Your client mentions a roof replacement, help for an adult child or a new expense at home. They’ve already decided how to pay for it: “I’ll just take it out of the IRA.” The money is there, the process is familiar and the immediate problem feels solved.
That’s a useful moment to slow the conversation down. A traditional IRA distribution can be fully or partly taxable, so the amount the client needs to spend and the amount they need to withdraw may be different. Before the transfer, you still have time to compare the choices.
Ask what the withdrawal is really doing.
Is this one unusual expense, or has the retirement account quietly become the household’s emergency fund? If repairs, insurance renewals and family support keep landing in the same account, the client may need a broader liquidity plan. An isolated transaction can be reasonable while a recurring pattern deserves another look.
Your tax and investment analysis should lead that review. You can compare cash reserves, investment sales and retirement distributions with the client’s income needs and longer-term goals. For a homeowner with meaningful equity, a current mortgage comparison may add another useful option.
What can a reverse mortgage add?
For an eligible homeowner, a HECM may provide a way to access part of the home’s equity without a required monthly principal and interest payment. That could help fund a planned expense or create a reserve, allowing you to compare borrowing costs with the consequences of using other assets.
The comparison needs actual numbers. Establishing the loan involves costs and time, and interest and charges add to the balance. Taxes, insurance, maintenance and occupancy obligations continue. A last-minute bill won’t wait for a mortgage closing, which is why this conversation works best while the client still has time.
Compare the dollars the client actually gets to spend.
A useful comparison begins with the expense itself. How much is needed, when is it needed and will it happen again? A roof replacement has a different funding pattern from several years of help at home. Putting those details on one page keeps the discussion grounded in the client’s life rather than in account balances or product features.
Then compare the amount each funding source must supply to leave the client with the required spendable dollars. The CPA can calculate any tax associated with a retirement distribution, while the advisor considers what selling investments would change. Richard can show the available reverse mortgage proceeds after existing debt, closing costs and any required reserves are addressed. That gives the team comparable starting points.
Here is where the direct benefit becomes useful.
Reverse mortgage proceeds are loan advances rather than taxable income. For a client considering a discretionary traditional IRA withdrawal, using available home equity instead may avoid creating taxable income from that particular distribution. That can give the tax professional more room to evaluate the year’s income decisions. Required minimum distributions still have to be satisfied, and borrowing does not create an exemption from those requirements.
The benefit should be measured against the mortgage’s cost and the client’s intentions. Preserving an account balance today does not guarantee a better financial outcome later. But an option that supplies spendable funds without requiring the same retirement distribution deserves a fair comparison when the client’s circumstances support it. The CPA evaluates the tax consequences; Richard explains the financing that makes the alternative possible.
There can also be a monthly benefit. If the client is using investment withdrawals to make an existing mortgage payment, a qualifying HECM refinance may pay off that mortgage and remove the required monthly principal and interest payment. The advisor can then review how much portfolio support is still needed. This changes the payment structure; it does not eliminate the debt or the ongoing cost of owning the home.
Ask a question that invites a real discussion.
You might ask, “Before we take money out of that account, would you like to see whether the house offers another way to fund this?” That wording connects the review to the client’s actual concern. It gives the client permission to ask questions without suggesting that a loan decision has already been made or that the existing plan was somehow wrong.
Follow with the practical questions. Does the client expect to stay in the home? Are property expenses manageable? How important is preserving equity for a later move or heirs? Is the need temporary or recurring? Those answers help the team decide whether a mortgage illustration would add value and which alternatives should remain in the comparison. The best starting point is usually a broad description, with personal documents shared through the appropriate process later.
Turn the review into a useful next step.
The first conversation can identify whether the borrower and property appear to fit a current program. A HECM is generally for eligible homeowners age 62 or older, with the home as a primary residence and required counseling. Available funds depend on the individual proposal. A meaningful amount of home equity is a reason to explore the numbers, not a promise that the proposed expense can be funded.
From there, the mortgage illustration can show the proposed cash flow, upfront costs and projected loan balance under stated assumptions. You can test those figures against the client’s tax plan and intended use of other assets. The review can also consider a future sale or move so the client understands how the mortgage might affect resources available for the next chapter.
For a CPA, this can become a straightforward habit: when a retired homeowner mentions a large expense or an unusual withdrawal, ask how it will be funded before discussing only the tax result. That small change moves the planning conversation earlier, when the client still has a choice. It also creates a natural opportunity for the advisor and mortgage specialist to work together.
Keep your advice at the center.
Richard can prepare the mortgage illustration and explain eligibility, available proceeds and the loan’s obligations. With your client’s permission, he can review those numbers with you while you evaluate the tax and investment effects. His background as a former CPA helps him appreciate why the funding source matters as much as the expense.
Have a retired homeowner approaching a substantial withdrawal? Bring Richard into the comparison before the money moves. He’ll see whether the home offers a useful alternative and give your client a clearer basis for deciding.