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(WTOP)   Here it is, your semi-regular "don't bother trying for that $425 million Powerball jackpot because even if you do win, you'll probably have to split the pot with 3 or 4 other people and pay taxes on it, too," article   (wtop.com) divider line 132
    More: Stupid, Powerball, mess, University of Akron, semi-trailer trucks, Powerball jackpot, car chase, Mega Millions, ConAgra  
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3943 clicks; posted to Main » on 27 Nov 2012 at 2:40 AM (1 year ago)   |  Favorite    |   share:  Share on Twitter share via Email Share on Facebook   more»



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2012-11-26 11:56:51 PM  
You mean I might only end up with something like $30million if I win? WELL FORGET IT THEN! Obviously not worth the effort.

:-/
 
2012-11-27 12:19:18 AM  
Here's my semi-regular "thanks for financing my infrastructure, lottery players" post.
 
2012-11-27 12:27:15 AM  
Odds of winning 1 in 175 million. Cost of ticket $2.

Step one: buy ALL the tickets (cost: $350,000,000).

Step two: Win, inevitably.

Step three: Pre-tax profit: $425,000,000 minus $350,000,000 in outlay leaves $75,000,000 in pre-tax profits. Even divided by four, this makes $18,750,000 each. Pay about 60% in taxes, remaining after-tax profit: $7,500,000 EACH. A lump sum will be much smaller than this, which is the prize money spread over many smaller payments per year or per month.

Not great but not shabby and, in theory, totally inevitable, a sure thing, safer than houses.

The thing is, that if the prize is big enough, it overwhelms the rather scanty change of winning. As my calculations show, your expectation of winning, even allowing for sharing a winning number with three rivals and even after paying taxes shows an expectaton which makes punting a $2 you can afford to lose on a lottery ticket. Mind you, when the pot is less than $350,000,000, your expectation is not a remote chance of winning, but a near certain change of losing money.

It is not always foolish to buy a lottery ticket. Depends on the odds, the price of the ticket, the prize pot and the chances of sharing the prize and how much you can afford to lose. By being a contrarian's contrarian and playing numbers that other people avoid, you increase your chance of not sharing the prize (therefore avoid birthdays and "lucky numbers" like the plague. Also, only play the lottery when the prize monies are bigger than the cost of every ticket. You'll still lose most of the time, but the odds shift heavily depending on how you play and when.

Play when the pot is big enough to give you a positive expectation.
It is better to put all of your gambling money on one drawing. IN A LIFETIME. Ten tickets in the same drawing is a totally different game from ten tickets in ten drawings.
Box your bets (learn how to do this from a gambler).
Do your math carefully.
Understand the odds.
Be a contrarian.
Never ever bet money you can't afford to lose.
Never take a loss or a win to heart.
Never allow a loss or win to change your strategy or raise irrational expectatons or cause irrational behaviour, such as betting the farm.
Be prepared to act responsibly and carefully if you win. The big mistakes are made by winners more often than by losers of small sums. They forget they owe taxes. They give the money away to fair-weather friends and whores. They blow the lot. They go paranoid and lose all their friends and their loved ones. They spend too much on booze and drugs. And so forth. Being rich is hard and disciplined work.

You will probably be wise to take the smaller lump sum rather than the annual or monthly payments unless you are very young and not good with money. There is many a slip twixt cup and lip.

Don't forget to tip Brantgoose a million or two, especially if you win the whole pot.
 
2012-11-27 12:42:46 AM  
For me, the fun isn't about actually thinking I'm going to win. For the few times a year I buy a ticket or two, I enjoy the wait while I can have fun imagining all the things I might do with the money. Though it's nearly completely impossible that I hold the winning ticket, it's not a 0% chance. So the fun for me is just the enjoyment of playing "what if," while it's still technically possible that my ticket could win.

I don't mind spending $6 a couple of times a year to enjoy that. But I just see it as $6 of entertainment.
 
2012-11-27 01:05:52 AM  

ambassador_ahab: For me, the fun isn't about actually thinking I'm going to win. For the few times a year I buy a ticket or two, I enjoy the wait while I can have fun imagining all the things I might do with the money. Though it's nearly completely impossible that I hold the winning ticket, it's not a 0% chance. So the fun for me is just the enjoyment of playing "what if," while it's still technically possible that my ticket could win.

I don't mind spending $6 a couple of times a year to enjoy that. But I just see it as $6 of entertainment.


It's a fantasy. a couple bucks is a small price to pay for that. Much less than a movie
 
2012-11-27 01:11:35 AM  

Ambivalence: It's a fantasy. a couple bucks is a small price to pay for that. Much less than a movie


Exactly. It's just a little thing I do maybe once every 3-4 months or so, because it's fun to fantasize about all that money.
 
2012-11-27 01:27:54 AM  
Hey, it gives my girlfriend and I something to talk about.
 
