Good questions Paul! *Hopefully my answers will tell you the method of my madness.
I'm currently carrying PMI on a 5 year ARM. My goal is to contribute enough $$ so that in five years time through appreciation and pre-payments I can amass >20% equity in the house. *That way I can drop PMI, which is running me about $150/month - yuck!
Since I'm only 28 (soon to be 29), retirement is still a long ways away for me so I'm not really rushing to get to 20% on my 401K. *Additionally, in order to feel comfortable, I have to keep some investments separate from retirement funds. *So, in case of an emergency I can just cash out some stocks, pay taxes and be done. With 401K/IRAs $$ I have to worry about paying back the loan and/or paying penalties in addition to taxes. *
The increases that I plan to make to 401K contributions each year are intended to match the increases in my pay so that all my raises will go into retirement and I will subtely teach myself to live below my means *
Oh yeah! *I have a 5K next weekend. Wish me luck!! *I'll also be starting training for my half marathon next week!