When Portfolios Shrink, a Reverse Mortgage Can Grow Your Financial Resilience

Last week’s market drop was a wake-up call for many investors.

Stocks fell sharply, volatility spiked, and fears around inflation, tariffs, and the economy came roaring back. For retirees — or those nearing retirement — it stirred up something deeper:

“Will I have enough?”

“Is my portfolio strong enough to withstand another 2008?”

“Should I sell now and move to safety?”

Even if clients aren’t calling to ask these questions, many are thinking them. And for financial advisors, this is where the true value of planning shows up — not in predicting the market, but in helping clients stay the course without jeopardizing their long-term outcomes.

One Overlooked Threat to Retirement — and How a Reverse Mortgage Can Help

Most people focus on average returns. But in retirement, it’s not just the average — it’s the order of those returns that matters.

If a client experiences losses early in retirement and begins withdrawing funds to live on, those losses are effectively locked in. Their portfolio may never fully recover — even if the average return over time looks strong on paper.

This is called Sequence of Return Risk. And in volatile markets like these, it becomes one of the most dangerous threats to retirement security.

The Reverse Mortgage Line of Credit: A Hidden Asset That Grows When Markets Shrink

One tool that’s gaining traction — especially in coordinated planning strategies — is the reverse mortgage line of credit (also known as a HECM LOC).

Used proactively, it allows clients to access tax-free funds from home equity without monthly payments, and the available credit line grows over time based on unused balance and current interest rates.

Here’s why that matters:

✅ Clients can pause withdrawals from investment accounts during downturns

✅ It serves as a non-correlated reserve — not impacted by stock market losses

✅ It provides liquidity and peace of mind without disrupting the financial plan

✅ And it’s federally insured, stable, and available to homeowners 62+

The key is setting it up before it’s needed. That way, it becomes a strategic safety net — not a last-minute fix.

More Than Just a Loan

For many, reverse mortgages still carry outdated stigma. But today’s planners — especially those working with longevity-focused clients — are starting to see this as a true financial tool.

When used correctly, it can extend portfolio life, improve retirement income strategies, and reduce unnecessary risk.

It’s not about replacing the financial plan. It’s about enhancing it with smarter tools — especially when markets are shaky.

📘 Want to dive deeper into the research behind this approach?Here’s a great article from the Journal of Financial Planning by Sachs and Sacks:

To Reduce the Risk of Retirement Portfolio Exhaustion, Include Home Equity as a Non-Correlated Asset in the Portfolio