(MONEY Magazine) – More than a year has passed since Newton and Suzanne Fink got religion, so to speak, on the subject of their finances. The Fort Lupton, Colo. couple, both devout Methodists, had borrowed freely while they were putting their three children through college and while Newton, 55, was trying unsuccessfully to turn a profit with the small computer training firm he founded in 1983. But by 1990, having run up $48,000 in credit-card, installment and home-equity debt, the Finks wanted to get their finances under control. Newton, a former schoolteacher and administrator, extricated himself from the business and took + a $28,000-a-year job teaching science at a Denver junior high school. Suzanne, 51, earns $28,000 teaching fourth grade in the suburbs. Next they refinanced their $86,000 home to pay off their debts and free up $1,000 a month in extra cash. Then they used that money to buy $284,000 in life insurance on Newton. ''I'm now the happiest guy in the world,'' says Newton. ''For the first time in 31 years of marriage, Suzie and I were on a cash basis last Christmas. We even had enough to pay the $300 air fare for my daughter to visit from Nashville.'' But there remains one big question in their financial future: Will they have enough money to retire comfortably? Newton's and Suzanne's pensions will total about $24,000 if both stop working, as planned, in 10 years when he turns 65. (These and all other projections are in today's dollars; actual amounts may be higher, owing to cost-of-living adjustments.) But with Social Security paying just $10,700 a year, their combined income of $34,700 will equal only 62% of their current salaries -- well below the 80% that many financial planners recommend (see the worksheet on page 88). While the Finks certainly won't starve on that amount, it could mean a drop in their standard of living -- especially since they now spend nearly that much -- $34,200 -- just on housing, food, clothing, phone bills, utilities and Newton's $12,000-a-year insurance. Moreover, having recently finished one round of belt tightening, and with Newton's policy eating 22% of their after- tax income, they may not be able to build up much in the way of savings. Their sole cash reserves today: $15,000 in a bank money-market fund and Suzanne's credit union. Lacking savings, Newton hopes to tap the cash value of his life insurance for extra retirement income. But MONEY's advisers argued that the policy was not the best investment for that purpose and suggested that the Finks drop it (their advice begins on page 95). The family's only other sizable source of income: a new computer training company that Newton has launched in his spare time, which he says netted $8,000 in its first year. If the Finks do retire cash-poor, they will not be alone. The median American family reaches retirement age with a mere $11,000 in liquid assets. And the median household's income drops by nearly 50% -- to $16,855 a year from $32,365 -- in the move from the 55- to 64-year-old age bracket to the 65- and-up stage. Yet expenses don't always go down proportionately. ''For many of our clients,'' says Baltimore attorney and financial planner Jay Perry, ''the only costs that decline are taxes, clothes and parking. Travel, entertainment and health care all go up.'' Adds Westerly, R.I. planner Malcolm Makin: ''That's why we occasionally counsel people to replace a full 100% of their income in retirement.'' Newton and Suzanne aren't worried. ''If worse comes to worst,'' he jokes, ''we can always fall back on our kids.'' Fortunately, all three could help: Bryan, 29, is a Methodist pastor in Earth, Texas; Jeffrey, 27, is a sports law attorney in Dallas; and Michelle, 23, works in promotion for a Nashville record company. Even so, Newton and Suzanne need to consider whether they should do more now to prepare for their later years. Specifically, they must free up extra cash, re-evaluate the wisdom of the life insurance policy, and look for ways to boost their savings. The son of a railroad maintenance worker and his piano teacher wife, Newton was raised in Warrenville, Ill., 30 miles west of Chicago, and became the fifth generation of his family to attend Greenville College, a Christian liberal arts school in southwest Illinois. He met Suzanne, also