Episode 142 – What Is FIRE (Financial Independence, Retire Early) and Is It Actually Realistic?

The idea of retiring decades earlier than most people sounds incredibly appealing.

No alarm clocks. No daily commute. No pressure to work unless you choose to.

In Episode 142 of The Last Paycheck Podcast, Archie Hoxton, CERTIFIED FINANCIAL PLANNER®, and Rob Hoxton revisit a popular financial movement known as FIRE, which stands for Financial Independence, Retire Early. They break down what it really takes to achieve it, the math behind it, and the trade-offs many people overlook.

While FIRE has gained significant attention through books, influencers, and online communities, the reality is more complex than it appears.

What Is FIRE and How Does It Work?

FIRE (Financial Independence, Retire Early) is a strategy focused on aggressively saving and investing a large portion of your income so you can build a portfolio that replaces your income much earlier than traditional retirement age.

Most FIRE strategies rely on:

  • Saving 40% to 70% of income
  • Living well below your means
  • Investing consistently over time
  • Using rules like the 4% withdrawal strategy

The goal is to accumulate enough assets so that your investments can generate income to support your lifestyle without needing to work.

Why FIRE Has Become So Popular

The concept of FIRE taps into something deeply appealing.

The ability to control your time.

For many people, traditional retirement at age 65 or later feels too far away. FIRE offers an alternative path, one where financial independence can be achieved much earlier through discipline and planning.

This movement gained traction through books like Your Money or Your Life and was further popularized after the 2008 financial crisis, when many people began rethinking job security and financial independence.

It also aligns with a broader shift toward prioritizing lifestyle and flexibility over long-term career structures.

What Actually Drives Long-Term Investment Success?

At its core, FIRE is not a mystery. It is math.

One of the foundational concepts is the 4% rule, which originated from the Trinity Study.

The rule suggests that if you withdraw approximately 4% of your portfolio annually, adjusting for inflation, your savings may last for about 30 years.

A simple way to estimate your FIRE number is:

Annual Spending × 25 = Required Portfolio

For example:

  • If you need $40,000 per year → you need about $1,000,000
  • If you need $100,000 per year → you need about $2,500,000

This calculation highlights a key reality:

Your lifestyle determines how much you need, not just your income.

How much do I need to retire early?

The amount you need depends entirely on your spending.

FIRE is not about hitting a universal number. It is about replacing your personal lifestyle costs with investment income.

Lower spending requires a smaller portfolio. Higher spending requires significantly more.

This is why many FIRE strategies focus heavily on reducing expenses.

How much do I need to save to achieve FIRE?

Traditional retirement savings rates are often around 5% to 10% of income.

FIRE requires something very different.

Most individuals pursuing FIRE save:

  • 40% to 70% of their income

This level of saving accelerates the compounding process and reduces the time needed to reach financial independence.

However, it also requires significant lifestyle trade-offs.

Why FIRE Is Difficult for Most People

While the concept is appealing, the execution is challenging.

There are two major constraints:

  1. Income Requirements

To save 50% or more of your income, you typically need a relatively high income to begin with.

Saving 70% of a modest income may not leave enough to cover basic living expenses.

  1. Lifestyle Trade-Offs

Many FIRE strategies involve:

  • Living on extremely low expenses
  • Delaying major life decisions
  • Avoiding lifestyle upgrades

In some cases, this can mean sacrificing experiences or milestones that others prioritize, such as:

  • Starting a family
  • Owning a home
  • Traveling

For some individuals, these trade-offs are acceptable. For others, they are not.

Different Types of FIRE

One of the more interesting aspects of FIRE is that it is not a single approach.

There are multiple variations, each with different levels of intensity.

Lean FIRE
Retire early by living on very low annual expenses.

Fat FIRE
Retire early while maintaining a higher standard of living, requiring a larger portfolio.

Coast FIRE
Invest heavily early, then allow investments to grow without additional contributions while continuing to work.

Barista FIRE
Leave full-time employment but maintain part-time work to supplement income.

These variations highlight that FIRE is not an all-or-nothing strategy. It can be adapted based on personal goals and preferences.

Search Intent: Is retiring early actually realistic?

For most people, achieving traditional FIRE is difficult but not impossible.

It requires:

  • High savings rates
  • Strong income
  • Long-term discipline
  • Willingness to make lifestyle trade-offs

However, many people find that a modified approach, such as partial retirement or part-time work, is more realistic and sustainable.

