MONEY

Owners save for college and retirement with a deli valued at $100,000

Sixteen years after opening a deli in Novato, Calif., Corrado and Amy Fabbro can make sandwiches with their eyes closed. While their routine is well established, however, their finances are more unsettled. Business took a hit with the downturn.

And though their income has leveled out at around $85,000 — after peaking at $100,000 in 2008 — tenants have moved out of nearby offices, which could hurt sales further. Meanwhile, they’re trying to both save for retirement and build college funds for their children, ages 9 and 12.

“We’ve got too many balls in the air,” says Corrado, 48, who manages the business day to day while Amy, 48, focuses on the kids.

Related: Guide to college savings plans

The good news? At their current saving pace — $15,000 a year — the couple have a shot at reaching a comfortable retirement, says Los Altos, Calif., financial planner Don Martin. The bad news: Inadequate insurance and emergency savings could foil the Fabbros’ chances.

Three fixes

Beef up insurance. If Corrado were unable to work because of an illness or other impairment, the family’s income could take a serious hit.

Disability insurance would hedge this risk, says Martin, who advises Corrado to buy a policy that replaces 60% of pay. (Cost: $5,800 or so a year.) Also, though Amy and Corrado have term life insurance — $250,000 and $500,000, respectively — the policies expire in 13 years.

Related: Couple copes with the potential loss of their pension

And the Fabbros need income protection until Corrado retires at 67, Martin says. He suggests Corrado take out a second, 20-year, $700,000 policy now, which should run about $145 a month.

Hoard cash. With no dedicated emergency savings, the couple are counting on their $8,500 brokerage account and $11,000 vacation fund as a backstop. Bad idea, says Martin. They need to have at least six months of expenses in cash so that they can keep up their lifestyle and savings habits in slow business cycles, which are to be expected.

Boost income. A part-time job for Amy, possibly at the deli if someone quits, could do wonders for the couple’s security, Martin notes. It’s also more feasible for her now that both kids are in school. Assuming she takes in $15,000 after taxes, the Fabbros would be able to cover their extra insurance needs, build a cash cushion and, once that’s done, save $7,500 a year for college.

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