Smoking is the leading cause of statistics. ~ Fletcher Knebel

Welcome to RetireMentorship, Your Mentor To and Through Retirement. I am your host, Freeman Linde, Certified Financial Planner®. 

Today we examine why Smoking is Hazardous to Your Wealth. We all know how hazardous it is to our health, but do we know just how ruinous it is of our wealth?

That’s coming up on the RetireMentorship Podcast.

First, the RetireMentorship Two-Min Tune-In. The primary points of the podcast in two minutes. 

I don’t smoke, and you may not either. But I found this topic to be fascinating. If you know anyone that smokes or vapes, share this with them. It’s not about bashing smokers and isn’t more statistics on lung cancer and deaths. And at the end, we’ll share how it is easy to stop smoking. That’s right. Easy.

Smoking costs a lot of money. There are the direct costs: the cost of the cigarettes; indirect costs: increases in other costs due to smoking; and opportunity costs: what you could be doing with the money otherwise. 

When you add it all up, smoking or vaping costs you millions of dollars over your lifetime. 

But it doesn’t have to! It’s easy to stop. I know; I didn’t believe it either. But the belief that smoking is hard to quit is promoted by tobacco companies. They want people to believe that it is hard to quit, so they reinforce the message.

A fascinating book about quitting has this basic premise: Keep as often as you want while reading the book. By the end, you’ll smoke your last cigarette, and you’ll never smoke again. No patches, gum, or withdrawals. Done. 

Intriguing, right? First the bad news about how much smoking costs. Then the good news about how easy it is to stop smoking and exchange those costs for riches! 

Even if you don’t smoke, you’ll find this interesting. And you’ll never look at smoking the same way again. That’s coming up on the RetireMentorship Podcast.

Smoking is Hazardous to Your Wealth

We’ve all heard the terrible statistics about smoking and what it does to our health. I’m not even going to bring it up.

What you probably haven’t heard is the damage to our wealth. At least, not laid out like you’re in this episode. First, let’s cover the Cost of Smoking, what it’s doing to our wealth. We’re going to cover it from the view of a lifetime of smoking. We’ll add up all the costs from when a 21-year-old starts smoking and then assume they smoke a pack a day. We’ll start today and project forward.

Then we will cover the End of Smoking, how to easily quit. 

The Cost of Smoking

Smoking has three costs, Direct, Indirect, and Opportunity. Let’s look at each.

Direct Cost of Smoking

Direct costs are the costs of the physical products themselves. I’m going to focus on traditional cigarette smoking, but vaping and chewing apply as well. 

According to the National Cancer Institute, the average cost of a cigarette pack is $6.28 as of July 2020. A pack a day puts you at $188 per month or $2,300 per year. 

But that’s not the cost per year as we advance. Even when looking up the cost of cigarettes, the first article points out that smoking for ten years will cost you $23,000. But that assumes the price stays the same, which it won’t. We cannot ignore inflation. 

Cigarettes have inflated in price from 1997 to 2021 at an average of 7% per year. Everything else has only inflated at 2% per year. 

When you take this into account, the annual cost of smoking a pack a day increase dramatically. By age 65, a pack a day will cost $45,000 per year! By age 80: $125,000 per year. The good news is smoking shortens your life expectancy by ten years. So while I usually project people out to age 90 and beyond, we’ll cap it at age 80.

Cumulatively, smoking a pack a day from age 21 until age 80, the average smoker will spend $1.87 million on smoking. 

I hope you’re enjoying those smokes. Because they are costing you a couple million bucks. Smoking is Hazardous to Your Wealth.

Indirect Cost of Smoking

Smoking doesn’t merely cost money for the packs. You have to look at the rise in other costs due to smoking. 

Life insurance will cost you more. The cost of being a smoker compared to a preferred rate non-smoker is more than double. I calculated the increase in life insurance costs by inflating current prices out and putting in the various times you’d reapply for life insurance. You’re looking at about $35,000 more in life insurance costs over your lifetime. 

