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Mega Millions
Old 03-28-2012, 08:22 PM   #1
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Mega Millions

I think the odds of the big prize are about 250 million to 1, so with the payout now $476 million the Mega Millions lottery might for the moment actually offer close to a statistically reasonable return after taxes.

I've long thought that if a lottery wants to attract a different clientele the prize should be no taxes for life.
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Old 03-28-2012, 08:33 PM   #2
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Actually 175M:1 per wikipedia. An NPV positive lottery? The more tickets I buy, the higher my expected return. Sounds great (on paper)!
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Old 03-28-2012, 08:47 PM   #3
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What are the odds of multiple winners?

And don't forget that $476M is for payments over 20 or 25 years. If you want it lump sum I think you get around 55 or 60%, then pay taxes on that.

On the other hand, the jackpot isn't the only prize.
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Old 03-28-2012, 09:25 PM   #4
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According to a CNN update the jackpot has risen: "Friday's $500 million prize is payable as an annuity over 26 years. If a winner prefers, he or she could choose a one-time, lump-sum payment, which in this case would be $359 million. Both figures are before taxes."

If anyone here wins the jackpot, I'll be happy to accept a 10% finder's fee.
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Old 03-29-2012, 12:30 AM   #5
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Hmmm...... 359 million minus taxes of approx 125 million leaves 234 million. At a conservative WR of 2%, that would pay me a little over 4.5 million a year.

My rent is $640/month, groceries about $300, phone and DSL $30, annual bicycle maintenance around $50. I have no debt.

I think I'd be OK - might even be able to fit the occasional trip or two in as well
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Old 03-29-2012, 01:36 AM   #6
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I think the odds of the big prize are about 250 million to 1, so with the payout now $476 million the Mega Millions lottery might for the moment actually offer close to a statistically reasonable return after taxes.

I've long thought that if a lottery wants to attract a different clientele the prize should be no taxes for life.
Didn't GM win that lottery?
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Old 03-29-2012, 04:35 AM   #7
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My wife keeps warning me that if we won a prize like that it would cause problems for us...I just don't see it. I think I could handle an instant, massive infusion of wealth pretty easily...and I am perfectly willing to risk it.
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Old 03-29-2012, 05:34 AM   #8
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Like someone has said before, the lottery is a tax on people who can't do math.
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Old 03-29-2012, 06:55 AM   #9
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Hmmm...... 359 million minus taxes of approx 125 million leaves 234 million. At a conservative WR of 2%, that would pay me a little over 4.5 million a year.

My rent is $640/month, groceries about $300, phone and DSL $30, annual bicycle maintenance around $50. I have no debt.

I think I'd be OK - might even be able to fit the occasional trip or two in as well
And you'd still be able to easily afford the $44k Hassleblad camera to record the event. Hasselblad H4D-200MS Digital Camera 70490520 B&H Photo Video
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Old 03-29-2012, 07:44 AM   #10
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Like someone has said before, the lottery is a tax on people who can't do math.
We buy tickets, (in Canada there's no tax on winnings), on the premise that the little we spend/waste has no impact whatsoever on our finances, but a win, (especially a large win), would have a positive effect on the many people with whom we'd share it.
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Old 03-29-2012, 10:13 AM   #11
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Yes, it is stupidly unlikely.

But it is only the cost of a cup of coffee. And I can afford a couple of tickets. So blah! I have blown more on dumber things. Like really bad cups of coffee.
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Old 03-29-2012, 10:24 AM   #12
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Yes, it is stupidly unlikely.
It all depends on how you choose to look at it - we think it's 50-50....we either win or we don't.
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Old 03-29-2012, 10:27 AM   #13
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As others have eluded to, the odds for a lottery are never in your favor... because as the prize goes up the number of people playing does also. If anyone could ever prove a statistical advantage (payout of 0.0001 for every 1$ bet on average...) then a billionaire would just buy up one of every single ticket and walk away with a 0.01% guaranteed return on investment.

The nuts and bolts of it is that when the lottery payout exceeds the odds of winning, you will most often find multiple winners. That isn't to say you might get "lucky" twice in being the winner and also having no one else win at the same time... but from a statistical point of view, your odds haven't really improved.

