Last fall, Cathy Berk and her husband, Dave, were vacationing in Mexico when he fell ill. Doctors thought he had a massive heart attack, so he was airlifted to a hospital in San Diego. In fact, he had pneumonia; the next month Dave was dead. The infection had spread to his heart.

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Last fall, Cathy Berk and her husband, Dave, were vacationing in Mexico when he fell ill. Doctors thought he had a massive heart attack, so he was airlifted to a hospital in San Diego. In fact, he had pneumonia; the next month Dave was dead. The infection had spread to his heart.

They had been married 38 years. The tragedy was made worse because of finances. In addition to thousands in unexpected health-care bills, she faced a future she had never expected.

At 60, both she and her husband, the primary wage earner, expected to keep working and saving for at least another five years.

“I could easily live for 30 more years, and I don’t have a clue what to do so that I don’t outlive my money,” she said. “There doesn’t seem to be as much money as I thought there was. I don’t see how it can last for 30 years.”

Berk found help with Betty Hedrick, a Mercer Island certified financial planner and member of the Financial Planning Association — Puget Sound Chapter.

The death of a spouse or a divorce can be especially challenging for women. Many leave money management to their husbands. Cathy Berk did most of her family’s finances — but she didn’t realize the full picture of their finances until after her husband had died.

Berk has lived in Anacortes most of her adult life. She attended Portland State University and married soon after graduation. She has two grown daughters and two grandchildren.

Dave Berk was self-employed as a health-care financial analyst, primarily working with small, rural hospitals.

Cathy was a homemaker and an avid quilter. Ten years ago, with a business partner, she bought the Quilt Shop in downtown Anacortes.

“My mother sewed, and I fell in love with fabric,” she said.

Unfortunately, with the demands of running a shop, she has less time for her own quilting. And the slowdown has hurt sales.

“Quilting is not a necessity of life,” she said. “It’s entertainment, and people have fewer discretionary funds.”

With the death of her husband, household income plunged from $180,000 a year to $53,000.

Berk lists her debt level at about $154,400. She has a simplified individual retirement account worth $50,493, another IRA worth $77,172, and more than $58,500 in savings and a money-market account.

She owes $133,000 on a mortgage for her 3,300-square-foot house on a large lot. The house is valued at about $500,000. She and Dave had planned to eventually sell the house and downsize.

She also owes $21,400 in medical bills — the cost of the medevac out of Mexico, which her insurer would not reimburse.

With Dave’s life insurance, she receives an annuity of $2,046 a month for 10 years. She also should qualify for Social Security survivor’s benefits of about $1,507 a month.

Her goals: “I really hope I don’t have to change my style of living but don’t want to use up funds I shouldn’t be. I’d like a comfortable home, a car that doesn’t break down all the time. Time to quilt and work in the yard, read books. Travel a little. Spend time with my grandkids.”

The good news for Berk is that a closer examination of the family finances showed some additional investments worth as much as $200,000 that Hedrick recommends gradually selling off for supplemental income. Berk pays off her credit cards every month and has a good estate plan.

Hedrick focused on Berk’s buying a smaller house. In a down market, Berk could get a good deal purchasing a property. Hedrick recommends renting it until real-estate prices start to rise again, when Berk can sell her large house at a profit and move into the smaller house. With the proceeds from the sale of the old home, Berk can pay off the mortgage on the smaller house.

“It’s not going to be easy,” qualifying for a mortgage and navigating the volatile market, Hedrick said, “but with work, you can do it.” Make a lump-sum down payment — $40,000 or less — on a 30-year mortgage, with the ability to pay it off any time.

Berk said her business partner has discussed buying her out at the Quilt Shop. Hedrick — herself a quilter — recommended making no changes for two years, but to have a lawyer draw up a buy-sell agreement so in the case of either partner’s death, the other can buy the store.

The downside to Berk’s situation is the annuity. Like many financial planners, Hedrick said many annuities are more costly and less flexible than a variety of other investments. Often the fees are high, the rate of return is low and it offers poor protection against inflation.

With Berk’s investable money, Hedrick recommends a conservative strategy, including holding individual stocks and, especially, bonds and other fixed-income securities.

The verdict: “You’re going to be fine,” Hedrick told Berk. “It’s going to require careful management, but you’ll do OK.”