Health insurance will cost a lot more. Forty of the states charge the maximum 50% more in health insurance premiums for being a smoker than not. I did a calculation that pulls in the current cost of health insurance by age and inflates by our rate. I assumed that the employer is picking up half the coverage cost and then did the 50% increase for being a smoker. Smoking will cost you an additional $128,000 from age 25 to 64 and costing your employers the same. 

Thankfully for smokers, Medicare premiums cost the same for smokers and non-smokers. You can thank everyone else for picking up a hearty portion of the medical bill tab you will run-up in the latter portion of your life. 

Smoking can cause a lot of separate health issues. The average cost of a stroke today is $21,000. Let’s inflate that out to age 55, $42,000, and age 75, $62,000. Health insurance will pick up some of that, but can we assume that it will start adding additional health costs in your later years? I think so. Let’s put $2,000 a year in starting at age 55, increasing, of course. That’s going to total $88,000 of additional health costs.

Add all that up, and smoking is costing you another $252,000 in indirect cost. The direct and indirect cost of smoking is now up to $2.1 million. Smoking is Hazardous to Your Wealth. 

Opportunity Cost

The cost of smoking is not the cost of smoking today, added together over the next few decades. You have to inflate it at two and a half times the increase of everything else. It’s also the other costs, inflating those as well. But much more these costs are the opportunity costs: what you could have done with that money otherwise.

You could, for example, invest it in a Roth IRA or 401(k). Let’s use our historical 30-year rates for the S&P 500 of 10% (which is also the rate since its inception in 1957). Then let’s subtract out some fees and whatnot and use 9% instead. 

If you took the annual cost of smoking, both direct and indirect, and invested it in a Roth IRA making 9% from age 21 to age 65, you would have:

Drumroll, please.

$4.5 million.

Smoking a pack a day, from age 21 to age 65, is costing you $4.5 million. You are giving up being a multi-millionaire at retirement to smoke. 

But it gets worse. Since you were smoking throughout retirement in our base example, that means that,

A) You don’t need to pull from this Roth IRA that you never had in retirement, and 

B) You could continue to afford cigarettes at $45,000 up to $125,000 per year. 

In the base example, you had enough other retirement funds to do that. This means we can both leave the $4.5 million alone and continue to fund it with your cigarette money. 

By age 80, you would have $19 million. 

And in this new scenario, where you quit smoking immediately at age 21 and began investing it instead, you now will live to age 90. We won’t add anything to it after 80 because it just doesn’t seem fair. Let’s simply grow it from age 80 to age 90. 

$45 million. Tax-free. 

Smoking a pack a day from age 21 for the rest of your life is costing you $45 million over your lifetime. Every time you take a puff, you are watching $45 million go up in smoke. 

Smoking is Hazardous to Your Wealth. 

The End of Smoking

So that’s the bad news. You are burning up your lungs and millions of dollars. The good news is you don’t have to.

Don’t take it from me because I’m not a smoker and therefore have never tried to quit. Take it from the millions of people who have done it after reading this book and confirm that it works. 

I heard about this book on a podcast, and it seemed so outrageous that I had to listen to it myself. I, like you, have always heard how hard it is to quit smoking. And this book asserts that it is, in fact, easy.

The book is Allen Carr’s Easyway to Stop Smoking. I’ll have links to it in the show notes for both the book and audiobook. Even as a non-smoker, the book is amazing.

Allen Carr is now deceased, but the book has been carried on by the company he started. 

The book begins by telling you to smoke as much as you want. Don’t try to quit. Don’t try to easy off. Keep right on puffing away as much as you always have until you finish the book. Then you’ll smoke your last cigarette and never smoke, or want to smoke, ever again. 

You have to admit, that sounds outrageous… and intriguing.

He then goes on to share how smoking isn’t what we think it is. 