In some cases, you could actually be at a disadvantage, because with a record jackpot there are sometimes so many tickets bought that it is 'expected' at least 2 or 3 winners exist out there, for any random set of numbers.

It always comes back to taxes also... the lottery is simply a gamble. I read an articles a few years back that stated that if every American who played the lottery invested the money into an index fund instead... we'd save billions a year in social programs to support the lower 10% (who are the most likely to play)...

of course, the lottery pays for a lot of things... like schools - so that would have to come from somewhere else.
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Old 03-29-2012, 10:35 AM   #14
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The smaller, non-jackpot prizes offset the reduction in expected payout due to multiple winners, but the exact calculation of that offset is non-trivial. Even so, this is a rare lottery moment at which, for a single jackpot winner, the math says the expected return on a $1 ticket is greater than $1.

I suppose the master Mega Millions computer knows what number combinations have not yet been selected by anyone, but it's not going to share that info with us.
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Old 03-29-2012, 10:41 AM   #15
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The winner would still be posting on here asking if they have enough to quit their job or if they should stay on for "just one more year."
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Old 03-29-2012, 10:56 AM   #16
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...to quit their job...
and still have money to hire someone to do work like this, instead of doing it themselves?



Would it be the same thing?
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Old 03-29-2012, 11:41 AM   #17
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Hurry need to know?
My state tax is 9%....can i move to nevada before i claim my prize and pay no state tax...i am feeling lucky?
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Old 03-29-2012, 11:49 AM   #18
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Hurry need to know?
My state tax is 9%....can i move to nevada before i claim my prize and pay no state tax...i am feeling lucky?
Give it a try and report back. We'll be waiting to hear the story.
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Old 03-29-2012, 11:53 AM   #19
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My wife keeps warning me that if we won a prize like that it would cause problems for us...I just don't see it. I think I could handle an instant, massive infusion of wealth pretty easily...and I am perfectly willing to risk it.
I came to the same conclusion as your wife eventually. IMO it's just too much money to come into suddenly like that. Obviously, few of us on this board would have a problem generating an income to live on from a sum of this magnitude but for me, the potential problems wold come from:

a) Deciding who to give money to and how much
b) Denying money to some who want it and the fallout that may come as a result
c) The feeling that this isn't really my money as I did nothing to earn it or grow it into that sum

I think that I could possibly find a way to handle a) and b). The counter-argument to b) is that it's a good opportunity to find out who your real friends are. As for c) I'm not sure if I'd ever feel as if it was really my money. If I'd earned that money from real estate deals, investing etc, it would feel like mine, but not when my only labor was to buy a lottery ticket.

Coincidentally, there's a comedy-drama series that just started on BBC television called The Syndicate, that depicts a group of supermarket workers who form a pool to play the lottery and end up winning the jackpot between them. I've only watched the first episode (I think it's the only one that has aired so far) but it looks as if the drama of a group of working class folk who suddenly come into a lot of money is going to be thoroughly explored. You can watch it on the BBC iPlayer. If you're outside the UK, you need to go through a proxy server.

PS - My thinking on this is constantly evolving and I'm beginning to think that I could handle a sum like this. I'd be strict about the sums that I'd give to close family members. Then, I'd set aside an amount to generate my living expenses. It would be enjoyable to use the rest to donate to charities. Just the work involved in figuring out the good ones could be quite engaging.


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And you'd still be able to easily afford the $44k Hassleblad camera to record the event. Hasselblad H4D-200MS Digital Camera 70490520 B&H Photo Video
A 50MB sensor that is 4.5 x 6cm in size? I think I just drooled into my morning cup of coffee. Imagine the beautifully detailed landscapes you could shoot with that!
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Old 03-29-2012, 12:08 PM   #20
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See how just the thought of all that money brings out the lust in us? A $44K camera?

Should I refer everyone back to the concurrent thread about "frugality in ER"?

What's the chance of one of the 50 megapixels going bad? That would drive the perfectionists among us insane, and they would have to toss that camera and buy a new one.

I remember when LCD displays for PC just came out, they all came with a caveat that the warranty would not apply unless so many pixels went bad. I have not seen an LCD with a bad pixel for a long time now.
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