by Wade Pfau, Ph.D., CFA
Originally published at Forbes
Maintaining higher fixed costs in retirement increases exposure to sequence risk by requiring a higher withdrawal rate from remaining assets. Drawing from a reverse mortgage has the potential to mitigate this aspect of sequence risk by reducing the need for portfolio withdrawals at inopportune times.
An HECM line of credit provides a tool that can be used to mitigate the impacts of sequence of returns risk. Since 2012, this has been the focus of a series of research articles highlighting how the strategic use of a reverse mortgage can either preserve greater overall legacy wealth for a given spending goal, or can otherwise sustain a higher spending amount for longer in retirement.