The Biggest Risks of Retiring Early

One of the most important parts of the discussion in Episode 142 is understanding the risks.

Retiring early introduces challenges that do not exist in traditional retirement.

Longevity Risk

The 4% rule was designed for a 30-year retirement.

If you retire at 40, your retirement may last 40 to 50 years.

That significantly increases the likelihood of:

  • Market downturns
  • Unexpected expenses
  • Inflation impact
Healthcare Costs

Without employer-provided insurance, healthcare becomes a major expense.

Healthcare costs tend to rise faster than general inflation, making this a critical planning factor.

Loss of Benefits

Early retirees may miss out on:

  • Social Security contributions
  • Employer benefits
  • Pension accumulation
Career Risk

Stepping away from work early can make it difficult to re-enter the workforce later.

Skills may become outdated, and employment gaps can create challenges.

Why Planning Matters More Than Ever

FIRE is not something that should be approached casually.

A successful strategy requires:

  • Detailed financial modeling
  • Scenario testing
  • Ongoing plan adjustments
  • Contingency planning

Without a structured plan, the risks can outweigh the benefits.

Even for those not pursuing FIRE, many of the principles still apply.

Understanding your spending, increasing your savings rate, and building flexibility into your financial life can improve your long-term outcomes.

Common Questions About FIRE

Is FIRE only for high-income earners?

While higher income makes FIRE easier, it is not exclusively limited to high earners. However, lower income levels make it more challenging due to limited capacity to save aggressively.

Can I retire early without extreme lifestyle changes?

In most cases, significant lifestyle adjustments are required. However, hybrid approaches like part-time work can reduce the need for extreme sacrifices.

Is the 4% rule reliable for early retirement?

It can be a useful guideline, but it may not fully account for longer retirement timelines. Additional planning is typically required.

What is the biggest mistake people make with FIRE?

Underestimating the long-term risks, especially longevity, healthcare costs, and market volatility.

FIRE is an exciting concept, but it requires careful planning, realistic expectations, and a clear understanding of trade-offs.

If you want to evaluate whether early retirement is possible for you, start by understanding your current financial position and identifying what changes may be needed.

Download the Retirement Readiness Checklist to help organize your finances and evaluate your path toward financial independence:

Download checklist

To learn more, click here to schedule a conversation with 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 141 – What Really Matters in Investing (and What Doesn’t)

When it comes to investing, the biggest risk most people face is not market volatility. It is distraction. In Episode 141 of The Last Paycheck, the conversation centers on cutting through noise, avoiding emotional decision-making, and focusing on the few factors that actually drive long-term results.

For individuals approaching or in retirement, this distinction becomes even more critical. At this stage, the goal is no longer just growth. It is sustainability, predictability, and confidence.

What Really Matters in Investing

The factors that truly matter in investing are:

  • Consistent, long-term strategy
  • Asset allocation aligned with your goals
  • Cost control (fees and taxes)
  • Behavioral discipline
  • Risk management

What matters far less than most people think:

  • Market timing
  • Chasing trends or “hot” investments
  • Complex or overly engineered strategies
  • What others are doing

In short, successful investing is less about finding something new and more about staying committed to what works.

Why Do Investors Get Distracted So Easily?

One of the biggest themes discussed in this episode is the influence of noise. Conversations with friends, headlines, and even professional conferences can create a constant sense that there is something better, faster, or more advanced available.

This often leads to a subtle but dangerous mindset: fear of missing out.

When investors hear about new strategies, emerging asset classes, or complex investment vehicles, it can create doubt about their current plan. Even experienced professionals are not immune to this.

The problem is not curiosity. The problem is reaction.

When decisions are driven by comparison rather than strategy, portfolios become fragmented, inconsistent, and misaligned with long-term goals.

What Actually Drives Long-Term Investment Success?

The reality is far less exciting than most marketing would suggest, but significantly more effective.

1. Asset Allocation

The way your portfolio is structured across stocks, bonds, and other assets has a greater impact on long-term results than individual investment selection.

This allocation should reflect:

  • Your time horizon
  • Your income needs
  • Your tolerance for risk

For retirees or those nearing retirement, this balance becomes especially important. Too much risk can create instability. Too little growth can erode purchasing power.

