Two people can retire with the same savings and earn the same average return over 25 years, and still end up in very different places. One runs low at 82. The other leaves a legacy. The difference usually isn't how much they saved or how their investments did on average. It's when the bad years showed up.
That's sequence-of-returns risk. It's one of the most overlooked threats to a comfortable retirement, and it does the most damage early.
Why the first few years carry so much weight
While you're working, a market drop is almost a non-event. You're not selling anything, ad you may even be buying at lower prices. Retirement flips that. Now you're pulling money out of the portfolio to cover groceries, property taxes, and life. If a real downturn lands in your first several years and you're forced to sell investments while they're down, you lock in those losses for good. There's less money left to recover when the market comes back, and the damage follows you for decades.
Get a good stretch first, and the math works in your favor. Get a bad stretch first, and the very same portfolio can struggle to last. You don't get to pick which one you get.
A buffer you can draw from instead
This is where a lot of retirees are quietly rethinking the role of their home. For a homeowner 62 or older, a reverse mortgage line of credit can sit alongside your portfolio as a standby buffer. In the years the market is down, you draw from the credit line instead of your investments, and you leave your portfolio alone to recover.
The idea is simple. In an up year, you live off your investments like normal. In a down year, you pause those withdrawals and pull from your home equity. Your investments stay invested through the recovery instead of being sold at the bottom.
Because the money from a reverse mortgage is loan proceeds rather than income, it's generally not taxed. How that fits your specific picture is a question for your tax professional.
The honest trade-offs
A reverse mortgage isn't free money, and it isn't right for everyone. Interest and insurance premiums are added to the balance over time, which lowers the equity that passes to your heirs. You stay the homeowner, responsible for property taxes, homeowners insurance, and upkeep. And HUD requires an independent counseling session before you move forward, specifically so you understand all of it.
For the right household, having a buffer that doesn't move with the stock market can be the difference between weathering an early downturn and being defined by it.
Frequently asked questions
What is sequence-of-returns risk?
It's the risk that poor investment returns early in retirement, combined with withdrawals, permanently shrink your savings. The same average return can produce very different outcomes depending on the order the good and bad years arrive.
How can home equity help?
A reverse mortgage line of credit gives you a separate source of funds to draw from in down markets, so you aren't forced to sell investments at a loss while they recover.
Do I still own my home?
Yes. You keep the title. You remain responsible for property taxes, insurance, and maintenance, just as with any mortgage.
Want to see how this could work with your numbers?
Talk to an Improve Retirement advisor.
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.