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Subject:  Re: What percentage of gross? Date:  2/28/2004  11:13 AM
Author:  SeattlePioneer Number:  2041 of 5232

<<My goals are to pay off all debt--credit cards (this year), student loans, and vehicle (next year). After that we can handle the mortgage payment while maxing out our retirement accounts and my son's 529 and hopefully have a little extra to build some wealth in investments.


Those sound like really excellent goals for life. It sounds like you have chosen.... wisely.

<<My father (a CFP) told me I should put only 3% in my 401K and use the rest to pay off the debts. I realized that with watching our spending, I don't have to sacrifice my 401K (somedays the increasing balance is what keeps me going). DH and I decided that in order to pay off our debts, vacations had to be forgone for 2 years and work we wanted to do on the house had to be put off for 1. Anyway, he has no pension or any big well of retirement funds and basically lives on Social Security along with a tax job. If he were to have an long illness during tax season (a possiblity, he smokes, drinks and has a heart problem) he would end up having to borrow against his home (a condo with ever-rising common fees and taxes -- NYS). So I think we are taking the best course for us.

You are making choices that involve sacrifice and which you are willing to do because you can meet specific goals such as watching that 401K balance rise. Those are emotional but real reasons for making the choices you have.

If you have high interest rate debts, the rational thing to do might be to pay those off and reduce the 401 K contributions. It might also be worthwhile to fund Roth IRAs because of the tax advantages of those. But you have a good plan which are willing to make sacrifices for in order to carry it out. That appears to be more important to you, and may be a good reason for sticking with your current plan.

Seattle Pioneer

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