Powerball Jackpot

[PoohNBoom]

I understand math so I'm not playing, but it's really funny to think about. I don't quite get the motivation that gets exponentially more people to buy when the jackpot gets above $400 million, or in this case, $1 billion.

One of the reasons people who know math decide to play when the jackpot gets bigger is that at some point the game becomes a +EV (Expected Value). Not going into all of the math, but with the jackpot at 1.3B and with all of the other lower payouts, it is probably safe to say that the game is now +EV. I do understand the chances of winning the jackpot stays the same (very very remote) though. However to put a few unneeded dollars into a +EV game and to be able to dream a little, is worth it to me.

 

[mel&me]

I'll be happy with second place. I know, I know its only a mere 1 million but I can get by. And the odds are great just 11.5 million to 1. I've got this won.

 

[Dan Murphy]

$1.5 billion now, lump sum $930 million, less federal, and if any, state taxes.

 

[Liberty Belle]

I don't get that it's rude and arrogant, what I think he's trying to say is why do so many more people either buy more tickets or more people play when the jackpot is 1 billion compared to 200 million. I know there are people out there when it's 200 million buying maybe 10 tickets but when it's at 1 billion, those same people are buying 100 tickets because they think their chances are higher.

I understand all that, but I still think it was implying those who play do not understand math, which I find rude.

 

[Dentam]

I understand math so I'm not playing, but it's really funny to think about. I don't quite get the motivation that gets exponentially more people to buy when the jackpot gets above $400 million, or in this case, $1 billion. I know playing the lottery in any condition is economically irrational, but this extra bit of irrationality is really weird. Economic theory proves in most cases that marginal utility decreases as a payout increases. Yet the reverse seems to happen here. What I mean is, how is $1.3 billion than much more of a motivator than say $200 million? Especially when the investment is still just $2. So many people who couldn't be bothered to try to win $200 million, are all over it now that it's over $1 billion... but what's the difference? When I picture living with the $1.3 billion I imagine having all the things you'd normally think of buying with a lottery win, plus owning a private jet, fully staffed, constantly on call and fueled up. I think that cost, plus the associated opulence I'd be indulging in everywhere I went, would be the most efficient way to blow threw tons of cash. But I think I could still do that with the puny $200 million too, right? Add in the fact that some people express concerns that it's actually "too much" money, and the even greater watering down of your chances due to the media blitz, and it just seems even crazier.

For your reading pleasure:

http://time.com/money/4172196/powerball-math-odds-advantage/

 

[The Mystery Machine]

How about you? What would you do first?

Hmmm....freak out.

Probably first thing is I would deal with medical issues and selling this house. We are trying to get this house on the market soon. A sign would be in the yard the next day.

I have a few pressing things that are on the #1 to do this even before getting my money. I would be getting a full body scan from a top hospital ASAP. I was diagnosed with breast cancer on Dec. 23rd 2015.

If I knew I won the lottery then I could go and take care of the medical tomorrow instead of waiting, due to work schedules, money, and time.

Then we would hire a tax attorney & a lawyer.

After that, who knows?

 

[mnrose]

Hmmm....freak out.

Probably first thing is I would deal with medical issues and selling this house. We are trying to get this house on the market soon. A sign would be in the yard the next day.

I have a few pressing things that are on the #1 to do this even before getting my money. I would be getting a full body scan from a top hospital ASAP. I was diagnosed with breast cancer on Dec. 23rd 2015.

If I knew I won the lottery then I could go and take care of the medical tomorrow instead of waiting, due to work schedules, money, and time.

Then we would hire a tax attorney & a lawyer.

After that, who knows?

I have a house to sell too, but the pressure would be completely off about "what" I would get for it. I would put it on the market where is, as is (fully furnished except for a few personal possessions and photographs) for 1/2 of it's current value. I'll bet I'd have a buyer by the weekend. LOL. I just wouldn't care. Heck maybe I'd give it to my kids (got two homes to sell in Minnesota). Yup, that's what I'd do. Give it to 'em. Let them figure it out. I'd be gone, gone, gone in a heartbeat. Buy a house on the beach (somewhere), hire a private tutor for my kids to get them out of high school, and enjoy my new life.

 

[runwad]

I was curious so I googled thought others might like to know too:

The following is a break down of what you can win, depending upon how many numbers you picked correctly:

Five numbers but not the Powerball: $1 million

Four numbers AND the Powerball: $50,000

Four numbers but not the Powerball: $100

Three numbers AND the Powerball: $100

Three numbers but not the Powerball: $7

Two numbers AND the Powerball: $7

One number AND the Powerball: $4

Match only the Powerball: $4

 

[Dentam]

I was curious so I googled thought others might like to know too:

The following is a break down of what you can win, depending upon how many numbers you picked correctly:

Five numbers but not the Powerball: $1 million

Four numbers AND the Powerball: $50,000

Four numbers but not the Powerball: $100

Three numbers AND the Powerball: $100

Three numbers but not the Powerball: $7

Two numbers AND the Powerball: $7

One number AND the Powerball: $4

Match only the Powerball: $4

And if you add power play the lesser prizes will be multiplied by whatever the multiplier is for that drawing. Up to 10x. Except for the million dollar prize which will only be doubled with power play.

