If you take only one idea away from the last twenty years of academic research on reverse mortgages, make it this one: the HECM line of credit grows over time. Open it at 62, leave it alone, and the amount available to you at 75, 80, 85 will be dramatically larger than what you could open then.
That's not marketing. That's the central finding of Dr. Wade Pfau — professor at the American College of Financial Services, principal at McLean Asset Management, and arguably the most influential retirement income researcher of his generation. His work has reshaped how the best financial planners think about reverse mortgages.
The old narrative: reverse mortgages are a last resort
For decades, the assumption ran like this: you tap your reverse mortgage only when you've exhausted everything else. It was framed as a desperation product — something you considered when the portfolio ran dry.
Pfau's research blew that up. Starting around 2012 with collaborators like Barry and Stephen Sacks (a finance professor and his attorney brother), then with John Salter and Harold Evensky, then with his own follow-up work, Pfau showed mathematically that using the reverse mortgage line of credit early and strategically — not as a last resort — produces dramatically better retirement outcomes in most scenarios.
The three Pfau insights you should actually know
1. Open the line of credit early, use it later.
The HECM line of credit has an unusual feature: the available borrowing limit grows over time at the same rate the loan would accrue interest, plus the annual mortgage insurance premium. If rates are around 7%, your line grows at roughly 7.5% per year. Crucially, the lender cannot freeze or cancel this line (unlike a HELOC), and the growth is independent of home value going forward.
A 62-year-old who opens a $300,000 line of credit and never draws on it will, by age 80, have access to roughly $1 million in available credit — even if their home value stays flat. That's eighteen years of compounding access. The same person who waits until 80 to apply will get a much smaller line based on their age and the rate environment at that time.
2. Use it as a buffer asset during bear markets.
The biggest single risk in retirement is sequence-of-returns risk — having to sell stocks at depressed prices early in retirement, which permanently impairs your portfolio's ability to recover. Pfau's research shows that drawing from the reverse mortgage line of credit during down years, and only drawing from the portfolio in up years, dramatically extends portfolio longevity. The line of credit becomes a tax-free shock absorber for the portfolio.
3. Coordinate with Social Security and the portfolio.
Pfau's coordinated-strategy modeling pairs the reverse mortgage with deferring Social Security (each year of deferral past 62 boosts your eventual benefit by roughly 7–8%) and with tax-efficient portfolio withdrawals. The reverse mortgage line of credit lets you delay Social Security without depleting the portfolio during the bridge years. The combined effect across a 30-year retirement is, in many of Pfau's scenarios, a portfolio that lasts a decade longer than the conventional draw-from-the-portfolio-first approach.
What this looks like in practice — a Dana Point example
Picture a 62-year-old in Dana Point with a $1.4M paid-off home and a $1.2M retirement portfolio. They open a HECM line of credit today — call it $600,000 of available credit, with no required monthly payment. They leave it alone.
For the next eight years they use a small portion to fund travel and family gifts during 2026's mild market correction. Their portfolio recovers fully. At age 70 they defer Social Security to maximize the benefit. By 75 their line of credit, mostly untapped, has grown to roughly $1.1M of available access. They have three large independent buckets — Social Security at full freight, the recovered portfolio, and a tax-free line of credit larger than the original loan.
That same person, without the HECM, would have either (a) sold portfolio assets at the worst possible time in 2026 to fund travel, permanently impairing the portfolio, or (b) skipped the travel altogether. Pfau's point is that the reverse mortgage line of credit is a retirement income tool, not a bailout product.
What advisors and CPAs are missing
Most financial advisors learned the old narrative — reverse is the desperation product, avoid it. The research has moved on. The Journal of Financial Planning, Retirement Management Journal, and the American College curriculum now teach the Pfau framework. But advisor education catches up slowly, so most planners still default to portfolio-only strategies that the modeling shows underperform in 60–80% of scenarios.
If your CPA, financial advisor, or estate attorney shrugs at the reverse mortgage idea, ask them specifically about Pfau's research. Read Reverse Mortgages: How to Use Reverse Mortgages to Secure Your Retirement (Wade Pfau, 2nd edition). The numbers speak for themselves.
What it doesn't fix
- It won't help if you can't qualify on residual income or property charges (you're still responsible for property taxes, homeowner's insurance, and maintenance).
- It's not a no-cost product — closing costs and mortgage insurance premiums are real. Pfau's modeling accounts for them and still shows the strategy outperforming.
- It works best when set up before you need it. Setting one up in a panic at 80 is worth doing, but you'll have less compounded access than you would have had at 62.
Next step
The cleanest way to see whether the Pfau approach fits your specific situation is a 30-minute scenario call. We model your home value, age, portfolio size, and target retirement income, and show you the line-of-credit growth curve and the buffer-asset math side-by-side with a portfolio-only approach.
If your financial advisor wants to be in on the call, even better — most of them are intrigued once they see the modeling.
Call (949) 241-3900 or email jason@lyonlending.com.