2. Costs and Efficiency

Fees, taxes, and unnecessary turnover can quietly reduce returns over time.

Investors often underestimate how much these factors compound. Even small differences in cost structure can significantly impact long-term outcomes.

A disciplined approach focuses on:

  • Minimizing unnecessary fees
  • Managing tax exposure
  • Avoiding excessive trading
3. Behavioral Discipline

This may be the most overlooked factor of all.

Markets will fluctuate. Headlines will create urgency. Opinions will vary.

The ability to stay consistent through these conditions is what separates successful investors from reactive ones.

Behavioral discipline includes:

  • Avoiding panic during downturns
  • Not chasing performance during up markets
  • Sticking to a defined plan

Do You Need Complex Investment Strategies to Succeed?

This is one of the most important questions addressed in Episode 141.

The short answer is no.

Complexity is often marketed as sophistication. In reality, it frequently introduces:

  • Higher costs
  • Lower transparency
  • Greater risk of misunderstanding

Many high-performing portfolios are built on relatively simple principles executed consistently over time.

Complex strategies can have a place in certain situations, but they should never replace a solid foundation.

If an investment cannot be clearly explained and aligned with your goals, it likely does not belong in your portfolio.

Is Market Timing Ever a Good Strategy?

Market timing is one of the most common temptations for investors.

The idea is appealing: get out before downturns and back in before growth.

In practice, it is extremely difficult to execute consistently.

Even missing a handful of the market’s best days can significantly reduce long-term returns.

Rather than attempting to predict short-term movements, a more effective approach is:

  • Staying invested
  • Rebalancing periodically
  • Adjusting based on life changes, not headlines

This approach reduces emotional decision-making and improves consistency.

Why Simplicity Often Outperforms

A key takeaway from this episode is that simplicity is not a limitation. It is an advantage.

Simple strategies are:

  • Easier to understand
  • Easier to maintain
  • Less prone to emotional interference

They also make it easier to evaluate performance and make adjustments when necessary.

In contrast, overly complex portfolios can obscure risk and make it difficult to determine what is actually driving results.

For individuals approaching retirement, clarity is essential. You need to understand how your portfolio supports your income, not just how it performs in isolation.

How Should Your Investment Strategy Change Near Retirement?

As retirement approaches, the focus of investing shifts.

It is no longer just about accumulation. It becomes about distribution and preservation.

Key adjustments may include:

  • Reducing exposure to unnecessary risk
  • Increasing income-generating assets
  • Aligning withdrawals with a sustainable plan
  • Stress-testing the portfolio for market downturns

This is where many investors benefit from stepping back and reassessing their strategy.

The goal is not to eliminate growth but to balance it with stability and reliability.

Common Mistakes to Avoid

Even well-intentioned investors can fall into these traps:

  • Constantly changing strategies based on new information
  • Comparing your portfolio to others without context
  • Overcomplicating your investment approach
  • Ignoring fees and tax implications
  • Letting short-term market movements drive long-term decisions

Each of these mistakes introduces friction into what should be a disciplined, goal-oriented process.

Frequently Asked Questions

What is the most important factor in investment success?

Consistency. A well-structured plan followed over time is more impactful than any individual investment decision.

Should I change my investments based on market news?

In most cases, no. Market news is often short-term and reactive. Your investment strategy should be based on long-term goals.

How often should I review my portfolio?

At least annually, or when there is a significant life change. Reviews should focus on alignment with goals, not short-term performance.

Is it better to have a simple or complex portfolio?

Simple portfolios are often more effective because they are easier to manage, understand, and maintain over time.

What to Do Next

If you are unsure whether your current investment strategy is focused on what truly matters, it may be time to step back and evaluate.

A structured approach can help you:

  • Clarify your goals
  • Align your portfolio with your retirement timeline
  • Identify unnecessary complexity or costs

Investment Planning Worksheet

Download the Investment Planning Worksheet to evaluate how your current portfolio aligns with your long-term goals and retirement needs. This tool will help you identify gaps, simplify your strategy, and focus on what truly matters.
Download worksheet
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 140 – Should You Change Your Portfolio During a Geopolitical Crisis?

When headlines are dominated by global conflict, market volatility often follows.

For retirees and those approaching retirement, these moments can feel especially unsettling. It’s natural to wonder:

“Should I be doing something with my portfolio right now?”

