Reverse Mortgage Strategy

Bridge to Social Security

How South Dakota homeowners 62 and older can use home equity to delay Social Security - and permanently increase their lifetime benefit.

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 difference between claiming at 62 versus 70 can represent hundreds of thousands of dollars in additional lifetime income.

The obstacle is cash flow. How do you cover living expenses during those bridge years while you wait for a larger benefit?

For many South Dakota homeowners, the answer is a reverse mortgage line of credit.

How the bridge works

At or after age 62, you establish a HECM reverse mortgage line of credit. Rather than drawing from your IRA, 401(k), or investment portfolio - and rather than claiming Social Security early for a reduced lifetime benefit - you draw living expenses from the reverse mortgage line during the bridge years.

Your investment portfolio continues to compound. Your Social Security benefit continues to grow. When you reach 70 and claim, you receive a permanently higher monthly benefit for the rest of your life.

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Illustrative example A 64-year-old South Dakotan with a $300,000 home 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 approximately 48% - a difference she receives for the rest of her life. These are illustrative figures only; actual results depend on individual circumstances.

Why this strategy works

  • Social Security's 8% per-year delay credit is guaranteed - it does not depend on market performance
  • Drawing from home equity rather than a portfolio preserves investments during the critical early-retirement years when sequence-of-returns risk is highest
  • Reverse mortgage proceeds are generally not considered taxable income, which can help manage tax brackets during the bridge period
  • The unused portion of a reverse mortgage line of credit grows over time - any amount not drawn continues to expand the available reserve

This strategy works best as part of a coordinated plan with a financial advisor or CPA. Jeff Buum is glad to work alongside your existing advisors and model this scenario using your actual numbers.

Who this fits

  • Homeowners 62 or older in good health who expect a long retirement
  • Those who would benefit most from a higher lifetime Social Security payment
  • Homeowners with significant equity who can fund the bridge years from home equity rather than portfolio withdrawals
  • Those working with a financial advisor on a coordinated retirement income plan

Related guides

How a reverse mortgage fits into a South Dakota retirement plan Create a retirement income stream How much can you get from a reverse mortgage in South Dakota? Reverse mortgage overview