The Pricey American Dream in 2025 & How a Reverse Mortgage Can Help
The “American Dream” has always been more than a price tag — it’s about home, family, security and the freedom to choose how you live. But in 2025 that dream adds up to a lot more financially than people expect. New analyses show the lifetime cost of the typical set of milestones (homeownership, raising two kids, retirement, healthcare, weddings, cars, vacations and pets) now tops $5 million. That’s an eye-opening number, and it helps explain why many households feel squeezed even when they work hard and save.
What’s Driving the $5M Number - A Quick Breakdown
Investopedia’s 2025 tally groups eight common life expenses and gives these headline figures (rounded):
- Retirement: ~$1.64 million (assumes average annual spending of roughly $63,600 for 20 years after age 65).
- Homeownership (lifetime): ~$958k. Home prices and mortgage interest add up quickly.
- Cars (lifelong ownership pattern): ~$900k. Includes buying and maintenance over many decades.
- Raising two children (including college): ~$876k. College alone is a major contributor.
- Healthcare (ages 22–85): ~$414k. Long-term care and chronic care costs can push this much higher for some families.
Altogether, (plus weddings, vacations and pets), those line items add up to the $5M plus figure. Of course, not everyone dreams of every one of these things, but this list does highlight how much it can cost to live out the American dream, and how many people will need multiple income streams and smart planning to retire comfortably.
Americans Feel the Pinch — and Many are Changing Plans
Surveys show the stress is real: large samples of Americans report cutting or abandoning major life goals because of rising costs (homeownership, having children, retirement expectations). At the same time, Federal Reserve research shows many households still lack enough liquid savings to handle multi-month shocks — so the margin for error is thin. These realities make flexible strategies for retirement income more valuable than ever.
How a Reverse Mortgage Can Help Someone Achieve the American Dream in Retirement
A reverse mortgage, like the FHA-insured Home Equity Conversion Mortgage (HECM) or Smartfi’s proprietary Choice reverse mortgage, allows senior homeowners to convert a portion of their home equity into tax-free cash1 without a required monthly mortgage payment. Borrowers must continue to pay property taxes, insurance, HOA fees and costs and maintain the home. When used thoughtfully, reverse mortgages can directly support the American Dream in retirement:
- Boost retirement income and cash flow — Lifetime or term payments from a reverse mortgage can supplement Social Security and pensions so retirees can maintain their standard of living without tapping volatile investments. This helps cover the kind of annual spending Investopedia uses in its retirement estimate.
- Cover healthcare or long-term care gaps — Reverse mortgage proceeds can pay for in-home care, medical bills, or bridge costs until other benefits kick in, reducing the risk that health expenses derail someone’s retirement plan.
- Preserve other assets for legacy or college costs — Instead of liquidating investments to pay for a child’s education or a big expense, homeowners can draw on home equity — allowing taxable accounts to remain invested for growth or inheritance goals.
- Eliminate required monthly mortgage payments* — Removing or reducing a monthly mortgage payment can convert a high fixed cost into a discretionary payment or saving power, helping a retiree stretch limited fixed incomes.
Bottom line — the American Dream is Still Possible, but Planning Must Get More Creative
The headline $5 million estimate makes a blunt point: today’s costs call for better planning, diversified income strategies, and wider use of tools that unlock household resources. Reverse mortgages aren’t for everyone, but for eligible homeowners they’re a legitimate, regulated tool that can:
- increase retirement cash flow,
- reduce required withdrawals from investments, and
- create options for funding healthcare, housing, or family goals — all of which can keep parts of the American Dream within reach.
If you have senior homeowner clients, you should see how a reverse mortgage can help them live out their American dream. Contact us today to run the a scenario - (877) 816-6706 or check out our free calculator.
Smartfi Contributor
Our Smartfi Contributors are made up of a collective group of mortgage industry professionals, who share their personal opinions of the mortgage industry, topics, and various products. These are the express opinions of the Smartfi Contributor, and the article is based on their opinion and recommendations alone. It may not have been reviewed, commissioned or otherwise endorsed by Smartfi Home Loans, LLC.
Reverse mortgage proceeds may affect the eligibility and payments of Medicaid, SSI and similar program benefits. All clients should be advised to seek guidance on their financial situation with their financial planner/advisor. A reverse mortgage is not suitable for all clients in all situations.
All loans are subject to loan underwriting and must meet all product requirements. Programs can change at any time, please see product handbooks for full underwriting guidelines.
1Consult a tax advisor and appropriate government agency for any affect on taxes or government benefits.
Editorial note: This article used generative AI to assist with drafting and/or editing. Our team reviewed and approved the final content for accuracy, context, clarity, and tone. This is not financial advice. Smartfi Home Loans, LLC is responsible for the final content. If you spot an issue or error, please contact marketing@smartfihomeloans.com.