a student, while working nights as a short-order cook at a diner. ''It must have been my culinary skills that attracted her,'' he quips. The couple married in 1960 in Suzanne's hometown of Centralia, Ill., where her dad ran a movie theater and her mother sold health foods. They settled in the Chicago suburb of Harvey, with Newton earning $4,000 a year teaching junior high school science and math. Their family soon expanded: Bryan arrived in 1963. Newton's career grew too: by age 30, he was school superintendent in Riverdale, Ill. at a salary of $12,000. In 1974, after Jeffrey and Michelle had joined the clan, Newton got an even better job as a $20,000-a-year superintendent of schools in Fort Lupton, a 40- minute drive north of Denver. The Finks bought a four-bedroom tri-level house there for $42,500, putting $12,000 down and financing the rest on a 20- year, 8 3/4% fixed-rate mortgage. (Their only other real estate: a $35,000 two-bedroom frame house in Salem, Ill. that they inherited from Suzanne's mother in 1989 and rent out for $275 a month.) During the early 1980s, though, Newton began to weary of his job -- particularly the politicking needed to deal with the school board. ''I had always wanted to go into business for myself,'' he explains. ''I had been teaching computer classes at a local college and had the idea of setting up a company to do the same thing.'' In 1983, he raised $18,000 by cashing out his Illinois and Colorado pension funds, pulled together another $80,000 from 20 private investors, and launched Computer Instructional Services (CIS). The company offered courses like a four-session introduction to personal computers for $99, using low-cost classrooms rented from the Denver Parks and Recreation Department. ''Giving up the pensions was frightening,'' he admits. ''But I figured that retirement was still 18 years away, and I was going to invest in a company that would support my retirement.'' The CIS years were relatively lean ones at home, though. Newton says he paid himself just $24,000 a year, about 53% of what he'd made in his last year as superintendent. At the same time, he and Suzanne were still putting their two younger children through college. Like Mom and Dad, all three kids went to Greenville, at costs ranging from $8,000 to $12,000 a year. ''There was a strong family tradition to go there,'' explains Jeffrey, despite the relatively high price (attending the University of Colorado at Boulder, for instance, would have cost only $4,300 in 1985). To help meet the expense, Newton and Suzanne drew on savings, credit cards and their home-equity line of credit while the kids worked summers and took student loans. ''Education was paramount,'' Bryan remembers. ''If there was ever any question about how to afford it, the answer always was: borrow what it takes.'' Unfortunately, even borrowing could not make CIS prosper. Although Newton plowed more money from his cards and the home-equity line into the firm, the company kept hemorrhaging red ink. In 1990, for example, CIS lost $50,000, says Newton, on revenues of more than $300,000. By that fall, Fink decided he needed a second source of income, so he took his present job at Denver's Cole Middle School while still working part time at CIS. ''My partners and I disagreed over expansion plans, and I began to feel it was time to move on,'' he says. At about that time, as Suzanne recalls it, the business card of an insurance salesman turned up in her mailbox at school, and when Newton called the salesman, he put them in touch with a financial adviser named Jay W. Roth. Roth, who goes by the initials J.W. and likes to be called Jay Dub, is a self-described budgeteer who heads the Roth Financial Group in Denver. Though he's only 28 years old and says his formal training in financial planning is limited to a six-month course from Prudential in 1983, Roth has devised something he calls a financial-fitness program to help people get their spending under control. Its principles are laid out in a three-inch-thick workbook titled One Move -- Your Destiny that costs $285. The price includes up to a year of his company's monthly newsletters, quarterly workshops and assistance from his staff of six professionals in completing and analyzing the worksheets. Roth promotes the book