(MONEY Magazine) – The story Buck Traynham most loves to tell from his boyhood on a South Carolina farm is about discipline. "Farmers couldn't lock up their guns in those days," drawls the tall, courtly 71-year-old. "They needed 'em handy in case animals attacked the livestock. So Daddy told us kids not to touch. If one of us did, Daddy would whip him. He wasn't a hard man, but it's better to whip you than let you shoot yourself or somebody else, isn't it?"

Like his late father, Buck--christened Ballenger-- believes that a little less coddling and a little more tough love would do Americans a world of good. It's an opinion he apparently shares with millions of voters who swept a Republican majority into Congress last November on a platform of smaller government, lower taxes and a greater premium on personal responsibility. "Washington has gone too far trying to help people with taxpayers' money," says Buck, who now lives with his second wife Maxine, 62, in Charlotte, N.C. "It's time individuals learned to help themselves."

Down as he is on entitlements--he derides some welfare recipients as "irresponsible people leading chaotic lives"--Buck is worried about his own safety net. Although 15 years ago the former manufacturer's sales representative had a nest egg of $500,000, financial reverses and unexpected expenses have slashed his assets to about $200,000, and he's concerned about outliving his money. One contingency that neither he nor his wife-who has substantial assets of her own--have planned for is long-term care; he fears a lengthy nursing-home stay could wipe them both out. For the first time in his life, Buck feels vulnerable. "I know my daughters would always take care of me, but it would just about kill me to ask," he says.

Buck's anxiety about insolvency is probably overblown: In addition to $115,000 equity in a $175,000 four-bedroom home in Charlotte's leafy Oak Run section and undeveloped land at a lakeside vacation site worth $50,000, he has a $15,000 annuity paying 7.7%, $12,000 in a personal unsecured loan he made that earns 12%, $4,600 in municipal bonds, and $10,500 in two-year certificates of deposit and a money-market fund. His annual income is about $11,000--more than 80% of which comes from the government he wants to cut back. Indeed, Buck is not unlike many Americans who, while railing against the welfare state and the danger of ballooning deficits, take for granted the many government giveaways that they themselves enjoy.

Buck, for example, collects monthly Social Security payments, which this year rose 2.8% to $9,190. Within about a year, he will have gotten back all the cash he ever paid into the Social Security system, meaning that future payments will be pure gravy. Like virtually every American over age 65, he also gets lifelong health coverage from Medicare at the current cost of $46.10 a month, a figure that represents only 25% of the actual premium cost. Taxpayers pick up the other 75%, regardless of the Medicare recipient's income. But unlike many others on the dole, Buck feels he got his benefits the old-fashioned way: He earned them. "My generation doesn't need to learn to take care of itself," he says. "We've done it all our lives."

To be sure, Buck embodies much of the ambition and clear-eyed self-reliance that seem to be fading from the American ethos. After high school and a stint in the Marines, he went into sales, eventually founding his own firm. On his earnings, which ran as high as $80,000 a year, he put his two oldest daughters through college. But life can slap around even the most responsible of individuals, as Buck learned. In 1984 his first wife died of multiorgan cancer after two years of painful chemotherapy and radiation treatments that cost him $150,000 out of pocket. Around that time he also lost $80,000 in the junk bond market and anted up $100,000 to send youngest daughter Tracy through college and law school.

In 1985 he married Maxine Barton, a soft-spoken divorcee who has three children of her own but, unlike her husband, holds no strong political views. Maxine has more than $300,000 in investments of her own--including three annuities worth about $250,000, a parcel of raw land in Charlotte valued at $25,000, an $18,000 IRA invested in certificates of deposit earning 7.4%, and $14,000 in stocks and bonds. She also has $48,000 coming due from a retirement plan payout. Maxine and Buck do not mingle their assets, though they do file a joint tax return.

The couple both worked until last year. Buck, who retired from sales in 1989, had been earning $150 a week picking up and delivering laundry in one of Charlotte's poorest neighborhoods, a job he found too arduous to continue. Maxine retired from her job as a dental assistant last May and started collecting Social Security benefits of $6,950 a year in December when she turned 62.

Despite their combined net worth of more than $550,000, the Traynhams paid just $851 jointly in federal income taxes for 1993, compared with $3,912 for the average family. Ironically, one thing that helped keep Buck and Maxine's taxes low in 1993 was Buck's $5,002 deduction for mortgage interest--an entitlement claimed by five times as many households as receive federal welfare payments.

