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You may think that how much you make is the only contributing factor in how much you can save. When and if you do skip a year, it's important that you rerun any savings calculations and make any necessary adjustments to your contributions going forward. The more years you miss, the more it could affect your savings goal. There may also be a year or two when you can't make a contribution to your accounts.
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Missing 2013's 32.4% gain would've dragged your average down by more than 3 percentage points to 11.25%. For instance, if you'd invested in large-cap stocks over the last 10 years, you would've earned an average rate of return of 14.5% per year. Rates of return that predict the potential growth of your account are averages of these different numbers, and missing even one of the best years could change your final outcome. Some years you will have a lot of gains, some years you will end the year flat, and some years you will lose money. From year to year, the rate of return that your account experiences will vary. Projections of how much your money could grow to assume that you'll do the same thing consistently. Using a calculator, you can determine just how much by factoring in how much you've already saved, how many years you have left until you hit your millionaire goal, and your new rate of return. You can compensate for this lower return by adjusting your annual contributions. Doing this will decrease your volatility, but you will probably earn a lower rate of return. While this type of portfolio may be suitable for you when you are young, reducing your stock exposure steadily as you near retirement may be prudent. You can potentially achieve this rate of return by investing in a portfolio of 100% equities. If you save $5,250 a year starting at age 25 and earn 10.3% each year on average, your account could grow to more than $1 million by the time you are 55. Starting young is one of the best ways of snagging the title of "The Millionaire Next Door." If you can invest the money that you save, investment returns combined with the power of compound interest can grow your assets exponentially. Rather than leaving it to chance, making these simple changes to your savings and investing habits can get you there as well. And while these are quick and easy ways of gaining entry into the millionaire club, the chances of these events happening might be low. You may think that becoming a millionaire can happen only if you win the lottery or inherit a ton of cash.