Strong

Market volatility feels different when you are retired or nearing retirement. Your portfolio is no longer just a long-term growth engine. It is a primary income source meant to support you for the rest of your life.

Rob acknowledges how uncomfortable it can feel to watch a retirement portfolio drop 20 or 25 percent, even if those declines are historically temporary. That discomfort often leads to a powerful urge to stop the pain by moving to cash.

But reacting emotionally to volatility can create long-term consequences that are easy to underestimate.

Timing the Market Is a Two-Step Gamble

Many investors assume the danger lies in selling at the wrong time. Archie points out that timing the market requires getting two decisions exactly right. You must know when to get out and when to get back in.

History shows that very few investors manage this consistently without luck. Getting back into the market is often harder than getting out. Fear lingers, and the next downturn always feels just around the corner.

As a result, investors who move to cash often stay there far longer than planned, missing critical periods of recovery.

Risk Does Not Disappear. It Changes Form

One of the central ideas in this episode is that risk never disappears. When you remove market risk entirely, you take on other risks that are quieter but potentially more destructive.

Archie describes cash as the carbon monoxide of investing. It feels safe because there is no visible volatility, but the damage happens slowly and silently.

Three risks stand out.

Inflation Risk

Cash offers no meaningful protection against inflation. Even modest inflation steadily erodes purchasing power year after year.

An account balance may stay the same, but what that money can buy shrinks over time. Over ten, twenty, or thirty years, the cumulative effect can be devastating. Inflation does not announce itself loudly most years, but its impact compounds relentlessly.

Longevity Risk

No one knows how long retirement will last. Planning based on a fixed life expectancy can be dangerous, especially when inflation and unexpected expenses are factored in.

Rob explains why planners often assume longer lifespans, sometimes into the mid-nineties. The risk is not dying early. The risk is living longer than expected and running out of money.

Without growth in a portfolio, longevity risk increases dramatically.

Opportunity Cost

Perhaps the most overlooked risk is opportunity cost.

Every year spent out of the market is not just a lost return for that year. It is the loss of decades of compounded growth. Archie illustrates how even modest missed returns can translate into hundreds of thousands of dollars over time.

Those lost dollars may be needed later for healthcare, long-term care, or simply maintaining quality of life.

A Better Way to Think About Risk

Rather than viewing risk as something to eliminate, Archie and Rob advocate managing it intentionally.

One helpful framework is a bucket approach. Short-term needs are covered by cash. Intermediate needs are supported by bonds. Long-term needs are invested in growth assets like stocks.

This structure allows retirees to weather market downturns without panicking. When stocks decline, income can come from cash and bonds, giving the long-term portion of the portfolio time to recover.

The key is not avoiding risk entirely, but taking the right amount of risk for the right time horizon.

Investing Should Never Happen in a Vacuum

Throughout the episode, Rob emphasizes that investment decisions must be made within the context of a broader financial plan.

At Hoxton Planning & Management, portfolios are evaluated based on potential ranges of outcomes over defined periods, not just average returns. Those ranges are then compared to a client’s spending needs and long-term goals.

This approach allows clients to understand what short-term volatility might look like and whether their plan can withstand it. When risk is measured and aligned with a plan, it becomes far less frightening.

The Real Goal: Balance

The takeaway from this episode is not that risk should be ignored or embraced recklessly. Taking too much risk can be just as dangerous as taking too little.

For most retirees, the appropriate level of risk is moderate. Enough to outpace inflation and support longevity, but not so much that short-term volatility threatens essential income needs.

Finding that balance is far easier with clear planning, realistic expectations, and the right tools.

Your Next Step

If you have ever wondered whether your investment strategy truly aligns with your retirement goals, this is the right time to check.

Hoxton Planning & Management offers a free Investment Alignment Worksheet designed to help you evaluate whether the risk you are taking matches what you are trying to accomplish long term. It is a practical way to move from fear-based decisions to informed ones.

You may also choose to schedule a complimentary conversation with the Hoxton team to review your portfolio within the context of a full financial plan.

Risk is unavoidable. Mismatch is optional.

Download the Investment Alignment Worksheet or schedule your meeting.
Download the Checklist
Certified Financial Planner Board of Standards Center for Financial Planning, Inc. owns and licenses the certification marks CFP®, CERTIFIED FINANCIAL PLANNER®, and CFP® (with plaque design) in the United States to Certified Financial Planner Board of Standards, Inc., which authorizes individuals who successfully complete the organization’s initial and ongoing certification requirements to use the certification marks.

Episode 135 – The Retirement Countdown: Five Things You Must Do in the Final Year Before Retirement

Insights from Last Paycheck Podcast Episode 135

When retirement is a year away, excitement and anxiety often show up at the same time. Even people who have planned diligently for decades can feel a surge of stress as the reality of a final paycheck approaches.