and the program through a 28-minute infomercial that he says has run in major television markets like Denver, Chicago and Jacksonville. With Roth's counsel, Newton cut a deal to get out of CIS: he took 12 leased computers, while his partners, who are still in business, got the other 80 computers plus office equipment. Newton then refinanced his house with a new 30-year, 9 3/4% fixed-rate mortgage of $60,000. That money, along with $20,000 the couple had saved, was enough to pay off the $12,000 they owed on the old mortgage, the $40,000 home-equity line and the $8,000 in credit-card and installment loans. As a result, their monthly debt payments dropped from a combined $1,500 to just $500, freeing up the $1,000 a month in cash. Still under Roth's guidance, the Finks put that money into Newton's $284,000 insurance policy, supplementing the $45,000 in coverage that he gets free from the Denver schools. The policy is of the type known as whole life, meaning that it functions both as insurance and as an investment. Over the years, it builds up a cash value that Newton can tap, among other ways, by making tax- free withdrawals (although doing so reduces the cash value and death benefit). The Finks must pay the $12,000 premium for 20 years. Thereafter, the policy is paid up, and the insurance remains in force for the rest of his life. Roth says he was paid a first-year commission of roughly $6,000 on the sale but kept only $1,300 of that, passing the rest to the salesman who had put him in touch with the Finks. He says his firm will receive all future commissions on the policy, though -- a total of perhaps $5,500 in payments spread over the ensuing 19 years. Both and Newton argue that the policy accomplishes three goals: first, it protects Suzanne, who is an insulin-dependent diabetic, in case Newton dies before she does; second, it could provide an inheritance for their children; third, it serves as a source of tax-free cash after they retire. Here's how the retirement income might work: Suppose the Finks pay the premium for 10 years, and then withdraw $9,424 a year for the next 10 (actually, they would withdraw $21,424 each year, but $12,000 of that would go to pay the premium). The death benefit would be cut to $192,890, according to an insurance company projection. But so long as the Finks didn't take any more money out, the policy would still be considered paid up. And during those 10 years of withdrawals, the tax-free $9,424 a year would give them the equivalent of a taxable $13,000 (for simplicity, this and all other tax calculations are based on an effective tax rate of 28% even though the Finks' taxes will actually be lower in retirement). That would put their minimum income during the period at $47,700, or 85% of their current salaries. Newton and Suzanne are delighted with Roth's restructuring of their financial lives. ''I really admire this young man and what he's done for me,'' says Newton, who even agreed to appear among the dozen or so clients who gave testimonials on Roth's infomercial. Adds son Bryan: ''I would guess that after Jesus Christ, Roth is right up there for my father.'' Meanwhile, the Finks are trying to cut spending in other areas. ''I used to buy six Broncos season tickets every year,'' says Newton, ''but now we get two'' -- a saving of $300 a ticket. And they take only three skiing trips a winter, instead of 10 or more, since a day at the slopes costs as much as $150, including lift tickets for two, gas and food. Newton still keeps his hand in the business world with the new computer training company, Fink & Associates, that he founded in Dallas last year. ''I chose Dallas because it's a good market, but also because my two boys live near there,'' he says. Roth, who handles the firm's books and taxes for $65 an hour, believes it may eventually make enough to pay Newton's full $12,000-a- year insurance premium. But even if the new company doesn't fare any better than CIS did, the Finks have a couple of fallback scenarios. Newton says he may apply for an administrator's job, which could double his salary -- albeit at the expense of a return to bureaucratic headaches. Suzanne, though, has a sunnier dream: ''I would sell the Illinois house and buy something in Florida. In fact, I think I could enjoy living there.''

