Q. I am 44 and would like to retire at age 62 with an income of about $50,000 a year. We now have $157,000 in a 401(k) plan, with $17,000 of it in a 5.95 percent guaranteed income fund, $56,000 in Fidelity Magellan, $59,000 in a Standard & Poor's index 500 fund, and $25,000 in Warburg Pincus Emerging Growth. Annual contributions, including my employer's match, will be $11,000 a year. Other investment options within the 401(k) are Warburg Pincus International Equities and Fidelity Advisor Balanced. Our only debt is a $148,000 mortgage, on which we have been making $400 monthly prepayments and expect to pay it off in about 10 years. Are we better off continuing with that, or should we be investing the extra money? We have two children who will be going to college in the next few years. Some of the money needed will come from my wife, who will return to work. Should we contribute less to the 401(k), or make lower mortgage prepayments to help fund college expenses?

K.G., Vancouver, Wash.

A. My suggestion is to keep plugging away at the 401(k) contributions at the current rate.

For one thing, your employer's contributions may come in the form of a match of your own, so that every dollar you divert may cost you more than a dollar in eventual savings.

More important, you seem to be pretty well on track to reach your retirement goal, but a reduction of payments might leave you short.

If you achieve average annual total returns of 10 percent from the retirement portfolio, with contributions at the current level, after 18 years the pool would be $1,397,608. You might expect such a sum, invested in retirement to produce an income stream of 6.5 percent, to bring you $90,844. This sounds great, until you begin thinking of inflation. If inflation runs at a 3 percent average over the next 18 years, that $90,844 would have the buying power of $53,361 in today's dollars.

My suggestion would be to stop prepayments of the mortgage, putting the money instead into college savings, and when the second child graduates, go back to the mortgage prepayments -- this would still give you a decade before retirement, which would be plenty of time to retire the mortgage.

Even though I'm not enthusiastic about the current market, I'm even less enthusiastic about that $17,000, or a little less than 11 percent of the 401(k) portfolio, that's in the fixed-income fund. I suggest you grit your teeth and move it into Warburg International Equities, which will broaden the diversification of the portfolio, and which over 18 years should give you a much better performance.