Housing wealth my provide additional flexibility during market volatility in retirement.One of the greatest risks in retirement planning is not simply market volatility.
It is the timing of that volatility.
Financial advisors understand this well. A retiree who experiences negative investment returns early in retirement — while simultaneously taking withdrawals from the portfolio — may permanently damage the long-term sustainability of the plan.
This is commonly referred to as sequence-of-returns risk.
And it is one of the primary reasons advisors build strategies around liquidity, diversification, and withdrawal management.
We believe there is one retirement asset that is often overlooked in this conversation:
Home equity.
Understanding Sequence-of-Returns Risk
Two retirees may average the exact same long-term investment returns over time, yet experience dramatically different retirement outcomes.
Why?
Because the sequence of those returns matters.
If significant market declines occur during the early years of retirement, withdrawals from the portfolio can compound the damage. Assets may need to be sold at depressed values, reducing the portfolio’s ability to recover when markets rebound.
This creates pressure on the retirement income strategy.
That is why financial advisors often implement tools such as:
- Cash reserves
- Bond ladders
- Guardrail strategies
- Dynamic withdrawal approaches
- Bucket strategies
The objective is simple:
Help clients avoid unnecessary portfolio withdrawals during unfavorable market conditions.
The Overlooked Asset on the Balance Sheet
For many retirees, home equity represents one of the largest assets they own.
Yet it is often excluded from retirement income planning conversations until the client is under financial pressure.
We believe housing wealth should be evaluated proactively — not reactively.
That does not mean every client should obtain a reverse mortgage.
But it does mean financial advisors may want to consider whether housing wealth can serve a strategic purpose within the broader retirement plan.
A Reverse Mortgage Line of Credit as a Liquidity Tool
One strategy some advisors evaluate is a reverse mortgage line of credit.
When used appropriately, a reverse mortgage line of credit may provide retirees with access to standby liquidity that can be coordinated alongside investment assets.
In certain market environments, this may help reduce the need to sell portfolio assets during periods of decline.
The objective is not to replace the investment portfolio.
The objective is to reduce pressure on it.
That distinction matters.
A coordinated liquidity strategy may help create:
- Greater retirement flexibility
- Reduced withdrawal pressure
- Improved cash flow management
- More disciplined long-term investment decision-making
- Additional options during market downturns
For some retirees, that flexibility may prove valuable.
This Is a Planning Conversation — Not a Product Pitch
We believe reverse mortgages should be discussed within the context of comprehensive retirement planning.
Not as a product of last resort.
Not as a replacement for traditional financial planning.
And not as a one-size-fits-all solution.
A reverse mortgage is not appropriate for every client. Borrowers must meet program qualifications and continue to satisfy loan obligations, including property taxes, homeowners insurance, occupancy, and property maintenance requirements.
There are costs, tradeoffs, and long-term considerations that deserve thoughtful analysis.
That is why collaboration matters.
The most effective outcomes often occur when financial advisors, tax professionals, estate planning attorneys, and reverse mortgage specialists work together as part of the planning process.
Looking at the Entire Retirement System
Many retirement plans focus almost exclusively on investment assets.
But retirement planning is ultimately about coordinating all available resources.
Investment portfolios.
Social Security.
Pensions.
Cash reserves.
Tax strategies.
And potentially, housing wealth.
Ignoring one of the largest assets on the client’s balance sheet may create an incomplete planning analysis.
The question is not whether every retiree should use home equity.
The better question is:
Could strategically incorporating housing wealth improve the durability and flexibility of the retirement income plan?
That is the conversation financial advisors should be willing to explore.
Final Thought
Sequence-of-returns risk is real.
Financial advisors already use multiple tools to help manage it.
We believe housing wealth may deserve consideration as part of that discussion.
Not as a replacement for sound financial planning.
But as another potential planning resource that may help strengthen retirement outcomes for certain clients.
Additional Resources:
- Wade Pfau – Reverse Mortgages: Misunderstood or Misused?
- Barry Saks – To Reduce the Risk of Retirement Portfolio Exhaustion, Include Home Equity as a Non-Correlated Asset in the Portfolio
If you’d like to learn more about how a reverse mortgage may help strengthen your client’s plan, we’re happy to walk you through the options.
Send us a request for a client analysis.