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Saving for retirement depends on the wonders of compounding. However if the mechanism of compounding is stock market investment the rate of return is unfortunately not fixed and not certain. Financial advisors avoid this fact of life and advise a specific savings rate to achieve a specific nest egg based on an assumed rate of return. Do not fall for this heuristic. The real question should be "what is the probability that a yearly investment of x will result in a final value of y after n years if it is compounded annually with a rate of return characterized by a normal distribution with mean r and standard deviation s". Answering this question requires making an effort to understand some basic probability mathematics. Given the importance of saving for retirement the effort is worth it. See the following to get started on your way.
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