A bigger reason, though, is tax shelter loopholes that disproportionately benefit wealthier Americans. Because most of Maxine's money is invested in tax-deferred annuities and an Individual Retirement Account, in 1993 the couple reported income of just $26,589 and were able to escape any assessment on Buck's Social Security payment. (Senior couples with incomes of $44,000 or more are currently taxed on as much as 85% of their benefits.) Though Maxine's shrewd planning has so far kept them in the 15% or 28% tax bracket over the years, Buck is incensed that current federal rates range as high as 39.6%. "A government that can't get by on 25% of its citizens' earnings," he growls, "is just plain out of control."

THE ADVICE

Financial planners Philip Bailey of Bailey Financial Management, Harry Greyard of Waddell & Reed, and Richard Joyce of Joyce Planning Services met with the Traynhams in Charlotte to discuss their situation. Their verdict: The sheer size of the couple's portfolio produces enough income for their needs, but it's short on diversity and liquidity, limiting the potential for growth.

Diversify--but not right away. With interest rates rising, the planners suggest that Buck invest the proceeds from his personal loan, which comes due next year, in U.S. Treasury bills and notes, with staggered maturities of three months to two years. They currently pay 5.8% to 7.5%. In addition to their attractive yields, Treasuries are exempt from North Carolina taxes.

Since Buck needs to make up shortfalls in his income, the planners feel he should consider selling his raw land. But since he'll have to pay capital gains on his expected profit of $30,000, he should wait to see if the new Congress makes good on its promise to lower capital-gains rates before he puts the land up for sale. He should then invest half of the proceeds in Treasuries and the rest in a balanced mutual fund that contains stocks for their appreciation potential but tempers their price volatility with bonds. One good pick, says Greyard: Fidelity Puritan (no load for 1995; up 13.7% average over 10 years; 800-544-8888).

In her zeal to avoid taxes, Maxine has put nearly all of her capital into fixed annuities, conservative investments that limit her flexibility, since she cannot cash out for several years after purchase without incurring steep fees for early redemption. Though her annuities currently pay from 6.1% to 7.2%, the returns are not high enough to provide her with both cash for living expenses and enough money to reinvest. For that, she needs a boost from stocks, which have historically outperformed all other investments by 100% or more over the long haul. "And the long haul is what Maxine is facing," points out Greyard. "At age 62, she can easily live another 30 years."

She is essentially locked into the annuities, however, so the planners suggest that once the new tax landscape becomes clear, she too should sell her unbuilt residential real estate to generate capital she can earmark for growth. Maxine should exercise caution with the $48,000 payout due from her pension plan as well, rolling it directly into her IRA until Congress acts--or doesn't--on capital gains.

Joyce recommends gradually re-directing the proceeds from the land plus the retirement plan into a stock index mutual fund, which holds many of the same issues that make up the major stock indexes, such as Standard & Poor's. Joyce's pick: Vanguard Index 500, which tracks the S&P (no load; up 14.1% on average over the past 10 years; 800-851-4999).

Consider insurance for long-term care. The planners agree that the couple should cover their mutual risk of an extended nursing-home stay with insurance. But rather than standard long-term-care policies, which require yearly premiums and generally pay no benefits if long-term care is not needed, planner Joyce recommends a single-premium life insurance policy, called Asset Care, sold by the Golden Rule Co. (800-261-3361). Asset Care allows policyholders to draw as much as 2% of their death benefit monthly for long-term care. Because it is a "second to die" cash-value policy that pays the death benefit only when both spouses are gone, however, the premium is based on their combined ages.

The policy Joyce suggests for the Traynhams would require a single premium of $50,000--to be split equitably between them. It would offer a death benefit of $116,849 and pay interest, currently at the rate of 7.9%. This means that if a move to a nursing home became necessary, either Traynham could draw $2,337 a month--or both could draw half of that--for more than four years. For comparable standard long-term-care coverage, without a death benefit, the couple would have to pony up $4,000 or so a year for the rest of their lives. "But that investment would earn no interest,'' points out Joyce, "and neither they nor their heirs might ever collect a dime."

The Traynhams are currently looking into the long-term-care policy recommended by the advisers. They are also open to the idea of selling their land and reallocating the proceeds but, says Buck: "We'll need to do a little more thinking about that one."