$315M Powerball Winner is now broke

[MikeD]

Rough estimate:

Jack Pot: 315,000,000
Annuity Payment (over 30 years): 10,500,000
AAA-rated general obligation bond yield (10 yr Treasury): 5.20%
Period: 30

Present value: $157,795,126.06
25% Federal Tax: $39,448,781.52
Virginia: 4% State Tax: $6,311,805.04
Payout after tax: $112,034,539.50 (not exactly $113M).

It was in WEST Virginia. There's a world of difference, especially in taxes.

Mike D.

 

[bright eyed]

As soupxcan said, "people who actually know how to manage thier money, don't play the lottery".

-Warthog

is that an official litmus test here? sounds like a poll is in order!

 

[larry]

Who was it that said there was one investment worse than a lottery ticket...a second lottery ticket?

 

[laurence]

I buy lotto tickets on occasion, but I am well aware of the odds. I know 99.9 cents of the dollar are allocated to entertainment value ( pondering with DW on what we'd do with the money etc.) and .1 cents is the value of the actual chance of riches....

 

[lets-retire]

I'll admit to buying a ticket, but only if the jackpot is over 10 mil. The way I figure it, anything less than that doesn't offer enough "dream entertainment" to throw away the dollar.

 

[DRiP Guy]

... all for suitable commissions, fees, and 12(b)-1 expenses...

Exactly! Just seeing how quickly we could whittle that lump sum down to size

 

[Delawaredave]

Wil Rogers (or someone famous...) once said:

"A lottery is a tax against people who can't do math".....

 

[Alex]

the lottery is a tax on the dumb

 

[NinjaPigeon]

The problem is: people who actually know how to manage their money, don't play the lottery.

I feel dumb reading this thread. I play the lottery. I probably spend anywhere from $20 to $150 a year on it. Although honestly, I wouldn't want to retire based on it. I want the satisfaction that only comes from retiring through saving and investing.

 

[jdw_fire]

I feel dumb reading this thread. I play the lottery. I probably spend anywhere from $20 to $150 a year on it. Although honestly, I wouldn't want to retire based on it. I want the satisfaction that only comes from retiring through saving and investing.

I dissagree, the satisfaction comes in retiring, by whatever (legal/moral) method.

 

[Spanky]

I feel dumb reading this thread. I play the lottery. I probably spend anywhere from $20 to $150 a year on it.

Thank you for your contribution.

Signed -- The state government and uncle Sam.

 

[Zathras]

I pay my stupidity tax from time to time (probably about $20 a year). It is fun to dream of having more money than I would know what to do with.
I also feel a little left out, as I don't smoke and the smokers get to pay their own stupidity tax (which is likely much more than what I pay for mine).

 

[kaudrey]

I play when the amount is over $75M. I read somewhere that it is "worth it" if the jackpot is over $80M or something - can't find the link right now...

I just do it for fun. If I spend $20 on it a year, it's not going to impact my FIRE plans!

Karen

 

[Nords]

I probably spend anywhere from $20 to $150 a year on it.

I play when the amount is over $75M. I read somewhere that it is "worth it" if the jackpot is over $80M or something - can't find the link right now...
I just do it for fun. If I spend $20 on it a year, it's not going to impact my FIRE plans!

You could look at it as a tax-deductible gambling loss against other gambling winnings, an investment education expense (good luck defending that to the IRS), or as a part of building a diversified asset allocation...

 

[rmark]

A diversified portfolio of lottery tickets - Oklahoma, Texas, Kansas + most small tech companies.

 

[NinjaPigeon]

I play when the amount is over $75M. I read somewhere that it is "worth it" if the jackpot is over $80M or something - can't find the link right now...

I just do it for fun. If I spend $20 on it a year, it's not going to impact my FIRE plans!

Karen

I've never understood that argument. Your odds of winning are no better when it's 75M than if it's 1M. And the ROI is so amazing even at 1M, that there's no point waiting for a super jackpot. Either it's a math tax or it's not

And I shouldn't feel so bad - the lottery paid about 3k of my college education. It'll take me many years of losing before I even am in the red.

 

[laurence]

I think it's a "Jackpot x chance of winning (in decimal form) > $1 argument. That is, if you have one in 80 million chance of winning, and the jackpot is 81 million, a ticket is worth slightly more than $1. Putting tax/lump sum/leeching relatives aside, of course.

 

[riskadverse]

I used to play the lottery when I worked. I alway joined in the office pools because I knew it they ever won and I was not in, I would be so bitter for the rest of my life! It was more like insurance than a lottery ticket.

 

[lets-retire]

I've never understood that argument. Your odds of winning are no better when it's 75M than if it's 1M. And the ROI is so amazing even at 1M, that there's no point waiting for a super jackpot. Either it's a math tax or it's not

And I shouldn't feel so bad - the lottery paid about 3k of my college education. It'll take me many years of losing before I even am in the red.

The way I looked at it was I most likely would have to share the jackpot. In my case I'd have to cut the 10 mil in half. Then take out taxes and the lump sum penalty and that leaves me with about 2.5 mil to play with. I would be able to pay off all my loans, fix or replace the things that need it, and give to my favorite charity. I could then use the rest to retire comfortably and live on a very safe 3% and continue to have my nestegg grow. I could retire on less, but then I'd have to watch my spending and investing rather than living carefree.

 

[kaudrey]

I think it's a "Jackpot x chance of winning (in decimal form) > $1 argument. That is, if you have one in 80 million chance of winning, and the jackpot is 81 million, a ticket is worth slightly more than $1. Putting tax/lump sum/leeching relatives aside, of course.

I think they do a NPV calculation or something...

Karen

 

[SolidA]

When I win the lottery tonight here in Minnesota (approx. $240 mil) I will let you all know EXACTLY how it works!!!

 

[work4beer]

Some statisticians wrote a paper on this a few years ago. I think they looked at powerball, the expected value of a Powerball ticket rose to about 85 cents on the dollar at the 80-100 million range, then tapered off above that as the chances of having multiple winners increased. I recall the "base" expected value as being around 25 cents (i.e. for all the prizes besides the jackpot) and then the jackpot EV peaked at another 60 cents on top of that.

So: comparable odds to a slot machine, plus the entertainment value, makes it worth it to me to play small stakes by diversifying my portfolio.

 

[bssc]

I used to play the lottery when I worked. I alway joined in the office pools because I knew it they ever won and I was not in, I would be so bitter for the rest of my life! It was more like insurance than a lottery ticket.

I joined our office pool. I figure if the VP and both of his directors are in it and two of them are PhD econometricians then we have to be winners.

 

[jazz4cash]

I joined our office pool. I figure if the VP and both of his directors are in it and two of them are PhD econometricians then we have to be winners.

Really?..........So how did that work out?

 

[bssc]

Ask me again after the Powerball results are announced.