How a Reverse Mortgage Fits Into a South Dakota Retirement Plan
By Jeff Buum, Certified Reverse Mortgage Specialist (CRMS) | Fairway Heartland | Sioux Falls, SD | NMLS #400290
jeffbuummortgage.com · 11 min read · Reverse Mortgage
For most South Dakotans who have spent decades building a home, a retirement plan, and a family, retirement arrives with a specific tension: how do you generate enough income to live comfortably, protect the assets you've built, and not outlive your money?
Financial planners have increasingly turned to the reverse mortgage, specifically, the Home Equity Conversion Mortgage (HECM), as one answer to that tension. Not as a last resort, and not as a standalone fix, but as a coordinated element of a broader retirement income strategy. According to Jeff Buum, a Certified Reverse Mortgage Specialist at Fairway Heartland, this article explains how a reverse mortgage can integrate with Social Security timing, IRA withdrawals, long-term care planning, and sequence-of-returns risk management.
The Core Concept: Home Equity as a Retirement Asset
Most retirement plans treat home equity as background, something to fall back on in a crisis, or an inheritance for the kids. The research on retirement income planning increasingly challenges this assumption. Home equity, accessed through a properly structured HECM, can function as an active component of a retirement income portfolio rather than a passive reserve.
The key insight is this: a HECM reverse mortgage line of credit grows over time at the loan's interest rate. An unused line established today will be larger next year, and larger still the year after. Establishing a reverse mortgage line of credit early in retirement—even without intending to use it immediately —creates a growing, generally tax-free reserve that becomes more valuable over time.
A reverse mortgage isn’t right for every retiree; here’s how to weigh whether a reverse mortgage is right for you.
Strategy 1: Delaying Social Security With a Reverse Mortgage Bridge
Social Security benefits grow by approximately 8% for each year you delay claiming beyond full retirement age, up to age 70. For a healthy South Dakotan who expects a long retirement, the lifetime value of delaying from 62 to 70 can be substantial, often hundreds of thousands of dollars in additional lifetime benefits. The challenge is cash flow: how do you cover living expenses from 62 to 70 while you wait? For many South Dakota homeowners, the answer is a reverse mortgage line of credit. Drawing living expenses from home equity during those bridge years lets Social Security grow and preserves the investment portfolio, which continues to compound.
Example: A 64-year-old South Dakotan with a $300,000 home, no existing mortgage, and $400,000 in an IRA establishes a reverse mortgage line of credit. She draws $2,000 per month for six years, delaying Social Security to age 70. Her monthly Social Security benefit increases by 48% — a difference she'll receive for the rest of her life.
Strategy 2: Managing Sequence-of-Returns Risk
Sequence-of-returns risk is the danger of a significant market decline early in retirement, when you're drawing from your portfolio to live on. A bad sequence in the first five years can permanently damage a portfolio's longevity, even if markets recover, because you've been forced to sell assets at depressed prices. A reverse mortgage line of credit offers a solution: during downturns, draw from home equity rather than selling investments at a loss, and allow the portfolio to recover before resuming withdrawals. This coordination between home equity and investment assets can meaningfully extend how long a retirement portfolio lasts.
Research note: A 2019 study published in the Journal of Financial Planning found that incorporating a reverse mortgage line of credit into a coordinated retirement income strategy improved portfolio survival rates significantly for retirees at various risk levels. The coordination strategy, not the reverse mortgage in isolation, was the key variable.
Strategy 3: Bridging the Medicare Gap
If you retire before age 65, you face a healthcare coverage gap: no longer covered by an employer's plan, but not yet eligible for Medicare. For South Dakotans who retire at 62, 63, or 64, this gap can create high out-of-pocket costs. Paying those costs from an IRA or 401(k) may trigger a higher tax bracket or affect income-based benefits. A reverse mortgage line of credit can cover those costs from home equity instead, preserving the tax efficiency of retirement accounts and keeping you in a lower income bracket during those early retirement years.
Strategy 4: Long-Term Care Funding
Long-term care is one of the most significant financial risks in retirement. The average cost of a private room in a South Dakota nursing facility exceeds $90,000 per year, and in-home care can also be substantial. Reverse mortgage proceeds can be used to purchase long-term care insurance, fund a hybrid life/LTC policy, or pay directly for home care services. By using home equity for this purpose, rather than liquidating investment accounts or life insurance, South Dakotans can protect their liquid assets and potentially remain in their homes longer.
Strategy 5: Tax Efficiency and Roth Conversion Support
Reverse mortgage proceeds are generally not considered taxable income. This creates a planning opportunity: in years when you need income but want to keep taxable income low, perhaps to manage Medicare Part B premiums or create room for a Roth IRA conversion, you can draw from the reverse mortgage instead of taking a taxable IRA distribution. This kind of tax efficiency requires coordination with a CPA or financial advisor, but for the right South Dakota client it can meaningfully reduce lifetime taxes and improve retirement outcomes.
A Note for Financial Advisors in South Dakota
For CFPs, CPAs, financial planners, and estate attorneys serving South Dakota clients 62 or older, Jeff Buum welcomes the opportunity to be a resource, explaining the HECM program in plain terms, modeling scenarios for specific client situations, and participating in joint client meetings when appropriate. He is also available to present continuing-education content on reverse mortgages in retirement planning. The goal is to complement the advisor relationship, not replace it.
Frequently Asked Questions
Is a reverse mortgage only for people who have run out of money?
No. Increasingly, it is used proactively as a coordinated retirement income tool, for Social Security timing, portfolio protection, and tax efficiency, by homeowners with significant equity.
Why establish a line of credit early if I don't need it yet?
Because the unused line grows over time at the loan's interest rate, establishing it early creates a larger, generally tax-free reserve for later years.
Should my financial advisor be involved?
Ideally, yes. These strategies work best when coordinated with a CPA, financial planner, or estate attorney, and Jeff Buum is glad to work alongside them.
Financial advisors: let's connect. Homeowners: let's talk.
Jeff Buum · (605) 321-7303 · jeff.buum@fairwaymc.com · jeffbuummortgage.com/reverse-mortgage
Copyright©2026 Fairway Independent Mortgage Corporation (“Fairway”) NMLS#2289. 4750 S. Biltmore Lane, Madison, WI 53718, 1-866-912-4800. All rights reserved. Fairway is not affiliated with any government agencies. These materials are not from HUD or FHA and were not approved by HUD or a government agency. Reverse mortgage borrowers are required to obtain an eligibility certificate by receiving counseling sessions with a HUD-approved agency. The youngest borrower must be at least 62 years old. Monthly reverse mortgage advances may affect eligibility for some other programs. This is not an offer to enter into an agreement. Not all customers will qualify. Information, rates and programs are subject to change without notice. All products are subject to credit and property approval. Other restrictions and limitations may apply. Equal Housing Opportunity.
