Become a Millionaire by Quitting Smoking

A calculator lies on a pile of coins and cash.

Quit smoking while you are still young, invest the money in a pension and you could end up with almost a million by the time you’re 65!

At least that’s what Paul Claireaux, quoted in the Investor’s Chronicle, believes. He’s calculated that a basic rate tax payer who quit smoking 20 cigarettes and invested the daily £7.60 savings in a SIPP would have a pension fund of £530,000 by the age of 55 or £953,865 by the age of 65.

The sum relies on investing it in a pension which is matched by a 60% employer contribution (as under the new UK government pension scheme), and which the government tops up by 20% for lower rate tax payers. Higher rate tax payers, who get a 40% government top up, would enjoy an even larger sum – but the self employed amongst us don’t even have a chance 🙁

The Cost of Smoking (and One Benefit)

Lit cigarette representing wasting money

To continue to smoke 1o cigarettes a day after retirement, according to article, you’d need a pension pot of £36,000. But what the article doesn’t mention is that if you are a smoker when you retire you can get higher annuities. That’s because the pension fund assumes you will die sooner, and therefore they will not have to pay out for as long. (From a strictly financial point of view, then, your best bet is to be a non-smoker until you just before you retire and then take up the habit (and then ideally quit again soon after!) )

Other smokers have done well in the past by quitting smoking and investing the money in tobacco companies. However, with e-cigarettes rapidly gaining ground on tobacco cigarettes, who knows which tobacco companies will still be surviving and thriving in ten years time!

5 thoughts on “Become a Millionaire by Quitting Smoking”

  1. Thats just daft, fags havent always been this price and they wont stay at that price, they will always be the cash cow the government likes

    The tax paid on cigarettes pays for a lot of beds on the NHS, so quit moaning about smokers, they pay more tax than any car driver

  2. “Thats just daft, fags havent always been this price and they wont stay at that price, they will always be the cash cow the government likes.”

    Chances are cigarettes will actually continue rise above inflation, which means the potential benefits of investing the savings would rise. Of course, there are some pretty big assumptions being made (you are very young, you invest the money in a pension fund, maximum employer contributions e.t.c.)

    “The tax paid on cigarettes pays for a lot of beds on the NHS, so quit moaning about smokers…”

    I wasn’t 🙂 We have pointed out on this blog before how much smokers contribute towards the economy: https://www.ecigarettedirect.co.uk/ashtray-blog/2012/09/smoking-is-good.html

  3. Yeah, we were making our Governments two fortunes – one in taxes while we live&smoke and another in the pension payments we save for them by dying 5 or more years earlier than average non-smokers. I shuddered when I did that mathematics for myself. Very simple calculation indeed, but funny how few people ever thought about financial impact of earlier dying.

    This throwing money (and health!) out of the window is now history for us vapers. Considering how much money we used to make for them and now we’ve stopped, how can our dear governments possibly like us?

    Lj.

  4. “Yeah, we were making our Governments two fortunes – one in taxes while we live&smoke and another in the pension payments we save for them by dying 5 or more years earlier than average non-smokers. I shuddered when I did that mathematics for myself. ”

    There’s another factor as well, which is smoking diseases are a lot cheaper to treat than old age diseases. So if you die of lung cancer that’s going to be a lot cheaper than dying of Alzheimers. I’m not advocating everyone smokes to save the government money, but from a strictly financial view point smoking does hugely benefit the country.

  5. It benefits Big Pharma probably even more. Selling all those chemotherapies, chantix-es (aargh!), NRT gums etc.

    EU banned Swedish smokeless tobacco in 1992. They are capable of doing blatantly wrong things. And then my spineless government will immediately start dancing to their music, afraid it might miss a tact or two.
    (sigh)
    Lj.

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