In Episode 140 of The Last Paycheck Podcast, Archie Hoxton, CERTIFIED FINANCIAL PLANNER®, and Rob Hoxton tackle this exact question. They explore how markets have historically reacted to geopolitical events and, more importantly, what investors should and should not do during uncertain times.

The key takeaway is not about predicting markets. It is about understanding behavior, risk, and long-term strategy.

Should You Change Your Portfolio During a Geopolitical Crisis?

In most cases, no major changes should be made based solely on geopolitical events.

History shows that while markets may react in the short term, they tend to stabilize and recover over time. Making emotional, reactionary decisions often causes more long-term damage than the events themselves.

The better approach is to rely on a well-structured financial plan and maintain discipline.

Why Market Volatility Feels More Intense During Global Events

Geopolitical crises create uncertainty. War, international conflict, and economic disruption can trigger emotional responses that extend beyond investing.

Many investors begin to think:

  • “I can’t afford to lose money right now”
  • “I’m too close to retirement to take this risk”
  • “Should I move everything to cash?”

These reactions are completely natural. As discussed in Episode 140, emotions play a major role in financial decision-making.

The issue is not the feeling itself. The issue is what actions follow those feelings.

What History Tells Us About Markets and Geopolitical Events

Rather than speculating about the future, the episode looks at historical data from major geopolitical events over the past several decades.

Examples include:

  • The 1973 oil embargo
  • The Iran hostage crisis
  • The Gulf War
  • 9/11
  • The COVID-19 pandemic
  • Russia’s invasion of Ukraine

Across these events, the pattern is consistent.

Markets often react negatively in the short term. However, over longer periods, they tend to recover and move higher.

In fact, in the majority of cases reviewed, markets were positive within 12 months following the event.

Why Some Events Led to Market Declines

There were exceptions where markets were still down after one year.

However, those declines were not primarily caused by the geopolitical events themselves.

Instead, they were tied to larger economic issues, such as:

  • The stagflation environment of the 1970s
  • The dot-com bubble collapse around 2001
  • The financial crisis in 2008
  • Inflation-driven market challenges in 2022

The lesson is important.

Geopolitical events may trigger volatility, but broader economic conditions are often the real driver of sustained market declines.

Can You Time the Market During a Crisis?

One of the most common reactions during uncertainty is the urge to “do something.”

This often leads to market timing decisions, such as:

  • Selling investments to avoid losses
  • Moving to cash temporarily
  • Waiting for the “right time” to get back in

The problem is that market timing is extremely difficult to execute successfully.

Research consistently shows that missing just a handful of the market’s best days can significantly reduce long-term returns.

In many cases, those best days occur during periods of high volatility.

As highlighted in the episode, trying to time the market can cost investors substantial long-term growth.

Should I move my investments to cash during a crisis?

For most investors, moving entirely to cash during a crisis is not advisable.

Selling during market declines locks in losses. If the market rebounds, those gains are missed, making it difficult to recover.

A disciplined investment strategy typically outperforms reactive decisions driven by fear.

Is it safer to reduce risk as I approach retirement?

It is reasonable to adjust risk as retirement approaches, but eliminating risk entirely can create new problems.

Retirement can last 20 to 30 years or longer. During that time, investments must continue to grow to:

  • Offset inflation
  • Support ongoing withdrawals
  • Maintain purchasing power

The goal is not to eliminate risk, but to manage it appropriately within a structured plan.

How do I protect my retirement income during market volatility?

Protection comes from structure, not reaction.

A well-designed retirement plan often includes a bucket strategy, which separates assets into:

  • Short-term funds (cash or equivalents)
  • Intermediate-term investments (bonds)
  • Long-term growth assets (stocks)

This approach allows retirees to:

  • Cover near-term expenses without selling volatile assets
  • Maintain long-term growth potential
  • Reduce emotional decision-making during market downturns

The Real Risk: Emotional Decision-Making

One of the most powerful insights from Episode 140 is that the biggest risk is often not the market itself, but investor behavior.

Fear-driven decisions can lead to:

  • Selling at market lows
  • Missing recovery periods
  • Permanently reducing long-term wealth

In extreme cases, these decisions can impact a retiree’s lifestyle for decades.

Once losses are realized and recovery is missed, it is often difficult to regain that lost ground.

Why a Financial Plan Matters More Than Headlines

Market volatility is inevitable. Geopolitical events will continue to occur.

