August 2, 2008

How smoking could end up costing you a million dollars

The typical cigarette smoker consumes one pack a day of cigarettes. A pack of cigarettes retails for around $3 give or take in most states. The exact cost will vary greatly from state to state due to different tax rates on cigarettes. But if we take $3 a pack as an average value then a typical smoker is spending $3 x 365 or $1,095 annually on smoking.


If you were to start smoking now at age 18 and then smoke for the next 47 years until you retire at age 65 then you would be buying at least $51,465 worth of cigarettes without adjusting for inflation.

If you instead stopped smoking now and invested $1,095 each year in a tax sheltered retirement fund and experienced 10% annual growth in your investments you would see that investment grow through compound interest to $1,051,389 by the time you are 65. Even if you adjust for 3% annual inflation thats still $239,829 in todays dollars.

So you could either smoke for the rest of your life or you could save the money and watch it grow to $1 million in retirement nest egg.

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