245 Million Powerball Jackpot

[Bullgrit]

That $1 is buying the right to dream big dreams for a few days. If you view it like that, it is cheap entertainment at its best.

You're buying hope.

I think of it either as my daydreaming license, or (negatively) as my idiot tax.

In my case, I'm playing a really big game.

I posted this on my blog a couple weeks ago:

Playing the Lottery

I’ve mentioned before that I play the Powerball lottery. I usually buy my ticket at the same store, just a mile or so down the street from my home. When our state first got the lottery, the whole thing was just the one game. Then came various scratch off cards. Steadily the options for scratch off cards increased, and now there are about two dozen ways to play. A sizable space on the store counter is given to the case for all the scratch off cards.

I don’t play the scratch offs. I picked up a couple different ones way back, but after seeing how they work, I have no interest in them. The scratch off cards are not really any kind of game, and you don’t really play them. The scratch off cards I’ve seen have no real game to them – no thought or choice is necessary, at all. You simply scratch off all parts of the card and see if a win is under any of them. So basically, a scratch off card is either a winner or a loser before you pick it up and scratch it. That’s not a game.

To play the Powerball lottery, you at least get to pick what numbers you want to bet on. You can use special numbers, like birthdays or anniversaries, or you can just choose random numbers. I’ve tried different methods for choosing numbers, but lately I just go random. I mark whatever numbers come to mind when I’m filling out the card.

Now, I’ll admit this way of playing a game does not require a great mind, or even any understanding of the game at all. But I’m willingly self-deluded enough (or elitist enough) to think choosing my own numbers is a more real way to play a game than just scratching silver gunk off a card that was determined a winner or looser at the printer.

If you’ve never bought a lottery ticket before, this is how it’s done---I’m only explaining this to tell the next story:
You fill out a card and then hand it to the store clerk. The clerk runs the card through a machine that scans it and prints out the actual lottery ticket. The fill-out card is useless after you have the ticket, but some people, myself included, keep the filled out card with the ticket. I fold the card around the ticket to protect it---the ticket is pretty fragile and easily damaged by moisture.

When I bought my latest lottery ticket, there was another man in the store cashing in his ticket for $3. I was back sitting in my car in front of the store when that man exited the store. He threw his old lottery card in the trash (having turned in the ticket). But he didn’t just toss it in the can, or crumple it up and toss it in, as I would have done. He stood there and tore it up into small pieces and sprinkled them around the garbage. What was that about? Was he concerned that someone would come through the trash and find the numbers he bet on? If that was his concern, how did he pick his numbers? Did he have a pattern that he thought would work, and would be worth someone going through the trash for them? Did he use some personal information for the numbers? It just struck me as odd, and maybe paranoid.

Bullgrit

Total Bullgrit

 

[CarlZog]

You're buying hope.

Not so much real hope as simply a license to dream, I suspect.

At least, that's our rationale. It gives us an excuse to fantasize about all the causes we could support; how much we'd give to who, and how we'd live.

Carl

 

[Thornir Alekeg]

I, unfortunately, live in Massachusetts, and would have to add the gas I'd use to cross a state line to buy a ticket to the cost of dreaming, making it somewhat less worth it. But otherwise, I'd spend $1 for a ticket for sure.

Well, the Mega Millions in Massachusetts tonight is $171 million. I don't know if the extra $74 million before lump sum difference and taxes makes the difference to you or not. Of course I'm going to win this tonight, so if you would prefer you can just send me your $1 directly instead.

 

[Numion]

The US tax system sure does seem to suck for lottery winners in the US. If you win $10 million here in Australia, it means you get the $10 million, tax-free in one lump sum. There are no other strings attached or payment plans involved. The US system just sounds a bit deceptive for my liking. $245 million is actually only about $80 million at best. What a rip-off! Still, I imagine if you won the lot you really wouldn't care that much.

Yeah, it is a rip-off. I'll never play; that'll teach the IRS to smooch on my lottery winnings

Nah, actually here in Finland it's tax free, and you get the advertised amount.

 

[Glyfair]

Not so much real hope as simply a license to dream, I suspect.

At least, that's our rationale. It gives us an excuse to fantasize about all the causes we could support; how much we'd give to who, and how we'd live.

When I play I will usually put in $1. It's not much. Some of the money goes towards good programs in the state.