What matters most is whether your financial plan is designed to handle uncertainty.

A strong plan includes:

  • A sustainable withdrawal strategy
  • Diversified investments
  • Tax-efficient income planning
  • Contingency strategies for downturns

When these elements are in place, investors are less likely to react impulsively to short-term events.

How to Build Confidence During Uncertain Times

If you are feeling uneasy about your investments during a global crisis, consider focusing on what you can control.

Start with these steps:

Review your income strategy
Ensure your income sources are aligned with your needs and timeline.

Understand your risk exposure
Know how your portfolio is allocated and why.

Maintain liquidity for short-term needs
Having accessible funds can reduce pressure to sell investments at the wrong time.

Stick to your long-term plan
Consistency is one of the most important factors in long-term success.

Common Questions About Investing During Geopolitical Events

Should I sell my investments when markets drop due to global conflict?

In most cases, selling during downturns locks in losses and may lead to missing the recovery. A long-term approach is generally more effective.

Do geopolitical events permanently damage markets?

Historically, markets have shown resilience and tend to recover over time, even after major global events.

How much cash should retirees keep on hand?

This varies, but many strategies suggest maintaining enough liquid assets to cover several years of expenses.

What is the biggest mistake investors make during crises?

Making emotional, reactive decisions rather than following a structured financial plan.

Market uncertainty is unavoidable, but your response to it can make all the difference.

If you want to feel more confident about your retirement strategy, start by evaluating your readiness and identifying potential gaps in your plan.

Download the Retirement Readiness Checklist to help organize your finances and prepare for long-term success:

Download checklist
To learn more, click here to schedule a conversation with 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 139 – When Can You Retire? Why Retirement Is Really a Cash Flow Problem

Many people approach retirement planning with one simple question:

“When can I retire?”

For decades, the answer many people assumed was age 65. But in reality, retirement has far less to do with age than most people think.

In this episode of The Last Paycheck Podcast, advisors Archie Hoxton, CERTIFIED FINANCIAL PLANNER®, and Rob Hoxton discuss why retirement planning is not about hitting a specific birthday or reaching a certain portfolio size. Instead, the real question is much more practical:

Can your income support your life once you stop working?

The answer comes down to understanding retirement as a cash flow problem.

Is Retirement Based on Age or Income?

Retirement is primarily a cash flow decision, not an age decision.

You can retire earlier than 65 if your income sources and portfolio can sustainably support your spending. Likewise, someone may reach 65 and still need to keep working if their financial plan does not yet provide enough income to support retirement.

The key question is this:

Do you have reliable income sources and a portfolio strategy that can cover your expenses for the rest of your life?

Why Age 65 Became the “Default” Retirement Age

For many people, retirement planning historically revolved around the age of 65.

But that number is largely a cultural reference point rather than a financial rule.

Age 65 became popular as a retirement benchmark primarily because of Medicare eligibility, not because it represents the ideal time to stop working.

Social Security also plays a role, but full retirement age for Social Security benefits is no longer 65 for most people today.

In other words, the commonly cited retirement age exists mostly because certain benefits begin around that time, not because it represents a universal financial milestone.

Why Portfolio Size Alone Doesn’t Determine Retirement

Another common retirement benchmark people use is a target savings number.

You may have heard questions like:

  • “Do I need $1 million to retire?”
  • “Is $2 million enough?”
  • “Should I aim for $3 million?”

The reality is that portfolio size by itself doesn’t determine retirement readiness.

For example:

  • Someone with $500,000 saved could retire comfortably if their expenses are modest and they have additional income sources.
  • Someone else with $5 million might struggle if their spending habits are extremely high.

Your retirement success depends on how income and expenses interact, not simply on a headline savings number.

Retirement Planning Is About Replacing Your Income

During your working years, your ability to earn income is typically your most valuable financial asset.

Once you retire, that income disappears.

Retirement planning is essentially about replacing your paycheck with new income sources.

These sources might include:

  • Social Security benefits
  • Pension income
  • Part-time work or consulting
  • Rental income or real estate
  • Investment withdrawals

The question becomes:

How do these income sources combine to support your lifestyle?

Identifying Your Guaranteed Income Sources

A good starting point for retirement planning is identifying income sources that are relatively predictable.

Examples include:

  • Social Security benefits
  • Pension income
  • Certain annuity payments

These sources form the foundation of retirement income.

