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A healthy 401(k) account balance changes everything.

Don't look now, but if you check your account and compare it with what you had in January 2004, you should have at least 50 percent more money.

A $100,000 account balance roughly 31/2 years ago should be about $150,000 by now.

A diversified mix of small cap, large cap value, foreign stock, bond and even a few specialty funds thrown in would have generated an annual rate of return of at least 12 percent. Throw in three years of annual 401(k) contributions for good measure, and you're sure to be 50 percent ahead of where you were just a short while ago.

The smug sense of satisfaction we experience from the ethereal beauty of our 401(k) balances is priceless. The irony of the 401(k) phenomenon is that the total of $3 trillion we have all saved in these plans is never counted in the savings rate statistics we continually read about.

Lately, we have been bludgeoned by the financial press into believing that Americans actually borrowed last year at a rate exceeding their savings rate. Not so. Those statistics include just what people deposit in banks. Does anyone save in banks anymore? It's so 1970s.

Ken Fisher, a local money manager, points out in one of his e-mail solicitations that the U.S. savings rate is actually the highest in the world. The negative "official" U.S. savings rate excludes most of what constitutes an increase in savings in this country. It excludes any contributions to retirement plans, any capital gains on stocks, any increase in home equity, any increase in value of a closely held business, you name it.

Savings statistics exclude so much wealth-building that they amount to nothing more than junk science. Fisher's beautiful example would be Bill Gates. In the government's eyes, Bill never saved a dime while he amassed more than $50 billion.

Foreign countries whose savings rates are supposedly greater than ours have financial institutions that trap their populations into having to deal with middlemen.

A look at the comparative savings rates illustrates what a great opportunity we have here compared with other countries.

Japan has a high savings rate because saving is part of the culture. Fewer people own their own homes or even much in the way of stocks. They deposit money in savings accounts, and the banks turn around and buy equities and real estate. In Europe, the same thing happens to a large extent. These other countries have saddled their populations with a collection of middlemen, namely banks.

Remember Robert Vesco and Bernie Cornfeld? They may have been crooks, but they introduced mutual funds to Europe in the 1960s, and for this blasphemy they were ridden out on a rail.

When it comes to real estate and home ownership, nothing comes close to the opportunities we have in this country. Ever wonder why houses and buildings in Mexico take so long to build? Because there is no mortgage industry to the extent that we enjoy one here. People have to build their homes as they manage to save the money for materials.

For this reason, Mexico has one of the highest per-capita savings rates of the industrialized countries -- that is, if you're counting only what flows into bank accounts.

Beginning about 25 years ago, with the advent of money market funds and mutual funds popularized by 401(k) participation, we started to do an end run around the middlemen in the financial services industry.

Buying stocks and bonds directly or through mutual funds was a far more effective way to generate wealth and avoid what was typically about a 3 percent to 5 percent "spread" for the banks and "loss" to the public.

When gazing lovingly online at our 401(k) account balances, we need to remember not to confuse brains with a bull market. The recent 50 percent increase in our assets is terrific. The system works, but as Chairman Mao always said, "One step backward, two steps forward." We should be prepared for the inevitable short-term correction and optimistic about the long-term results.