The Value of Debt in Retirement
The Value of Debt in Retirement
Retirement is wonderful, but it certainly isn't easy. It brings with it many fears, uncertainties, and doubts. You're concerned about your health and wellness, your family and extended family, your financial resources and ability to live the life you have always dreamed about. It brings questions about inner purpose, fulfillment, and, frankly, even the meaning of life.
While retirement is an adventure that you will experience only one time, I have had the opportunity to vicariously experience thousands of retirements. 1 Using my academic, professional, and personal experiences, I have learned tricks and tools that may help you live the retirement of your dreams. I take strategies that the best companies and the ultra-affluent have been using for years and apply them to specific personal situations to create the best possible outcome for clients and their families.
My goal is to reframe the conversation around debt in general and highlight its potential benefits as well as the potential risks of being debt free . I deliver a new way of thinking about your risk tolerance in which your decisions depend on your needs. In doing so you will see why I care virtually nothing at all about your "risk tolerance." What I do care about are your needs and the best way to accomplish your goals and objectives. If you need a low amount of income-less than a 3 percent return-from your portfolio, you may not need to embrace a debt strategy. For example, if you have $1 million and need less than $30,000 per year in income from your portfolio, then you may have little need for debt. However, if you need a return between 4 and 6 percent, it's quite likely that you can benefit from debt. If you need a return of more than 6 percent, I recommend that you pay very, very close attention to this book. It may be the only way that you will be able to achieve your goals.
It is my opinion that the investment process traditionally used by professionals and "do-it-yourself" investors alike is broken. It is missing half of the picture! Too many people guess with respect to debt-they don't have a strategy. I often find that if they do it isn't well thought out or comprehensive. Generally it is as simple as "pay it all off as fast as possible." It is time that we consider, as companies do, debt to be a tool and open the world to a new approach to wealth management in retirement, one that factors in both sides of the balance sheet as an integrated ecosystem.
Equally important is that regardless of your beliefs with respect to debt, I want you to have a different understanding of the word "risk" and for you to think about risk differently. Many baby boomers have undersaved for retirement and are making decisions that mathematically make it virtually impossible for them to be successful. In this book I put the greatest care in examining trade-offs. I provide you with tools to compare and contrast different risks. For example, it may turn out that being debt free is great for you. It may also turn out that being debt free in fact considerably increases your risk. My goal is knowledge and empowerment around the risks we all face.
Part I of this book lays the foundation and discusses "why" you should consider the use of strategic debt in retirement. I begin with a discussion of the benefits of strategic debt. Chapter 2 provides an overview of conventional wisdom, what authors are currently saying about debt, and why it might be time for a new approach. Chapter 3 outlines the different types of debt-oppressive, working, and enriching-and establishes the seven rules for being a better debtor. It also discusses the impact of longer life expectancy on retirement planning. The longer our expected retirement, the more important it is that our money lasts for us, which means it's even more important that we take a holistic approach to personal financial management that