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No. of Recommendations: 2
Asumming all changes happen at the end of the year (lump sum payments from you and employer, investment returns and pay raises), one day before the end of year 1, your account is still worth $40,000. After a year and one day the value is $50,800. (The initial $40K, plus $4K from you and your employer. Plus $2,800 return on the $40K)

OK at the end of year 30, the total in the account will be $1,232,633 which really looks nice,

Before you start spending your retirement funds, a few sobering points.

#1 Returns are never x% a year -- year after year. Some are better and some are worse. 1929 was a bad year. 2008 was a bad year. 1932 was a great year. 2010 has been a good year. Just remember the story about the person who with a backpack full of rocks that decided to walk across a lake whose average depth was only 2 feet -- in the middle there was a section 8 feet deep.

#2 Inflation will happen. If for example we have really low inflation averaging 1% in 30 years a dollar will be buy goods and services worth $0.74 today. With 2% the dollar will be worth $0.54 and if we have 3% which is want many experts predict, it would take only $0.40 today to buy what will cost a dollar in 30 years.

#3 30 years in an eternity for predictions. Congress will make serious changes in tax laws and all kinds of things. One still should save, but don't let the power of compounding make you think you can cut your savings.

One approach is keep the savings up to your employer's match is used -- that is free money! A year or so down the road as you get that 2% raise, take 25% of your take home increase and save it. Do that with all new money. Then you have a cushion and maybe can even retire a bit earlier. Having that flexibility is something a whole lot of people who are say 55 today and lost there job really could use.

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