 

[Gumbo4x4]

Why buy a ticket now & only now?

Well, because even though I enjoy dreaming about winning the lottery, I don't enjoy it enough to go out of my way to buy a ticket EVERY drawing. So, if I'm only going to buy one "on occasion", I won't find a better occasion than now.

 

[Sabeking]

Hmmm....freak out.

Probably first thing is I would deal with medical issues and selling this house. We are trying to get this house on the market soon. A sign would be in the yard the next day.

I have a few pressing things that are on the #1 to do this even before getting my money. I would be getting a full body scan from a top hospital ASAP. I was diagnosed with breast cancer on Dec. 23rd 2015.

If I knew I won the lottery then I could go and take care of the medical tomorrow instead of waiting, due to work schedules, money, and time.

Then we would hire a tax attorney & a lawyer.

After that, who knows?

Don't want to hijack but I'm sorry about your diagnosis! I will be thinking of you in the days ahead. Take care of yourself Mystery Machine

 

[FlightlessDuck]

Again 25% is the standard federal withholding. It's 28% if a SSN isn't provided.

Now I get what you mean. 25% withheld, have to pay the other 14.9% in April.

 

[FlightlessDuck]

Times says it's better to take the annuity. You end up with 20% more money.

http://www.nytimes.com/2016/01/13/u...-and-take-the-annuity.html?smid=fb-share&_r=0

Each year is $50 million before taxes.

We'd take about $30 million of it in total and pay off debt, put money in trusts for our children and nieces/nephews, probably move to a different house (not a mansion), buy a second car, and put the rest of that first $30 million in savings to cover retirement costs.

Then my wife and I would create a charitable foundation for the rest of it. Work with the homeless like they do in Utah (actually giving them their own small homes). Donate to domestic abuse, cancer, and children's charities, npr, pbs, various NGO's, etc.

I would probably not retire. At least not right away. I'd be bored silly without a job. Maybe switch to part time...

 

[Tikitoi]

How about you? What would you do first?

First thing I would sign that ticket. Then I would have to call into work for at least that day. But I would pay off my house, that I just bought a couple years ago and my car that I just bought a couple months ago. Quit my job! Get my sister out of debt. She also has a sort of new car, but also medical bills and a student loan. Can't really think about too much beyond that.

But I definitely have charities in mind as well as vacations and of course SAVE, Save, save...!

 

[jdb in AZ]

 

[Gumbo4x4]

First step - call everyone you know & ask to borrow $1,000. After they all say "no" it will make it much more awkward for them to come begging once they realize YOU have money

 

[manning]

For your reading pleasure:

http://time.com/money/4172196/powerball-math-odds-advantage/

Was inflation factored in? You may be getting more dollars, however those future purchasing powers goes down.

If you are lucky enough to win the first thing to do before claiming the prize is pay a visit to a financial adviser.

 

[GaryDis]

Was inflation factored in? You may be getting more dollars, however those future purchasing powers goes down.

I think you replied to the wrong post. It was FlightlessDuck's NY Times link that argued in favor of the annuity. The link you quoted just shows the math at when the the payout is big enough to justify playing. Inflation doesn't enter into it because it's looking at the immediate lump-sum payout for the calculation.

But as it happens, inflation doesn't enter into the NY Times article argument because it's basically comparing what the Powerball annuity will pay out over 30 years against what you could get by investing in *comparably safe investments* like T-bills or your annuity. Since it's comparing two 30 year payout approaches, inflation is the same for both and thus not an issue.

The key insight for the NY Times article is that the Powerball annuity is invested pre-tax while the lump-sum would be post-tax. There's no way you could beat the Powerball annuity by investing the post-tax amount and limiting yourself to really safe investments, unless interest rates go up dramatically. Most people who argue in favor of the lump sum base that argument on investing in stocks instead of T-bills (and even then, the articles I've seen ignore the pre-tax versus post-tax difference).

 

[MillauFr]

Even at $1.5b I still think the expected return is negative. Nate Silver calculated it was $1.32 on a $2 bet.

 

[disney4us2002]

Can't even wrap my head around those crazy numbers. I absolutely can say, with 100% certainty, that I will not be broke in one year. Not a chance in hell.

My second call would be to a tax attorney!!