Eighty-seven percent of retirees own a home, yet most retirement income plans are built on only three buckets: income, investments, and insurance. In this episode, Scott Heinila sits down with Don Graves, a 27-year reverse mortgage veteran who has trained more than 30,000 advisors, to make the case for a fourth bucket: housing wealth. Don explains why he started out as the industry’s biggest skeptic, what a reverse mortgage actually is (“It’s just a mortgage”), and where the stigma came from. He then walks through real case studies: using a growing line of credit to bridge a Social Security delay, eliminating a mortgage payment to bring a 7% withdrawal rate down to 2.6%, funding a high-net-worth client’s life insurance premiums without touching the managed account, paying Roth conversion taxes, and buffering sequence of returns risk based on research by Wade Pfau. Most importantly for advisors, Don lays out the questions to ask clients and how to stay in your lane while bringing in the right partner.
In 1999, Don Graves was CEO of Habitat for Humanity in Philadelphia when his sister Michelle pitched him on reverse mortgages. His first reaction was that she was going to prison for taking older people’s homes. A year later he went looking for “the gotcha, the fine print,” meeting with HUD’s homeownership center, Fannie Mae, AARP, and three housing counseling agencies. By 2000 his skepticism was gone, and he has spent the 27 years since helping advisors and families use home equity responsibly. As Don puts it to audiences today, “you probably won’t be more skeptical than I am.”
Don sums it up in four words: IJAM, “It’s just a mortgage.” He describes the Home Equity Conversion Mortgage (HECM) as one leg of a three-legged stool of government-sponsored retirement, alongside Social Security and Medicare. The borrower keeps ownership and stays on title, makes no required monthly payment, and is never required to repay more than the home is worth. Don also unpacks the stories behind the stigma, including his “Uncle June Bug” example: the relative who says he lost his house to a reverse mortgage, but leaves out that he hadn’t paid his property taxes in four years. The borrower’s obligations are simple: live in the home, maintain it, keep homeowners insurance in force, and pay property taxes. He also notes that rule changes now protect a non-borrowing spouse from being displaced.
Don frames retirement resources as the income bucket, the investment bucket, the insurance bucket, and, for most retirees, a fourth bucket of housing wealth. Advisors don’t need to master rates, terms, or fees. Using a 4x100 relay baton as his analogy, Don says the advisor’s job is to run their leg, stay in their lane, ask a few important questions, and then pass the baton to a skilled partner with the right integrity. Scott compares it to how advisors already work with CPAs, estate planning attorneys, and Medicare specialists, with the advisor as quarterback.
• The growing line of credit. For a $600,000 home at age 65, Don shows an initial line of credit of about $178,000 projected to reach roughly $778,000 at 20 years and $1.6 million at 30 years. A 72-year-old client’s $284,000 line is projected to reach $1 million by age 100.
• Clients who already have a mortgage. Steve and Barbara have a $500,000 IRA and want to draw $35,000 a year, a 7% withdrawal rate. A reverse mortgage pays off their $200,000 mortgage and eliminates a $1,500 monthly payment. Because that payment would take about $1,900 a month in pre-tax IRA dollars, a point Don credits to Ed Slott, they now need to draw only about $13,000 a year, a 2.6% withdrawal rate.
• Social Security deferral. Scott asks how a household could bridge the gap to a later claiming age. Don models a 62-year-old drawing $32,400 a year from the line of credit until 70, then layers in repaying unneeded RMDs to grow the line, and later drawing on it for a parent’s and a spouse’s extended care, while still projecting equity left in the home.
• High-net-worth premium funding. A retired pharmaceutical CEO with $5 million under management, a $4.5 million home, and $2.1 million in mortgages wanted a life insurance policy with $180,000 in annual premiums. Paying off the mortgage eliminated a $21,000 monthly payment, $15,000 of which now funds the premium, with $6,000 a month left over and a $100,000 line of credit, all without drawing on the managed account.
• Roth conversion taxes. Bob and Sally, with a $1 million IRA, convert $100,000 a year and pay the roughly $22,000 in annual taxes from a $194,000 line of credit rather than from the IRA, which Don says leaves about $1.7 million in tax-free dollars by their early 70s versus $1.3 to $1.4 million.
• Sequence of returns risk. Drawing on Wade Pfau’s research, Don explains how using a reverse mortgage line of credit instead of the portfolio in a year following a down market changed outcomes in the modeled scenarios, from depletion to $800,000 to $1.3 million remaining using it once, and about $4 million using it four times.
Scott stresses that none of this is about selling a product; it’s about planning for income gaps, extended care, taxes, and market risk. Don notes that of roughly 16,000 consumer conversations, he has told 13,000 people “no or not yet.” A reverse mortgage isn’t always the right fit, but in his view it is always the right conversation. He also shows how advisors can model the strategy today in planning software such as MoneyGuidePro or eMoney by entering the line of credit as another asset with a tax-free growth assumption.