In Episode 135 of the Last Paycheck, hosts Archie Hoxton and Rob Hoxton, CFP professionals at Hoxton Planning & Management, walk through what they call the Retirement Countdown. These are the five most important things to address when you are roughly a year or less from retiring.

While many of these steps are ideally done earlier, this episode focuses on what truly must be clarified before you make the transition from earning a paycheck to living off what you have saved.

Why the Final Year Feels Different

Retirement represents more than a financial shift. It is a psychological one.

During your working years, income feels controllable. You can work longer, take on more responsibility, or delay retirement if needed. Once you retire, income comes from decisions already made. Savings, investments, pensions, and Social Security replace a paycheck you could once rely on.

That shift can be deeply unsettling. Archie and Rob emphasize that thoughtful planning during this final year can dramatically reduce stress and replace uncertainty with confidence.

Step One: Run the Numbers and Identify the Gap

The first step in the retirement countdown is deceptively simple. Take inventory.

You need to clearly identify every source of income you expect to have in retirement. This may include Social Security, pensions, annuities, part-time work, or other income streams. Then compare that income to your anticipated spending.

For most retirees, income does not fully cover expenses. The difference between what comes in and what goes out is the retirement gap. That gap must be filled by withdrawals from your investment portfolio.

Understanding this number is foundational. Without it, every other decision becomes guesswork.

Step Two: Build a Smart Withdrawal Strategy

Once the gap is identified, the next question becomes where the money will come from.

Most retirees have multiple types of accounts. Pre-tax accounts like IRAs, Roth accounts, and taxable brokerage accounts all behave differently from a tax standpoint. The order in which you draw from these accounts can have a meaningful impact on how long your money lasts.

Archie and Rob stress the importance of coordinating withdrawals to minimize taxes and manage required minimum distributions later in retirement. A thoughtful distribution strategy can extend portfolio longevity and reduce unnecessary tax drag.

Step Three: Plan for Healthcare Costs

Healthcare is one of the most underestimated expenses in retirement.

Medicare eligibility begins at age 65, but even then, premiums for Part B, Part D, and supplemental coverage can be substantial. Those premiums are often tied to income, which means withdrawal decisions can directly affect healthcare costs.

For those retiring before Medicare eligibility, the challenge is even greater. Private health insurance can represent a significant financial burden and must be planned for carefully.

Rob shares an example of recent retirees facing healthcare costs approaching $26,000 per year. Yet many retirement plans fail to include a realistic healthcare line item at all.

Step Four: Design a Scalable Lifestyle

One of the most important concepts discussed in this episode is lifestyle scalability.

Retirement spending does not need to be rigid. In fact, flexibility can be a powerful planning tool. Being willing to spend a little less during market downturns and a little more during strong periods can help protect long-term financial security while preserving quality of life.

Scalability requires clarity. You need to know which expenses are essential and which are discretionary. That clarity often comes only through ongoing planning and regular review.

Debt can be a major obstacle to flexibility. While certain types of debt may make sense in retirement, high consumer debt reduces your ability to adjust spending when needed. Eliminating unnecessary debt before retirement can significantly increase peace of mind.

Step Five: Get Your Legal and Estate Documents in Order

The final step in the retirement countdown is administrative, but no less important.

Wills, trusts, powers of attorney, healthcare directives, and beneficiary designations should all be reviewed and updated. Documents should be easy to access, and trusted individuals should know where to find them.

Archie and Rob frame this as one of the greatest gifts you can give your family. Grieving a loss is hard enough. Leaving behind confusion or disorganization only adds to that burden.

Getting these documents finalized before retirement allows you to focus on living well, knowing that your affairs are in order.

The Value of Ongoing Planning

Throughout the episode, Rob makes a critical point. Retirement planning is not a one-time exercise.

While it is possible to create a snapshot plan, the greatest value often comes from ongoing management. Markets change. Spending evolves. Health needs shift. Having a plan that adapts over time helps prevent small issues from becoming serious problems later in life.

Your Next Step

If you are within a year or two of retirement, now is the time to move from uncertainty to clarity.

Hoxton Planning & Management offers a Retirement Readiness Checklist designed to help you assess income sources, spending, healthcare planning, and portfolio strategy in one place. It is a practical starting point for understanding where you stand and what still needs attention.

You may also choose to schedule a complimentary conversation with the Hoxton team to walk through your retirement countdown and ensure no critical steps are overlooked.

Retirement is a major transition. It deserves a plan.

Download the Retirement Readiness Checklist or schedule your meeting.
Download the Checklist
Certified Financial Planner Board of Standards Center for Financial Planning, Inc. owns and licenses the certification marks CFP®, CERTIFIED FINANCIAL PLANNER®, and CFP® (with plaque design) in the United States to Certified Financial Planner Board of Standards, Inc., which authorizes individuals who successfully complete the organization’s initial and ongoing certification requirements to use the certification marks.