Texas financial planner Steve Orr, author of "The Noisemakers, Why They Keep Losing Your Money and How to Make It Stop," sent over this analysis of the cumulative cost of everyday spending and its impact on retirement savings. It made me feel guilty -- so I thought I'd share.
"Eliminating daily expenses can turn into big bucks down the road. The daily specialty coffee from the local coffee stand costs about $3.95, depending on where you live in the U.S. If you got one every day of the week for about 40 weeks out of the year for the typical 35-year employment span between ages 25 and 60, it would cost you about $27,650 over that 35 years."
His formula looks like this:
- Coffee or latte -- $3.95 x 5 = $19.75 x 40 = $790 x 35 = $27,650
- Energy shot -- $3.99 x 5 = $19.95 x 40 = $798 x 35 = $27,930
- Muffin -- $3 x 5 = $15 x 40 = $600 x 35 = $21,000
- Lunch -- $8 x 5 = $40 x 40 = $1,600 x 35 = $56,000
"If you were to put the total of all these items into your 401(k) or Roth 401(k) or any other type of retirement planning investment vehicle every year for 35 years and you earned a minimum of 3 percent interest every year on that money, you'd have an extra $246,560 in your retirement account at the end of that 35 years," Orr said.
If your money earned a higher interest rate, you could do better. Orr calculated that between 1970 and 2006, the annual rate of return from the Standard & Poor's 500 was 11.5 percent. At that rate, at the end of 35 years, Orr figures that workers would have an additional $1,792,373 in their retirement accounts.
Too bad I spent all those years going out to lunch with the girls -- and sending out for coffee from Irene's -- although Irene only charged 50 cents for black -- no sugar.
Retirement USA, a coalition of the AFL-CIO, the Economic Policy Institute, the National Committee to Preserve Social Security and Medicare, the Pension Rights Center and the Service Employees International Union, sent a letter signed by 28 national organizations, telling Congress to keep its mitts off Social Security and Medicare.
The letter said, in part:
"Cuts to Social Security's cost of living adjustments will lead to significant reductions in benefits for millions of vulnerable older Americans ... These proposed cuts in Social Security are the latest salvo in a broad-based attack on retirement security. They follow proposed reductions in Medicare benefits; wide-ranging efforts to reduce many state retirement benefits for teachers, firefighters, and other valuable public servants; and the decimation of secure pensions in the private sector ... We are calling on you to halt the assault on retirement security."
If you agree, tell that to your lawmakers.