Instead of uping your 401(k) contribution up to 10%, I would put the money into a Roth IRA instead. You then have access to all mutual funds available and also have the flexibility of it being not connected to your employer and also you get the lovely tax benefits.
I would keep putting up to your employers match and then put the full amount allowed for both you and your wife into Roth IRA's. That would be $5,000 for each of you for 2008.
Then when you get your other debts/emergency fund stuff figured out, then up your 401(k) contributions. A lot of people like to increase them when pay increases come around. For example, each year at the time of your pay increase, you could up your contribution up by 1%.
Good luck.
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