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...because the so-called retainer* is actually a mating contact surface for the rubber sealing ring mounted on the inner spindle.
Assuming the retainer/sealing washer could be pushed in farther, there would be little or no contact with the rubber sealing ring. Thus the grease seal effect of the rotating washer and stationary ring would be lost.
Two different sized washers and cotter pins are supplied because there was a manufacturing change at some point in the long history of this hub and bearing. One of the two should fit your car.
* This "bearing retainer" is more correctly described as a "sealing washer" in the Volvo procedure described on Bentley 240 Service Manual page 770-3.
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Bruce Young, '93 940-NA (current), 240s (one V8), 140s, 122s, since '63.
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