Introduction

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 includes both assets and liabilities (debts).

Part II focuses on "what" debt can do for you. I prove that with a proper debt strategy you may be able to virtually eliminate your taxes, increase your rate of return, and reduce your risk (Figure I.1). The more you understand these ideas, the more confident you will feel that you will have sufficient resources throughout your retirement. Confidence about your resources can ease many of the traditional fears, uncertainties, and doubts that come with retirement. This will in turn let you spend more time focusing on family, friends, charities, and maybe even the purpose and meaning of life!

Figure I.1 Strategic Use of Debt in Retirement May Help You

A proper debt strategy may be able to virtually eliminate your taxes, increase your rate of return, and reduce your risk.

This section could fundamentally change your life! I start out by discussing the importance of getting your numbers right and look at some big mistakes that even professional advisors make every day. I then prove that debt can enhance your rate of return and increase the probability that you will never run out of money.

This section includes one of my most stunning case studies, an individual with a net worth of $5.5 million who spends $20,000 per month after taxes and pays less than $4,000 per year in taxes. More important, I show you how-regardless of whether your net worth is higher or lower-it may be possible to make these strategies work for you, too!

Finally, I focus on the fact that risk is equally important-if not more important-than return when you are retired and look at the potential role of debt in reducing your risk. You read that right. I prove that it is possible that debt can actually reduce your risk, increase return, and lower taxes.

Figure I.1 Strategic Use of Debt in Retirement May Help You

Part III focuses on the "how." I discuss the risks in detail, outline a glide path on how to embrace these strategies, and conclude by bringing it all together.

It was fascinating to get feedback from early readers. Some people told me that they wanted more detail-and others told me they wanted less detail. Some told me that they wanted to hear more about my experiences with the emotional aspects of retirement; others said stay focused on the numbers. In order to address these conflicting comments this book is laid out differently than most. The nine chapters are written with a big-picture perspective and are intended to be simple illustrations of the ideas and concepts. In order to address the conflicting comments, I have designed a series of guides and appendices for those who want more detail on specific topics.

The last section of the book is intended to be a customized experience for you and your interests. Think of it as a nonfiction "choose your own pay for things you want to buy. The goal is that you can use the table of contents to turn to a specific topic that is relevant to you. Finally, I offer a few appendices with helpful information and detail for you to consider as you move forward with implementation of these ideas.

Caution: You Could Burn Your House Down Baking a Cake!

If you read a cookbook it may tell you to chop carrots or to bake something for 30 minutes. Think of all of the risks that these activities include: Chopping with sharp instruments, 350-degree ovens, and maybe an open flame-in your house! Risks range from minor injury to burning the place down. If I had to outline all of the risks with every step of every recipe, each one would likely be (1) impossible to follow and (2) 50 pages long, or longer! Further, a cookbook assumes some basic knowledge, for example, that you know how to operate your oven. A cookbook cannot include an owner's manual for your stove, oven, refrigerator, and dishwasher.

There is a lot of similarity between cooking and the ideas I will be presenting in this book. Risks range from very minor to the serious possibility of burning down your financial house. My goal is to reduce the risk in your life-not to increase it! I will do everything I can to present information in a balanced way and to help identify risks proactively.

Similar to a cookbook, I will not be able to provide an instruction manual for all of the tools in your financial kitchen. The simplest way to look at this book is that the ideas of increasing return and reducing your taxes are based on very basic math facts. To be clear, it is a fact of math that what I am about to outline is possible. However, your ability to accomplish these results depends on so many factors that it is far from certain, and your ability to be successful with these strategies is not a known fact at all. As we will see, all debt is simply a magnifying glass. If you make good decisions they will look better and if you make bad decisions they will be much worse. I will give you some guides to better decision-making but your actual results from using these tools and ideas are indeterminable.

To address risks and to make the book more approachable there is a very important disclaimer at the end of each chapter: "The information in this chapter is to be considered in a holistic way as a part of the book and not to be considered on a stand-alone basis. This includes, but is not limited to, the discussion of risks of each of these ideas as well as all of the disclaimers throughout the book." An entire chapter is dedicated to a discussion of the risks that come with...