2012-11-27 01:36:10 AM  
I buy when the pot is above $150M. I figure that's the point where I can't really justify not buying one ticket, if only for the daydreaming and entertainment value. I figure I'm not going to win (in all mathematical likelihood), I may as well not win the big pots.

It's a voluntary tax on being bad at math for a week.
 
2012-11-27 02:45:46 AM  

unyon: Here's my semi-regular "thanks for financing my infrastructure, lottery players" post.


'Cuz Reagan knows we're never going to ask the people who have the actual money to do it.
 
2012-11-27 02:46:00 AM  
It's 2.00 and whatever they take in taxes is money you didn't have to begin with.
 
2012-11-27 02:47:00 AM  
The Mrs. buys a ticket a few times a year when the pot gets really high. I think its fine as entertainment. If we win I'm buying Fark.com. So I've got that going for me. Which is nice.
 
2012-11-27 02:47:50 AM  

brantgoose: Odds of winning 1 in 175 million. Cost of ticket $2.

Step one: buy ALL the tickets (cost: $350,000,000).

Step two: Win, inevitably.

Step three: Pre-tax profit: $425,000,000 minus $350,000,000 in outlay leaves $75,000,000 in pre-tax profits. Even divided by four, this makes $18,750,000 each. Pay about 60% in taxes, remaining after-tax profit: $7,500,000 EACH. A lump sum will be much smaller than this, which is the prize money spread over many smaller payments per year or per month.

Not great but not shabby and, in theory, totally inevitable, a sure thing, safer than houses.

The thing is, that if the prize is big enough, it overwhelms the rather scanty change of winning. As my calculations show, your expectation of winning, even allowing for sharing a winning number with three rivals and even after paying taxes shows an expectaton which makes punting a $2 you can afford to lose on a lottery ticket. Mind you, when the pot is less than $350,000,000, your expectation is not a remote chance of winning, but a near certain change of losing money.

It is not always foolish to buy a lottery ticket. Depends on the odds, the price of the ticket, the prize pot and the chances of sharing the prize and how much you can afford to lose. By being a contrarian's contrarian and playing numbers that other people avoid, you increase your chance of not sharing the prize (therefore avoid birthdays and "lucky numbers" like the plague. Also, only play the lottery when the prize monies are bigger than the cost of every ticket. You'll still lose most of the time, but the odds shift heavily depending on how you play and when.

Play when the pot is big enough to give you a positive expectation.
It is better to put all of your gambling money on one drawing. IN A LIFETIME. Ten tickets in the same drawing is a totally different game from ten tickets in ten drawings.
Box your bets (learn how to do this from a gambler).
Do your math carefully.
Understand the odds.
Be a contrarian.
Never ever be ...


FALSE!

If multiple people win (say 4 people, as per your example,) then you don't get to use the $425 Million to start your calculation. You would instead start with $425 Million / 4 = ~$106.25 Million. After you subtract the cost of buying every ticket, you are deep in the red!!

Your calculation only works if you are the only one holding the winning ticket. Even if you have to share with one other person, then you only "win" $212.5 Million, while paying $350 Million to buy all the tickets, ending up with a massive net loss.

Now, if the jackpot was truly astronomical (say $800 million) then you might be able to afford sharing your jackpot with one other person, but when the jackpots get that high, a LOT of people are buying tickets and there is a very good chance you will have a split pot.

/Best way to win is not to buy a ticket. You keep your money.
//I have been known to buy 1 ticket on occasion, reasoning that the "entertainment value" of fantasizing about what I would do with the winnings is worth the $2. YMMV.
 
2012-11-27 02:50:07 AM  

ambassador_ahab: Exactly. It's just a little thing I do maybe once every 3-4 months or so, because it's fun to fantasize about all that money.


If you blow a couple of bucks once in a while, then it's state-subsidized daydreaming. At some point, of course, it crosses the "stupidity tax" threshold.
 
2012-11-27 02:51:54 AM  

brantgoose: It is not always foolish to buy a lottery ticket. Depends on the odds, the price of the ticket, the prize pot and the chances of sharing the prize and how much you can afford to lose. By being a contrarian's contrarian and playing numbers that other people avoid, you increase your chance of not sharing the prize (therefore avoid birthdays and "lucky numbers" like the plague. Also, only play the lottery when the prize monies are bigger than the cost of every ticket. You'll still lose most of the time, but the odds shift heavily depending on how you play and when.


No, the odds stay the same. The payback for the odds shift heavily depending on how and when you play.

Which is why it's actually almost always "foolish" to buy a ticket. Yes, the odds of you winning stay the same, and with all that money, you might get more...but the odds that you'll have to share it with others increases. That $300 million jackpot doesn't look so good at $150 million or $100 million (though they're both better than the base prize, which is why more people play when it's this big.)

As for the "ZOMG, you have to pay taxes on it!" angle: The base jackpot is usually about $20 million. The median wage is about $40,000. If you win, you just made about 10 lifetimes' worth of money. I think you can afford to pay taxes if you win.
 
