We’re Close to Retirement With $900,000 in Home Equity — Should We Open a HELOC First?

Ryan Peterson

Wed, February 18, 2026 at 5:31 AM GMT+9 3 min read

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A couple preparing to retire within the next year recently shared their situation on Reddit, outlining a financial profile that would look strong by most measures.

Both partners are 52, their home is paid off and valued around $900,000. They hold more than 33 times their annual expenses in investments and roughly two and a half years of expenses in cash.

Despite that cushion, they are considering opening a home equity line of credit now, before leaving the workforce. Their thinking is centered on access. Products like a Rocket Mortgage HELOC can be easier to qualify for while income is still coming in, and the couple views the line as a backstop rather than a source of ongoing cash flow.

The concern they raised is sequence-of-returns risk, which refers to the impact of poor market performance in the early years of retirement, when withdrawals begin before portfolios have time to grow or recover. Selling investments during a downturn can permanently reduce a portfolio’s ability to support future spending, even if markets rebound later.

For retirees drawing from savings while markets fall, more shares must be sold to cover the same expenses. That accelerates depletion and limits the benefit of later recoveries. Even moderate declines early in retirement can shorten portfolio longevity.

That is where a HELOC can fit into a broader retirement plan. With a line of credit already in place, a retiree can temporarily draw against home equity during a market downturn instead of selling investments at lower prices. Once markets recover, withdrawals can shift back to the portfolio and the balance can be repaid.

Opening a HELOC before retirement allows homeowners to qualify based on current income and debt levels. After retirement, income often drops to Social Security and portfolio withdrawals, which may not meet lender requirements for a large line.

Rocket Mortgage evaluates applicants based on home value, debt-to-income ratio, and credit profile. If qualified, you may be able to access up to 90% of your home’s value, depending on credit score. For homeowners with paid-off properties and strong credit, that can translate into substantial available credit, even if it is never used.

The couple on Reddit said that they would not plan to use the line unless a prolonged downturn depleted their cash reserves. In that context, the HELOC functions as an insurance layer rather than leverage. It provides flexibility without requiring large cash balances that could drag on long-term returns.

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Alternatives exist, including holding more cash, reducing withdrawals during downturns, or working longer.

For households with substantial equity, strong credit, and disciplined spending plans, opening a HELOC before retirement can preserve access to liquidity while qualification is still straightforward. Tools like Rocket Mortgage’s online HELOC questionnaire allow homeowners to assess eligibility quickly and understand potential limits without committing to borrowing.

In the Reddit couple’s case, the strategy aligns with their broader financial position. Their assets are sufficient, their debt is minimal, and their goal is protection rather than consumption. Used carefully, a HELOC can support that goal by reducing pressure on investment portfolios during early retirement.

The approach is a contingency tool. When opened early and used selectively, a HELOC can help retirees manage timing risk without forcing permanent changes to their investment strategy.

Image: Shutterstock

This article We’re Close to Retirement With $900,000 in Home Equity — Should We Open a HELOC First? originally appeared on Benzinga.com

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