D.B. in Houston wrote with an interesting dilemma. "My wife and I are both 31 and have good jobs. Our combined income is about $175,000 a year and we have been saving about 20 percent of it during our 7 years of marriage. Today we have a net worth of about $300,000. It is divided between $200,000 in 401k's, $15,000 in money market accounts, $40,000 in IRA accounts, and $40,000 in home equity. We have 13 years left on a 15 year mortgage with a balance of $150,000.

"We save this much because I want to retire early and not be forced to work much past 55.

"A small detail I haven't mentioned: My wife is pregnant with triplets.

"Obviously, our expenses will change.   I'm wondering if the current 20 percent savings is too much and if we are living too much for the future and not enough for today. I've been thinking about a larger house in a better neighborhood.

"If we moved to a more expensive home, we would obviously have to curtail our savings a bit. But with real estate doing just as well as the stock market these days, part of me says I could 'invest' in a new home and still continue having our net worth grow at its current rate. Basically, we'd be shifting monthly stock market investments to a house payment.

"How does one decide what the best route is?"

The first thing you need to know is that all plans will pale before your new triplet reality.

The good news, unrecognized in most financial planning, is that your children will teach you a valuable lesson. To accommodate their needs, you and your wife will learn to get along on less for yourselves. (You'll also learn that this is not a deprivation: It is what the vast majority of parents do with zeal and pleasure.)

The more you spend on your children, the less you will need in your retirement nest egg.   Since nurturing them reduces the personal standard of consumption you and your wife share, it will take less investment to support that reduced standard.

I know, that's hard to believe.

So follow me, D.B., in this example with your personal figures. Currently, you and your wife have a consumption standard of $140,000 a year ($175,000 less $35,000 in savings). Your financial assets amount to $240,000, excluding your money market account. So you have 1.7 years of consumption in savings.

If that nest egg grows at a real (inflation adjusted) rate of 7 percent, it will double in 10 years, quadruple in 20 years, and multiply eightfold in 30 years. So at 61 you will have 13.7 years of real consumption in your nest egg--- not quite enough to retire.

Now suppose your soon-to-be-born triplets reduce your current personal living standard by (Ho-Ho!) 20 percent for the next 25 years or so. That means the standard of living you'll need to replace in retirement won't be $140,000. It will be $112,000 ($140,000 less $28,000). As a consequence, your current $240,000 nest egg is equal to 2.14 years of personal consumption.

Growing at the same rate, it will multiply to 17 years of real personal consumption in 30 years. That's enough to put you in the ballpark for retirement, particularly when you consider that part of your remaining $112,000 consumption standard is your mortgage, which will be paid off in 13 years.

Indeed, some of the $28,000 "reduction" in consumption standard may be spent on a larger house in a better neighborhood.

This approach is unconventional but it is rooted in the life cycle hypothesis for which the late Franco Modigliani won a Nobel Prize. The calculations I've done were "back of the envelope" figures to demonstrate the principle. In fact, software exists to explore every aspect of life cycle planning. It's called Economic Security Planner and is available at http://www.esplanner.com.

Will more house be a good substitute for investing in financial assets?

It depends on your ZIP code. For the last 40 years residents of the East and West coasts have increased their net worth by where they chose to live, not what they chose for work nor how they chose to save.

One thing to consider: Rapid mortgage pay-down may not be in your long term best interest.   Your family may be better off if you (1) finance for a longer term and (2) aggressively save in a cash value life insurance policy. This will give you greater flexibility for both college expenses and early retirement.