I usually only spend $1. When I see the people putting large amounts of money I'm amazed (I've had to wait when people were spending $100 or so ahead of me). I figure the comparative difference between not doing it and spending a dollar is huge (no chance vs. some chance). The difference between $1 & $2 is infinitesimal.

The only time I put more than $1 down is when I rarely feel lucky about a number (3 is lucky today, so I'll put $3 down). What? You are saying that's illogical? When you ditch your lucky dice and lucky dice bags, then I'll ditch my occasional "playing a hunch."

 

[Dannyalcatraz]

Just as an FYI, I actually know some people who won the $5M Reader's digest sweepstakes some years ago...

Should I take it all at once in a lump sum of about 40 million or over 25 years thus getting about 80 million?

How does 245M turn into 40M? I understand that taxes take about half, but that still leaves 122M.

With any other game, if someone said you'd only get 1/4 to 1/2 the actual announced prize money, people would sue. Only the government can get away with blatant false advertising.

1) In the USA, lottery winnings are treated like most other forms of income, and are thus taxable...currently, the highest marginal rate is 38%, as I recall.

2) The reason the lottery commission doesn't award you the whole thing if you take it in a lump sum is the time-value of money. The reduced winning value of $xMillion today is equivalent to the full value of the lottery if the $xMillion is invested at about 7% interest for the 20+ years the lottery commission would take to pay out the full value.

3) You take the lump sum primarily because you want to gamble that you can invest the $xMillion at a rate greater than the 7% assumed interest rate. With that much money, odds are good a sensible investment strategy can beat the 7% rate by several percentage points...meaning you come out ahead.

4) You also take the lump sum because you get the money in today's dollars, as opposed to tomorrow's inflated dollars.

What to buy?

First, some history- the NY commission did some research and found that most of their winners spent their lottery winnings in 5 years. They did some more research and found ways to avoid that unfortunate effect, and now, before claiming a prize, a lottery winner in NY has to go through a 1 day class or read a brochure or some such.

Basically, the research showed that you should:

1) Buy something you really, really want in the first year. Getting yourself out of debt has lasting repercussions even if you blow through everything. AFTER that first year, settle your spending down. You could even set up a special Entertainment & Fun account that gets filled in January (from your investment income) and you only get that much to play with in a given year.

For me? I'd donate about 10% or so of the gross award to charities (before accepting the prize for tax reasons: the charity gets more and you still have the same amount after the Feds take their cut), then buy a house, some really cool guitars. Gemstones for jewelrymaking & other collectibles. A new car or two...something for my parents...blah blah blah.

2) DON'T quit working! If you do, you are much more likely to spend your winnings. (That doesn't mean you have to work at the same job, though.)

My friends who won the RD sweepstakes? They were a married couple who were both college professors. They continued teaching, but they each taught fewer classes per semester. They are still doing quite well, especially with their nice, paid-for lakehouse.

3) Invest in good accountants & lawyers to use sophisticated legal documents to protect your wealth. Trusts & certain kinds of investments can make your money work for you AND protect it from creditors.

BTW, consider this an invoice for my legal services...I want 3% of your winnings!

 

[ssampier]

If you do win, make sure you follow the path of those fortunate enough to keep a hold on their winnings, not those suddenly get rich and lose it all (by happenstance or poor decisions).

Good luck to you!

*as a Utahn, we have no forms of gambling. I do like to play the tables in Vegas and the border towns of Mesquite and Wendover, though.

 

[Glyfair]

BTW, I just read a story in the local paper and it says that the value of the $245 million jackpot is $114.7 million if taken as a lump sum. The odds are 1 in 146,107,962 of winning the jackpot.

 

[GlassJaw]

Bah. It's illogical buy a lottery ticket unless the average value of a ticket is over the price of a ticket. If you spend your $1 on a can of soda and a candy bar, you're at least getting something out of the deal...

That certainly isn't true. Read about pot odds in poker and you'll see why. Basically, it's a comparison between how much it will cost you to play, how much you can win, and what your odds are.

I'm not saying playing the lottery is "logical" but the statement you made is not accurate.

 

[megamania]

When I play I will usually put in $1. It's not much. Some of the money goes towards good programs in the state.

In Vermont its Education. For every ticket I buy (1 dollar) 50 cents goes to the education program.