Florida woman, 71, spent her 401(k) on cancer care after her health insurance fell short — now she’s struggling to survive on Social Security and a reverse mortgage

Roy was working as a mechanic when he was injured in a workplace accident in 1992, which left him permanently disabled and unable to work. He started receiving Social Security Disability Insurance (SSDI), while Wendy worked as a civil trial paralegal making $70,000 to $90,000 per year in the 1990s and early 2000s. With four children, money was often tight, but their finances improved when the kids left home.

Then, in the mid-2000s, Wendy was diagnosed with a brain tumor. She eventually had to leave her job and go on disability, which covered only two-thirds of her salary. Despite having good health insurance, she learned that it didn’t cover everything, and the couple quickly used up their 401(k). She wasn’t eligible for Medicare until two years after she was approved for SSDI, and during that time she was paying for Roy’s insulin (he’s also a diabetic) and $500 a month out of pocket for her own medication. At one point, they had to declare bankruptcy.

Their unexpected medical costs have continued after Wendy was diagnosed with various forms of cancer over the past two decades. Wendy and Roy get about $3,200 per month in Social Security and they’ve taken out a reverse mortgage on their home to make ends meet. Wendy makes about $300 per month working part-time, but she doesn’t necessarily want to work more since her benefits would get clawed back.

Preventative financial care can temper the pain

To help meet unexpected medical costs — without having to resort to a reverse mortgage — financial planners recommend setting up an emergency fund that will cover your regular expenses for at least three months. Many suggest it should cover six months or more.

It’s also worth talking to a licensed insurance broker who can suggest coverage if you don’t have any — or to review the coverage you have through work to ensure it’s adequate. Even if you have health insurance, you may want to top it up. For example, you may want to consider long-term disability insurance and critical illness insurance, which could help to cover costs that your health insurance won’t. Also speak to your broker about whether long-term care insurance could make sense for you.

If you currently have a high deductible health plan (HDHP), you may want to consider opening a health savings account (HSA), which is a tax-advantaged account that can help with medical costs not covered by your health insurance.

Get help with your medical costs

Federal and state governments offer a variety of plans that can help with medical costs, prescription drugs and vaccines. It’s worthwhile to investigate these and apply if you’re eligible. Organizations such as the American Cancer Society also offer programs and resources to help with expenses.

If you need non-emergency care, make sure you go to an in-network hospital that will accept your insurance. Keep in mind, non-profit hospitals must offer financial assistance programs by law. If you need medication, ask your pharmacist to substitute a generic drug where applicable, as these are normally cheaper.

Always review your bill and don’t be afraid to question it. Websites such as FAIR Health Consumer can help you determine how much your care should cost. Be sure to exercise your rights related to medical bills and collections. For instance, you can ask your provider for a “good faith” estimate of what your visit or procedure will cost, and you can file a dispute if it’s $400 or more above this amount.

Wendy and Roy’s story shows that unexpected medical expenses can devastate your finances, even if you have a good job, insurance and savings. Preventative financial care can help lower your medical costs — and protect your wealth.