BOX: THE ADVICE

Playing catchup The problems Re-evaluating Newton's life insurance policy, estimating financial needs in retirement, devising a savings program

The solutions Consider dropping your life insurance policy. Lawrence Howes, a partner in the Denver financial planning firm of Sharkey Howes Wagner & Javer, questioned whether the Finks really need their new $284,000 insurance policy. Howes counsels his clients to buy only enough insurance to replace a lost wage earner's income, taking into account any changes in taxes and living costs after the death. In the Finks' case, Howes calculated that $200,000 in coverage would be sufficient -- and Newton already has $45,000 of that free through his employer. Thus he recommended that Newton buy $155,000 in 10-year level-payment term insurance (cost: about $768 a year). Once the new policy is in place, he said, Newton should then drop the old insurance policy, collect its cash value of about $1,000 and add that money to their cash reserves. Invest in your tax-deferred savings plans. Although ditching the old policy would mean throwing away most of the $14,000 or so that they've paid in premiums, Howes said the Finks could make up for that loss by building retirement savings. They should start by contributing a combined total of $12,000 a year to their respective tax-deferred 403(b) retirement savings plans at work. The money could be deducted directly from their paychecks. ''Evidence suggests that the Finks do not have the most exemplary savings habits,'' Howes said, ''so a never-see-the-money approach is appropriate.'' They could invest the accounts in one or more of the many equity mutual funds available through the school system, such as Fidelity's Growth & Income (no load; up an average of 17.4% a year in the five years to Jan. 1; 800-544-8888). If their savings grew by 9% a year, Howes said, they would total $193,514 when Newton retired in 10 years. And if that money were rolled into a conservatively invested Individual Retirement Account earning 8%, it would generate a pretax $15,481 a year -- or $2,481 more than the taxable equivalent of their income under the life insurance withdrawal scenario. The proposal has disadvantages, of course: the insurance coverage would be smaller than under their current policy, and it would end after the 10th year; also, the payments would start a year later -- when Newton reached 65 -- because the insurance policy had a year's head start. But Howes' proposal has several key advantages in providing retirement income. For one thing, its payments could continue forever, unlike the insurance scenario in which the payments end after 10 years. Moreover, though Suzanne would not be in line for a huge insurance settlement if Newton dies before she does, she would at least have the IRAs, which, under Howes' plan, would total $193,000 forever. Conversely, if Suzanne dies before Newton does, Newton would have the IRAs -- in contrast to Newton's current policy, which would pay no death benefit for Suzanne, since she is not insured. Use your tax savings to open yet another retirement account. Howes' scenario has an added bonus: since the 403(b) contributions would be tax deductible, the Finks would save $3,360 a year off their taxes. Even subtracting the $768 annual cost of the term life, that would leave $2,592 a year to invest -- which, in 10 years at a taxable 9%, would grow to about $36,000 and generate another $3,000 a year in taxable income. As a check on Howes' calculations, MONEY asked Peter Katt, a fee-only life insurance adviser in West Bloomfield, Mich., to review the Finks' situation. Although Katt's proposal differed slightly from Howes' (Katt gave the Finks $300,000 of term insurance, for example, to more nearly approximate their existing coverage), he reached the same conclusion: Newton and Suzanne may be better off putting their money in their 403(b) plans. Commented Howes: ''The Finks should consider the $14,000 they've spent so far as financial tuition'' -- a steep price, but for a valuable lesson.

After hearing Howes' advice, neither the Finks nor Roth agreed with it. Roth disputed the contention that $200,000 in coverage would be enough to protect Suzanne. Moreover, he said, ''The amount of insurance a couple have can sometimes be based on what they want, rather than what they need.'' Suzanne added that ''Howes doesn't understand our investment philosophy. We like dealing with somebody who knows our family better.'' And Newton said that providing an inheritance was more important to him than safeguarding his own income during retirement. ''I was left with nothing but a whole lot of love,'' he says, ''and it would be kind of nice to leave a bit more to my kids.''

BOX: A legacy's high price

The premiums on Newton's $284,000 life insurance policy eat up a whopping 22% of his and Suzanne's after-tax income.

INCOME Newton's salary $28,000 Suzanne's salary 28,000 Business income (estimate) 8,000 TOTAL $64,000

OUTGO Insurance policy $12,000 Federal and state taxes 10,500 Mortgage and property taxes 7,200 Food 7,000 Auto loan, insurance, gas 5,000 Travel 4,000 Clothing 3,000 Telephone 3,000 Entertainment 2,700 Savings 2,400 Charitable contributions 2,000 Medical 2,000 Utilities 2,000 Miscellaneous 1,200 TOTAL $64,000

ASSETS House $85,000 Personal property 40,000 Autos (2) 37,500 Equity in new business 35,000 Rental house 35,000 Cash 15,000 TOTAL $247,500

LIABILITIES Mortgage $55,000 Auto loan 12,500 TOTAL $67,500 NET WORTH $180,000