6. Reverse Mortgage Proceeds

For many Americans, their primary residence is their largest single asset. A reverse mortgage—most commonly a Home Equity Conversion Mortgage (HECM) insured by the federal government—allows homeowners aged 62 and older to convert a portion of their home equity into cash.

You can receive the funds as a lump sum, a line of credit, or monthly payments. The IRS views these proceeds as a loan advance rather than income. Therefore, the money you receive is entirely tax-free and will not push you into a higher tax bracket.

A reverse mortgage line of credit grows over time, giving you access to more tax-free funds later in life. Many financial planners use reverse mortgages as a strategic buffer; retirees can draw from their home equity during years when the stock market is down, allowing their investment portfolios time to recover without locking in losses.