Here’s a question worth asking every client who carries a mortgage into retirement:

Would you rather your monthly payment be mandatory or voluntary?

That question sounds simple. But for clients who haven’t considered housing wealth as part of their retirement strategy, it can be genuinely eye-opening.

The Problem Is Bigger Than You Might Think

According to the Consumer Financial Protection Bureau, an increasing number of retirees are carrying mortgage debt into their retirement years. Some studies estimate that 50–68% of new retirees will have some form of loan payment, including home equity loans and lines of credit. For the mass affluent baby boomer demographic, that percentage may be even higher.

Think about it this way: at your last professional gathering, how many of the homeowners over 55 likely had a mortgage, home equity loan, or line of credit? Somewhere between 75 and 99% is not an unreasonable estimate. That is a lot of clients whose monthly cash flow and retirement security are being quietly eroded by a payment most of them never planned to still be making.

For retirees aged 75 and older, housing expenses — mortgages, property taxes, insurance, utilities, and maintenance — consume roughly 43% of monthly spending. With longer life expectancies and continued market uncertainty, eliminating that mandatory payment could be one of the most meaningful planning moves you help a client make.

Meet Pierce and Linda

Consider this scenario, which plays out with real clients more often than you might expect.

Pierce and Linda are 65, ready to retire at year-end, and sitting on a $650,000 home with a $200,000 mortgage balance. Their monthly principal and interest payment is $1,750. They have $650,000 in total retirement savings and want to withdraw $45,000 per year — roughly 7% of their portfolio.

The problem? Most financial advisors and planning tools suggest a safe initial withdrawal rate closer to 4%, which for Pierce and Linda would mean $26,000 per year. That is a $19,000 gap between what they need and what the conventional framework says is sustainable.

Their choices, framed by traditional planning, are limited: spend less, work longer, or accept a higher probability of running out of money.

But there is a fourth option most planners don’t immediately reach for.

The Reverse Mortgage Solution

Based on their ages, home value, and current interest rates, Pierce and Linda qualify for a reverse mortgage of $216,000. After paying off their $200,000 existing mortgage, they retain a $16,000 line of credit — and more importantly, they eliminate their $1,750 monthly payment entirely.

That single move creates a cascade of planning benefits that go well beyond cash flow.

1. Extending retirement savings. To net $1,750 per month from tax-deferred accounts like IRAs or 401(k)s, Pierce and Linda would need to withdraw approximately $2,250 per month before taxes. Eliminating the payment frees up roughly $27,000 per year in pre-tax dollars — savings they no longer need to pull from their nest egg.

2. Reducing income taxes. Retaining nearly $27,000 in pre-tax dollars not only lowers their income tax burden — it also reduces their provisional income, which could prevent their Social Security benefits from being taxed.

3. Bridging the budget gap. Their desired $45,000 annual withdrawal drops to around $18,000 once the mortgage payment disappears. That is well within the range of a sustainable withdrawal rate.

4. Supporting grandchildren’s education. The freed-up cash flow can be redirected to monthly tuition stipends, gifts, or low-interest family loans — creating a meaningful legacy without touching principal.

5. Funding life insurance policies. Monthly savings can be directed toward cash value policies for grandchildren, offering tax-deferred growth and guaranteed returns.

6. Covering healthcare costs. For retirees who worry about out-of-pocket medical expenses, prescriptions, and long-term care, that $1,750 per month creates a meaningful reserve.

7. Delaying Social Security. With the reverse mortgage covering living expenses, Pierce and Linda can afford to wait on claiming Social Security — potentially increasing their lifetime benefit by a significant margin.

8. Protecting insurance policies from lapsing. Premiums for life insurance, long-term care coverage, and medical plans get paid consistently, not sacrificed in a cash flow crunch.

9. Building an emergency fund. A dedicated cushion for home repairs, medical emergencies, and other unplanned expenses is a cornerstone of sound retirement planning — and now it is fundable.

10. Increasing charitable giving. For clients with philanthropic goals, redirecting that monthly payment to causes they care about can provide both personal fulfillment and tax benefits.

What Happens When the Numbers Don’t Fully Work?

Sometimes the reverse mortgage proceeds aren’t sufficient to completely pay off the existing mortgage. This happens every day. Many advisors and clients dismiss the reverse mortgage at this point. That can be a costly mistake.

There are four options worth walking through with clients in this situation:

BYOB — Be Your Own Bank. Pull the shortfall from savings, CDs, cash equivalents, or a cash value life insurance policy and combine those funds with the HECM proceeds to eliminate the mortgage entirely. Several of my clients have willingly brought $100,000 or more to the table to free themselves of a mandatory payment. When you walk them through the full math, it often makes sense.

Move. If the client is open to it, selling the current home, paying off the mortgage, and using the HECM for Purchase to right-size into their next home can be a powerful strategy — one that solves the mortgage problem and often improves quality of life simultaneously.

Hope. Proceed with the HECM and hope that the appraisal comes in higher than expected. Online tools are increasingly accurate, however, so this is rarely a reliable strategy.

Wait. Continue paying down the mortgage and revisit the reverse mortgage in a few years, when the loan balance is lower and — potentially — home values are higher. For some clients, this is the only option available. It is worth modeling.

The Right Questions to Ask

The value you bring as an advisor is not just in running the numbers. It is in asking the questions that open new doors.

When you sit down with a client who still carries a mortgage, consider starting here:

• Is your monthly loan payment causing emotional stress or limiting your lifestyle?
• Is it forcing you to withdraw more than you should from your retirement accounts?
• Is it keeping you from delaying Social Security?
• Is it preventing you from maintaining the insurance coverage you need?

If the answer to any of those is yes, a housing wealth conversation is overdue.

The modern reverse mortgage is not a product of last resort. Used strategically, it is a planning tool that can extend portfolio longevity, reduce tax burden, and give retirees the financial flexibility to live retirement on their own terms — with payments that are voluntary, not mandatory.

What to Do When You Have a Client or a Case?

• Go to www.HousingWealthPro.com and request a Housing Wealth Illustration. Give Details in the “Notes” Section including the clients’ phone # if they would like a Housing Wealth Assessment. You can also
• Schedule a Time to Speak with Me: Click Here

Related Articles:

When Reverse Mortgage Proceeds Don’t Pay Off the Existing Mortgage: Four Planning Options
Comparing HELOCs and RELOCs for Retirement Income Planning
A Better Reverse Mortgage for High-Value Homes

 The content of this blog is for financial advisors and professionals only and is not intended for consumer use. Names, cases, and scenarios are fictionalized for illustrative purposes. The opinions expressed here are those of the author alone and do not reflect the views of any affiliated entities or individuals. Don Graves, NMLS #142667.