Once you know how much income will reliably arrive each month, you can determine how much additional income you must generate from investments or other assets.

Filling the Retirement Income Gap

For most retirees, guaranteed income does not fully cover living expenses.

That means the remaining income must come from the investment portfolio.

This is often called the retirement income gap.

The challenge is converting accumulated savings into sustainable income while managing risks such as:

  • Market volatility
  • Taxes
  • Inflation
  • Longevity

Retirement planning therefore shifts from:

“How much can I save?”

to

“How do I turn what I’ve saved into a reliable paycheck?”

Why Early Retirement Is More Complicated

Retiring earlier than traditional retirement ages introduces additional financial complexity.

If someone retires at age 55, several issues arise:

  • Social Security benefits are not yet available
  • Medicare coverage has not started
  • Retirement accounts may have withdrawal penalties

For example, withdrawing from certain retirement accounts before age 59½ can trigger penalties unless special strategies are used.

Early retirees may also face high health insurance costs.

Health insurance premiums alone can exceed $25,000 to $30,000 annually for some households, which significantly impacts retirement planning.

Because of these challenges, early retirement requires careful planning around:

  • Withdrawal strategies
  • Tax planning
  • healthcare costs
  • income bridges before Social Security begins

Why Retirees Still Need Investment Growth

Another common misconception is that retirees should avoid investment risk entirely.

Many people assume that once they reach retirement, their portfolio should become extremely conservative.

However, retirement often lasts 20 to 30 years or more.

If a portfolio stops growing entirely, inflation can gradually erode purchasing power.

Retirement portfolios therefore must continue to grow enough to:

  • Outpace inflation
  • Support increasing expenses
  • Maintain income sustainability over time

Rather than eliminating risk, retirees often need to manage risk carefully while still allowing assets to grow.

Why Retirement Planning Reduces Stress

The years leading up to retirement can create anxiety for many people.

Market volatility, economic headlines, and uncertainty about expenses can make retirement feel risky.

One of the most valuable aspects of financial planning is that it provides clarity.

A well-designed retirement plan helps answer questions like:

  • How much can I safely withdraw each year?
  • Will my money last throughout retirement?
  • What happens if markets decline?
  • How should my accounts be used for income?

By evaluating a wide range of possible scenarios, planning can help retirees feel more confident about their financial decisions.

What to Do If Retirement Happens Unexpectedly

Sometimes retirement is not entirely voluntary.

Life events may force someone to stop working earlier than expected due to:

  • health issues
  • job loss
  • family caregiving responsibilities

In these situations, financial planning becomes even more important.

Potential solutions may include:

  • relocating to a lower-cost area
  • adjusting spending expectations
  • finding part-time income opportunities
  • restructuring investments for income

Having a flexible financial strategy can help people adapt if circumstances change.

How to Start Evaluating Your Retirement Readiness

If you want to understand whether retirement is realistic for you, start with a basic financial inventory.

Begin by asking three key questions.

  1. What income will I have in retirement?

Include sources such as:

  • Social Security
  • pensions
  • rental income
  • part-time work
  1. What do I currently spend each month?

Review your expenses and account for occasional or irregular costs throughout the year.

  1. What income gap must my portfolio fill?

The difference between your income and expenses represents the amount your investments must generate.

Once you know that number, you can begin evaluating whether your retirement strategy is sustainable.

Common Questions About Retirement Timing

Can I retire before age 65?

Yes. Retirement is possible earlier than 65 if your financial plan supports it. However, early retirement requires careful planning for healthcare, taxes, and withdrawal strategies.

Is there a minimum amount of money required to retire?

There is no universal number. Retirement readiness depends on income sources, expenses, lifestyle goals, and life expectancy.

Should retirees stop investing in stocks?

Not necessarily. Many retirees still need investment growth to offset inflation and support long retirement timelines.

How do I know how much I can withdraw from my investments?

This depends on your portfolio, life expectancy, tax situation, and other income sources. A financial plan helps determine a sustainable withdrawal strategy.

Retirement is less about reaching a certain age and more about building a sustainable income plan.

If you want to better understand your retirement readiness, start by reviewing your financial picture and identifying potential income gaps.

Download the Retirement Readiness Checklist to help organize your finances and prepare for retirement planning:

Download checklist

You can also learn more about financial planning services or 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 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.