For years, financial planners have used a “bucket” approach to help retirees organize their assets — segmenting resources into short-term and long-term buckets to balance spending needs against investment risk.
A related but distinct version of this framework organizes buckets around lifestyle instead of time horizon: Protect, Enjoy, and Preserve. While there are different variations, most divide retirement resources into three categories:
- Protect – Essential expenses like housing, food, utilities, taxes, and healthcare.
- Enjoy – Lifestyle expenses such as travel, dining out, hobbies, and entertainment.
- Preserve – Charitable giving, gifts to family, and other aspirational objectives.
It’s a simple framework that helps retirees align their resources with their priorities. But where does a reverse mortgage fit?
The answer depends on which reverse mortgage strategy is being used.
Option 1: Use a Tenure Payment to Fund the “Protect” Bucket
A reverse mortgage, such as a HECM tenure payment, provides steady monthly cash payments* for as long as at least one borrower lives in the home as a primary residence and continues to meet the loan obligations. In many ways, it behaves like another source of retirement income — supplementing Social Security, pensions, bonds, or annuities rather than replacing them.
Consider a retiree whose essential monthly expenses total $6,000:
- Social Security provides $3,500.
- A bond ladder or annuity provides $1,000.
- A HECM tenure payment provides $1,500.
Together, that’s enough dependable cash flow to meet essential expenses without increasing withdrawals from investment accounts. This strategy can reduce pressure on the portfolio and help preserve assets intended for future spending or growth.
Option 2: Use a Line of Credit to Fund the “Enjoy” and “Preserve” Buckets
A different approach leaves essential expenses funded by traditional income sources and establishes a HECM line of credit as a reserve instead.
Rather than withdrawing from investments during a market decline to pay for discretionary expenses — vacations, home improvements, helping grandchildren, replacing a vehicle — the retiree can draw on the line of credit. When markets recover, portfolio withdrawals can resume, giving investments more time to rebound.
Researchers such as Wade Pfau, Harold Evensky, and Barry Sacks have described this as a buffer asset that helps manage sequence-of-returns risk. The goal isn’t simply to borrow money — it’s to increase flexibility during the periods when selling investments would be least desirable.
Two Strategies—One Goal
Although these approaches differ, they share the same objective: protecting the retiree’s lifestyle.
A tenure payment strengthens the Protect bucket by creating another dependable source of income. A line of credit strengthens the Enjoy and Preserve buckets by providing a flexible source of funds that can reduce pressure on investments during unfavorable markets.
Neither strategy is universally better — the right choice depends on a retiree’s income sources, assets, spending goals, and overall retirement plan.
Perhaps the most important shift is recognizing that home equity isn’t just a static line on a balance sheet. Used strategically, it can become an integral part of a retirement income plan — either securing essential income or providing flexibility to preserve a retiree’s long-term lifestyle.
*Borrower must occupy home as primary residence and remain current on property taxes, homeowner’s insurance, the costs of home maintenance, and any HOA fees.
Mutual of Omaha Mortgage, Inc. dba Mutual of Omaha Reverse Mortgage, NMLS ID 1025894. 3131 Camino Del Rio N 1100, San Diego, CA 92108. Connecticut Mortgage Lender License ML-1025894. Florida Mortgage Lender Servicer License MLD1827. Maine Supervised Lender License 1025894. Massachusetts Mortgage Broker and Lender License MC1025894. Licensed by the New Hampshire Banking Department, Mortgage Banker License 1025894MB. Licensed by the New Jersey Banking and Insurance Department. New Jersey Residential Mortgage Lender License 1025894. Pennsylvania Mortgage Lender License 72932. Rhode Island Lender License 20163229LL. Rhode Island Loan Broker License 20163230LB. Virginia Mortgage Broker and Lender License, NMLS ID #1025894 (www.nmlsconsumeraccess.org). Subject to credit approval. These materials are not from HUD or FHA and the document was not approved by HUD, FHA or any Government Agency. For licensing information, go to:www.nmlsconsumeraccess.org #4533900893
Equal Housing Lender