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Cut out the coffee and save

By Jennie L. Phipps ·
Wednesday, July 13, 2011
Posted: 4 pm ET

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.

Orr writes:

"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.

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September 04, 2011 at 11:53 pm

I usually make my own coffee and if you're a migraine sufferer, the cost of coffee is much lower than the cost of the drugs used to treat migraines.

As far as the focus on retirement, I think this all part of the plan to get people saving more for retirement so that when the money they pay into social security is stolen by politicians they won't starve to death.

July 14, 2011 at 10:58 am

I am so SICK of hearing this stuff. Basically we are being told "Don't do anything that gives you any pleasure now, because you need to save every single penny because your government is inept!"

I am all for living frugally and doing my best to keep expenses down, but you know what, I'm a mother of two that has cut out EVERYTHING that is not a necessity, even things that are. I JUST got my first haircut in 7 months and this time I went to Great Clips (which turned out as bad I thought!) to be able to save money. I don't drink, smoke or go out and party. Hardly ever eat out, pack my lunches. Have to think twice every time I want to go somewhere that requires a car because of gas prices. The ONE thing that I get pleasure from (and frankly I need to keep going!) is my cup of coffee! Mine is not super fancy but it costs $2.50/day only during the week, bc on the weekends I actually have time to make my own. Why do I have to cut this out, when my government spends billions on nonsense every year!

Washington needs to pull their crap together and this Orr guy needs to go talk to them about their enormous staffs, THEIR jets and oh yeah, using publically paid for equipment, time and resources sending pictures of their genitals to random women over Twitter!

July 14, 2011 at 9:06 am

I'm not trying to bash this post, but I feel articles/posts like this need to be taken with a grain of salt. For the record, I am only 26 right now, so take that for what it's worth. While I am definitely doing my best to save for retirement and do look to increase my contributions, I think there tends to be WAAAY too much emphasis on retirement these days, some justifiably, but some not. The issue I have is that the logic in this post takes a very small calculation and extrapolates it over very large amounts of time. Sure, I could have money over retirement, but only by never ever buying another $4 latte? Even if the saved money + growth affords me more lattes in retirement, will I enjoy them as much then (if my health can even take it then)? I understand the current issue is that there wasn't enough emphasis on savings in the past, so retirees are struggling now, but the other extreme isn't particularly better...I can spend all my life saving for retirement by squeezing out these "pleasures," but if (heaven-forbid) I end up dying early, I could miss many things I kept putting off until retirement. So basically, I think a better calculation could be to say "if you cut down to 2 lattes a week instead of 5..." or something like that.

My point is, while people my age can definitely take this too far sometimes (myself included) by spending everything (and more) now, there IS something to be said for enjoying things in life while you're best able to, because all the things we keep saying we'll do in retirement may never happen, and we miss opportunities along the way.