Smoke gives a nicotine hit. Nicotine makes us calm and feels good while it’s in our system. But 95% of the effects of nicotine wear off in 30 minutes or less. So we begin to go into withdrawal in just 30 minutes. Then our brain requests that we add more nicotine. That’s why there are 20 cigarettes in a pack. We can smoke one almost every half hour for the day.

At this point, Allen separates the monsters. He calls the desire for nicotine the little monster. The big monster is the lies we tell ourselves about why we need to smoke. He says the little monster is easy to kill. It’s the big monster that needs to be slain.

Take these examples. Nicotine withdrawal happens after 30 minutes. Often people feel like they really need a hit after a couple of hours. But we routinely go eight hours without a smoke. We don’t wake up every 30 minutes to smoke. And when we take a long flight, say internationally, we can convince ourselves that, since we can’t smoke for 11 hours, we won’t. Then as soon as we land, the “nicotine craving” kicks in full force. Where was it the whole time we were on the flight? 

The nicotine craving is not that strong. It’s the mental reasons we tell ourselves we need a smoke that stirs up the desire. 

Allen then goes on to systematically destroy all the reasons we think we smoke. 

“I smoke because it calms me.” No, nicotine withdrawal makes you anxious, and a hit of nicotine removes that anxiety, bringing you back to calm—the calm where everyone else is all the time. 

“I smoke as a social habit.” No, smoking makes you antisocial, causing you to leave social situations to go out and smoke alone or with the other sad strangers out in the cold smoking. Have you seen smokers out in the rain on their phones? They don’t look very social to outsiders. 

There are so many reasons we think we smoke, and all of them are bogus. The tobacco industry feeds into the propaganda that quitting is hard. And the pharmaceutical industry makes billions off of patches and gum to other cessation products. But we don’t need those. It’s all in the mind.

I’m not going to be able to say enough here to convince you that it is easy to quit. As we’ve talked about repeatedly on here, belief is more important than knowledge. You know smoking is hazardous to your wealth. And you know that it is easy to quit. I just told you. But it will take actually reading the book for yourself to believe it is easy and do it. Then the wealth will come.

If you smoke, I urge you, in the strongest possible terms, to buy the audiobook and listen to it every day on your commute. It’s $15 with an Audible token or free with a free trial. Take it from a financial planner. Make the $15 investment. Buy it. Now! And listen to it. For the cost of fewer than three packs, they could be your last three forever. 

There are links in the show notes to the audiobook and the book. Get the book only if you read. If you aren’t the kind of person who already sits down and reads consistently, then get the audiobook. It’s easy to do while doing other things, and you’ll finish it. 

Don’t delay. Get it now. 

It’s costing you millions of dollars to smoke. Even if you’re skeptical, shouldn’t you at least try the book and see if it works? Millions have been successful with the program. Celebrities, including Ellen DeGeneres, Ashton Kutcher, James Spader, and Sir Anthony Hopkins, have quit easily and permanently after reading the book. 

If you don’t smoke, but you have friends who do and who have tried and failed at quitting with patches and other products, share this episode with them. It is easier to listen first to this short episode and then the book than to recommend the full book right away. 

I’m not being paid to promote this book. If you use the affiliate links in the show notes, I’ll get a couple bucks to help pay for podcast hosting, and the products don’t cost you any more using the links. I’m promoting it because I’m a Financial Planner, and my job is to help people build and preserve wealth. I want to promote things that promote healthy finances and attack things that harm your finances.

And Smoking is Hazardous to Your Wealth.

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This article is educational only and is not intended to be investment, legal, or tax advice or recommendations, whether direct or incidental. Again, this is not investment advice. Consult your financial, tax, and legal professionals for specific advice related to your specific situation. Never take investment advice from someone who doesn’t know you and your specific situation. All opinions expressed in this article are the opinions of the people expressing them. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly. RetireMentorship is not affiliated with any Registered Investment Advisor, Broker-Dealer, or other Financial Services Company.