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Author: aj485 Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 311074  
Subject: Re: Balancing debt vs Investing Date: 12/30/2012 1:54 PM
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I do already have a pretty good 401k and max out on both the 401k contributions as well as their ESPP. I am also putting away quite a bit for my daughter's college.

Congrats on being able to max out your 401(k).

On the ESPP - are you holding a significant amount of your employer's stock? If so, you are taking on some significant risk - think Enron, WorldCom, HealthSouth, Lehman, etc.

I would also urge you to remember that while college costs can be borrowed for, you can't get a 'retirement' loan, so your retirement goals should probably be a higher priority than saving for college.

While you say you have 'a pretty good 401k' - if you want to retire in 15 years, you should be thinking about your retirement savings in terms of multiples of the income you want to pull from it in 15 years, including any taxes you will have to pay on the distributions. If you subscribe to the 4% 'safe withdrawal rate' theory, you need 25 times that income. And you also need to remember that if inflation averages 3% - 4% per year for the next 15 years, the buying power of the income then will only buy 55% - 64% of what it buys today.

Once you work through some of these numbers, you can determine if it will be reasonable for you to retire in 15 years, and still be able to afford a beach house.

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