Most retirement plans account for travel, hobbies, and everyday living. Far fewer plan for the single expense most likely to disrupt them: healthcare. A serious diagnosis, a stretch of in-home care, or a move to assisted living can cost tens of thousands of dollars in a single year, and the instinct is almost always the same: sell investments to cover it.
That instinct can quietly cost you far more than the care itself.
The hidden risk of selling investments to pay for care
When you sell stocks or draw heavily from a retirement account to fund a health event, timing isn't on your side. Health emergencies don't wait for the market to be up. If you're forced to sell while your portfolio is down, you lock in losses and give up the future growth those dollars would have earned — a problem financial planners call sequence-of-returns risk. You also may trigger a larger tax bill in the same year (more on that in a future post).
In other words: paying for care out of your portfolio at the wrong moment can permanently shrink the nest egg meant to last the rest of your life.
What a "healthcare cushion" looks like
For homeowners 62 and older, there's another asset already sitting on the balance sheet: home equity. A Home Equity Conversion Mortgage (HECM) — the federally insured reverse mortgage — can be set up as a growing line of credit you don't have to touch until you need it.
Think of it as a standby cushion:
- You establish the line of credit while you're healthy and qualified.
- You draw from it only if and when care costs arise.
- You pay interest only on what you actually use.
- Because it's home equity, it doesn't force you to sell investments during a downturn.
That last point is the whole idea: the cushion lets your portfolio stay invested and keep working, while a health event is covered by an asset that isn't tied to the market's mood.
Why the line of credit is the piece that matters
A HECM line of credit has an unusual feature: the available balance can grow over time, independent of your home's value. The unused portion increases at the same rate as the loan, which means the cushion you set up at 65 can be meaningfully larger by the time you're 75 — right when healthcare needs tend to rise.
Set it up early, leave it alone, and it quietly grows into a larger safety net exactly when the odds of needing it go up.
Who this fits
This strategy tends to make the most sense for homeowners who:
- Are 62 or older and have significant equity in their home.
- Want to age in place and stay in the home through a health event.
- Have retirement savings they'd rather protect than spend down first.
- Value having a plan before a crisis forces a rushed decision.
What to keep in mind
A reverse mortgage is a loan, and it deserves the same clear-eyed look as any financial decision:
- You keep the title to your home. You remain responsible for property taxes, homeowners insurance, and upkeep.
- The loan becomes due when the last borrower permanently leaves the home.
- HUD requires independent counseling before you proceed, so you fully understand the terms.
- It's worth discussing with your financial advisor and family as part of your overall plan.
Used deliberately, the goal isn't to spend your equity — it's to have it ready, so a health event never forces you to dismantle the rest of your retirement.
Frequently asked questions
Can I use a reverse mortgage to pay for long-term care?
Yes. Funds from a reverse mortgage can be used for any purpose, including in-home care, medical bills, or the cost of assisted living for a spouse while you remain in the home.
Do I have to use the money right away?
No. With a line-of-credit option, you can leave the funds untouched and draw only when needed. You pay interest only on what you use.
Will this affect my portfolio's growth?
The point of the strategy is the opposite — it lets your invested assets stay invested, so a health event doesn't force you to sell during a market dip.
Is my home still mine?
Yes. You retain ownership and title. You're responsible for taxes, insurance, and maintaining the home.
Ready to see what a healthcare cushion could look like for your situation?
Talk with an Improve Retirement advisor — no pressure, just clarity.
This article is for educational purposes and is not financial advice. A reverse mortgage is a loan that must be repaid. Consult a licensed advisor and complete HUD-required counseling before proceeding.