Q. I get a little disheartened when I read your article and see the large amounts of wealth some people have accumulated at my age. I'm 35 and own my own home. It is worth about $145,000 with a mortgage balance of $105,000. I make $48,000 a year and put 8 percent in my 401k. My company matches 3 percent. I have around $7,000 in the 401k in an aggressive fund, which I don't expect to touch until I retire. I also have about $5,000 in Janus Twenty fund and $2,000 in a utility fund. I am not currently putting money in those two funds.

My house payment is $1,100 a month and I have a $200 car payment. My credit cards are paid. If I continue my rate of saving, will I have enough to retire? Should I consider refinancing my house with a 15-year note? My current rate is 7.75 percent.

---P.W., by e-mail


A.  There will always be people with more money than you have. It's a fact of life, not something to get disheartened about. Some will have more money because they made an unusually good investment. Others will have more money because they are two earner couples. Still others will have more money because their parents helped them with large down payments for houses or with gifts of automobiles. And some will have inherited large sums of money in spite of being remarkably undeserving in all eyes but their own.

In fact, you're in very good shape, well ahead of half the people your age. Your car payment--- your only consumer debt---- is only 5 percent of your income. Your house payment is 27.5 percent of income, so you have more flexibility than most of those burdened by credit cards.

If your company match is 100 percent of the first three percent of salary, your effective savings rate is 11 percent a year. This will serve you well for retirement. (Using a model the projects investment and income growth, you'll have 15 years of your final income in your 401k, assuming a 9 percent annual compound rate of return. Combine that with Social Security benefits and home ownership and you will maintain your purchasing power handily.)

Unfortunately, just because a mutual fund is considered "aggressive growth" doesn't mean it will provide you with an aggressive return. Of the 100 aggressive growth funds that have 5-year histories, only 31 provided returns that were greater than the return on the S&P 500 Index. As a group, the 100 funds trailed the S&P 500 index by 3.86 percent a year. They trailed by similar amounts over 10 and 15-year periods.

My suggestion: Dial back on the growth emphasis and consider putting at least part of your investment money in a broad index fund.


Q. I am a 30-year old single man who makes about $40,000 a year. I recently looked into buying a townhouse in the $50,000 to $70,000 range. After being approved for a loan I found out about all the extra charges associated with buying a house. Can you tell me why I should buy as opposed to saving all the extra charges (taxes, insurance, closing costs, down payment, etc.) and putting it in the bank for 30 years? I think I will come out far better financially by saving but everybody, including my parents, tells me buying is the way to go.

---M.D., by e-mail


A. If the total monthly cost of owning a house, townhouse, or condo is significantly larger than the monthly cost of rent on a similar unit, renting is the better choice if (and that's a big if) you actually save and invest the difference. The reason homeownership is so popular is that it is the only investment we have that does real double duty--- it also provides us with shelter. Sometimes bragging rights, too.

If you are comfortable renting, don't feel compelled to buy a house. Do, however, feel compelled to save a bit more to compensate for the reduced cost of shelter and income taxes that homeowners often enjoy in retirement.