Managing Sequence-of-Returns Risk
A Buffer for Bad Market Years
JP Dauber · Licensed HECM Specialist
NMLS# 386298 · Published September 2, 2026
Why the order of returns matters
Two retirees can earn the same average return over 30 years and end up in very different places — because the order matters. A big loss in the first few years, while you are withdrawing, can permanently shrink the base your portfolio grows from.
This is sequence-of-returns risk, and it is one of the biggest threats to a retirement that relies on investments for income.
The damage selling low does
When the market drops and you sell investments to cover living expenses, you lock in the loss and remove shares that would have rebounded. The portfolio has less left to recover with.
Do that during a prolonged downturn early in retirement, and the math may never fully recover, even when the market does.
The buffer-asset strategy
The fix is to have a source of cash that does not move with the market. A HECM line of credit can be that buffer. In a down year, you draw from the credit line for living expenses instead of selling investments.
When the market recovers, you go back to drawing from the portfolio — and you can repay the credit line if you choose, restoring the buffer for next time.
Key fact
A HECM line of credit doesn't rise and fall with the stock market, so drawing from it during a downturn lets your investments stay put and recover. This is why financial researchers study it as a buffer asset, not a last resort.
Why opening it early helps
The credit line's growth feature means the longer it sits unused, the more it can provide later. Opening it early — before you need it — builds a larger buffer for the down years that may come.
It also cannot be frozen or canceled, so unlike a HELOC, it will be there exactly when markets are ugly and other credit dries up.
This is mainstream planning now
Once dismissed, this approach is now studied and recommended by respected retirement researchers as a legitimate way to improve portfolio survival.
Want to see how a buffer asset could fit your retirement income plan? Reach out and I will walk through the mechanics with you and your advisor.
Keep reading
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HECM Line of Credit Growth Rate Explained →
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Is a Reverse Mortgage Just a Last Resort? →
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Using a HECM Line of Credit as a Retirement Safety Net →
Open it early, let it grow, use it when you need it. The standby reserve strategy.