I’m terminally ill with 3-5 years left to live. I have $270K saved and $30K in debt. What should I do with my money?

You’ve lived life as a typical middle-class American — balancing spending and saving, planning for retirement and accumulating some debt along the way. Then the unimaginable happens: you’re diagnosed with a terminal illness and given just three to five years to live.

It’s a reality no one wants to face, yet some of us may one day find ourselves in this position.

With limited savings, mounting medical expenses and concerns about your loved ones’ financial future, you may consider draining your 401(k) to cover costs. At first glance this might seem like the simplest solution, but is it the smartest one? Let’s explore the pros and cons.

Let’s consider the scenario of someone who’s just received an end-stage diagnosis. When facing that news, ensuring a comfortable and stress-free end-of-life experience becomes a top priority.

In-home palliative care can cost up to $6,500 per month if not covered by Medicare — and that’s assuming you don’t require round-the-clock care. Using the $270,000 in your 401(k) could help pay for these expenses, allowing you to focus on your well-being without financial stress.

Beyond medical costs, tapping into your retirement savings could significantly improve your quality of life. That money could allow you to address your $30,000 in debt, stop working, travel or check off bucket-list experiences with your family.

Additionally, terminally ill individuals may qualify for penalty-free withdrawals from their retirement accounts under the SECURE 2.0 Act, making early access to funds more financially feasible.

However, before making any major financial decisions, consider the long-term consequences.

If you have dependents, emptying your 401(k) may not be the best move for their financial security. While penalty-free withdrawals are possible, the money you take out may still be taxable, potentially impacting your beneficiaries’ tax brackets and overall financial stability.

Estate planning also becomes a critical factor. If you withdraw and spend all your retirement savings, your loved ones will inherit significantly less. Keeping funds in your 401(k) allows for better estate management, ensuring your assets are distributed according to your wishes.

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