Can You Drink Coffee and Retire?

Bill Parrott |

A venti honey almond milk flat white coffee costs $5.95; if you drank one daily for a year, it would cost $2,171, and after forty years, you would have spent approximately $960,000, and that’s a lot of coffee beans. Of course, you could brew your coffee at home for about 15 cents, but that’s not as exciting as ordering from your local barista.

Starbucks went public in 1992, and if you invested $2,171 annually, it would be worth about $2.82 million today. It currently pays a dividend of 2.05%, generating an annual payout of $57,810, which would cover your coffee habit.


Description automatically generated

If you’re investing regularly, contributing to your retirement plan, and planning for your future, your daily coffee habit won’t derail your retirement plan. However, the more significant issue is to pay attention to your expenses, so they don’t bust your budget. I don’t drink coffee but spend money on diet cokes, mountain bike gear, and fly fishing equipment, and the expenses can increase quickly.

In addition to watching your expenses, keep an eye on your revenue. Most planners focus on cutting costs to the bone but ignore revenue generation. If you can increase your income, you can spend more on things you enjoy.

Here are a few ways to generate extra income.

  • Buy T-Bills. The one-year US T-Bill currently yields 5.3%. If your bank account balance is high, consider buying a T-Bill. For example, if your balance is $100,000, you could earn an extra $5,300 annually with government bonds.
  • Buy Dividend Paying Stocks. Several stocks pay generous dividends north of 3%, including Verizon, Pfizer, Amgen, UPS, Medtronic, and Cisco. You can search websites like Schwab and Yahoo! Finance to look for companies with superior payouts.
  • Write options. A covered call strategy generates income from stocks you own. Let’s say you own 1,000 shares of Apple (APPL). It closed today at $153, so write the May 19 option with a strike price of $165 to collect $3.10 per share, or $3,100. If Apple trades above $165, regardless of price, on May 19, the stock will sell. If it stays below $165, repeat the process.

In addition to these income-producing ideas, you can walk dogs, drive for Uber, deliver food through DoorDash, shop for groceries with Instacart, help people on TaskRabbit, or rent your boat you never use.

Revenue and expenses are linked, so pay attention to both sides of the ledger. Reducing costs in retirement is essential, but so is generating revenue.

Sometimes I go hours without drinking coffee; it’s called sleeping. ~ Anonymous

March 8, 2023

Bill Parrott, CFP®, is the President and CEO of Parrott Wealth Management in Austin, Texas. Parrott Wealth Management is a fee-only, fiduciary, registered investment advisor firm. Our goal is to remove complexity, confusion, and worry from the investment and financial planning process so our clients can pursue a life of purpose. Our firm does not have an asset or fee minimum, and we work with anybody who needs financial help regardless of age, income, or asset level. PWM’s custodian is TD Ameritrade, and our annual fee starts at .5% of your assets and drops depending on your asset level.

Note: Investments are not guaranteed and do involve risk. Your returns may differ from those posted in this blog. PWM is not a tax advisor, nor do we give tax advice. Please consult your tax advisor for items that are specific to your situation. Options involve risk and aren’t suitable for every investor. Prices and yields are for today only and are subject to change without notice.