National Smoke Out Day
If you smoke cigarettes, you are not alone. A recent survey estimates that 36.5 million adults in the U.S. currently smoke cigarettes . If you’re looking for one more reason to quit smoking this year, this may be the clincher. Taking the money you will save by NOT buying another pack of cigarettes and instead putting that into a 401(k) retirement savings account can put you on the path to retirement readiness.
Following these 5 steps can help you get there:
Step 1: Decide to quit smoking – for good!
Step 2: Calculate what your pack a-day-habit costs you. While the cost of cigarettes varies from New York’s $12.85 to Virginia’s $5.25 , a recent study showed the average cost of a pack of cigarettes is $6.164, including tax; we’ll use that figure. Assuming a pack-a-day habit, the annual cost would be about $2,250 per year.
Step 3: Now, take that $2,250 that you have saved by quitting and apply that to your 401(k) each year. If you’re not currently participating, get enrolled.
Step 4: We plugged some numbers into the chart below and here’s the result. If your current age is 30 and your current salary is $36,000, and you put 6.5% of your salary (the $2,250 from above) into a 401(k) every year, and include a 1.5% annual increase in salary, then set the annual rate of return at 6%, with no employee match, at age 65 your 401(K) savings account will be worth about $322,169 . If you use those same numbers and add an employee match of 100%, up to 3%, your retirement savings can increase to $470,863, just under half a million dollars. Quitting smoking now becomes “worth it.”
Step 5: Use the link below to play around with the numbers and calculate your own retirement savings scenario. http://www.bankrate.com/calculators/retirement/401-k-retirement-calculator.aspx.
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