Quit Smoking to Pay for Retirement?

As the economy continues to decline, federal cigarette taxes are shooting up to $1.01 a pack.

Now cash-strapped smokers are finding that they need to make a choice. 

“I’m too broke to smoke,” says Emily Mayer, 23. “But it’s more stressful to try to quit.”

Mayer doesn’t plan to quit anytime soon, but there are some benefits to being a quitter, especially when cigarettes cost $10 a pack (or more) in places like New York.  A pack-a-day New York City smoker who quits could save $3,360 a year. Even someone who takes a whole week to go through a pack could save $480.

And that’s just counting money spent directly on cigarettes. Typically, smokers pay more for health and life insurance, see the resale price on a home or car depreciate and spend more money on dry cleaning and teeth whitening.

It is not easy. But if you can nix your need for a nicotine fix, here are some ideas on where to put that extra $1,700.

1. Pay off your credit cards. There’s no better way to use your cigarette money than to use it to pay off debt, says Mickey Cargile, managing partner of WNB Private Client Services based in Midland, Texas.

A pack-a-day habit can run you as much as $200 a month in some states. If you put that same amount toward a $5,000 Visa (Stock Quote: V) or MasterCard (Stock Quote: MA) bill, you’ll be able to pay off the principle on your card in about two years.

2. Open a savings account. If you have a pack a day habit, you could spend more than $50 a week for a fix. That may not sound like big money but, if you were to invest $50 in a savings account at 2.75% interest, you could have as much as $2,517 at the end of 12 months. If you save the same amount consistently for five years, that figure could jump to more than $13,000.