2012-11-27 02:54:04 AM  
i am saving my 3 dollars for something nice.
 
2012-11-27 02:57:35 AM  

brantgoose: Odds of winning 1 in 175 million. Cost of ticket $2.

Step one: buy ALL the tickets (cost: $350,000,000).

Step two: Win, inevitably.

Step three: Pre-tax profit: $425,000,000 minus $350,000,000 in outlay leaves $75,000,000 in pre-tax profits. Even divided by four, this makes $18,750,000 each. Pay about 60% in taxes, remaining after-tax profit: $7,500,000 EACH. A lump sum will be much smaller than this, which is the prize money spread over many smaller payments per year or per month.

Not great but not shabby and, in theory, totally inevitable, a sure thing, safer than houses.

The thing is, that if the prize is big enough, it overwhelms the rather scanty change of winning. As my calculations show, your expectation of winning, even allowing for sharing a winning number with three rivals and even after paying taxes shows an expectaton which makes punting a $2 you can afford to lose on a lottery ticket. Mind you, when the pot is less than $350,000,000, your expectation is not a remote chance of winning, but a near certain change of losing money.

It is not always foolish to buy a lottery ticket. Depends on the odds, the price of the ticket, the prize pot and the chances of sharing the prize and how much you can afford to lose. By being a contrarian's contrarian and playing numbers that other people avoid, you increase your chance of not sharing the prize (therefore avoid birthdays and "lucky numbers" like the plague. Also, only play the lottery when the prize monies are bigger than the cost of every ticket. You'll still lose most of the time, but the odds shift heavily depending on how you play and when.

Play when the pot is big enough to give you a positive expectation.
It is better to put all of your gambling money on one drawing. IN A LIFETIME. Ten tickets in the same drawing is a totally different game from ten tickets in ten drawings.
Box your bets (learn how to do this from a gambler).
Do your math carefully.
Understand the odds.
Be a contrarian.
Never ever bet ...


Math, How the hell does it work?
 
2012-11-27 02:58:33 AM  
If I spend $3 on a ticket, win $400 million, split it 8 ways, and end up paying $4,999,996 in taxes, I still come out with a $1 profit! So, Win! And I do not mind buying two tickets a week, as I would probably spend that money on Coke anyway, so it is all good.
 
2012-11-27 02:58:52 AM  
Last powerball my boss bought around ten tickets (three single tickets and a slip with at least five lottery number codes). He gave me and at least one other coworker one. Neither of them won but today I checked my ticket while at 7/11 and I won a hundred dollars. Bought a ten dollar scratch off with my winnings and won another twenty. It was a good day. I'm not buying more tickets except for one more powerball. I don't want to miss my slim chance of winning.
/Also found out I'm NOT failing one of my classes despite missing two weeks and I got a better paying job today. So yeah, go me?
 
2012-11-27 03:00:09 AM  
Wait a tick, it's three dollars for a ticket now? I swear I've only paid two but I haven't bought any for a couple months.
 
2012-11-27 03:02:06 AM  
Once, quite a long time ago, my parents were visiting relatives in a state that didn't participate in the Powerball, during a week when the jackpot was over 200 mill. So, they sent me an e-mail telling me that they all chipped into a pool and I needed to go pick up 75 tickets.

Imagine what it's like to go into the corner gas station/convenience store, go to the ATM and withdraw 80 bucks, then get in line and tell the cashier I needed 75 quick picks. Everybody in the whole store stopped and stared at me, with that awkward "is everything okay, mister?" look on their faces.

/not sure if they believed the explanation
//not one ticket won anything
///CSB
 
2012-11-27 03:04:28 AM  
If I won and no one else did, I would pay around 87 million in taxes on the lump sum payment.
That would only leave me with around 190 million.
Ya, I bought ONE ticket.
 
2012-11-27 03:06:17 AM  
So, if one single person were to win, just one winning ticket being sold for this new jackpot, approximately how much would the gov't grab for protection money? Going by lump sum.
 
2012-11-27 03:06:19 AM  

Devmapall: Wait a tick, it's three dollars for a ticket now? I swear I've only paid two but I haven't bought any for a couple months.


You can pay an extra $1 for the Power Play option. This will increase your winnings on any prize except for the jackpot.
 
2012-11-27 03:06:36 AM  
I toss out the $2 for a powerball quite often actually.

Hey, I am not picky. I don't need the jackpot. I'll happily accept a lower prize of $50,000. Even after taxes...I can still buy a nice used car and completely pay for school(it's only a 2 yr degree). With enough left over for a nice 80inch tv and surround sound.

Dreams are nice.
 
2012-11-27 03:09:59 AM  
img2.imagesbn.com
 
2012-11-27 03:12:12 AM  
Man, all these people, in all of these threads, saying that anyone who buys a lottery ticket is paying the stupid, or poor person tax. They must never, ever, do something that another person wouldn't do with money.
 
2012-11-27 03:22:09 AM  

robohobo: So, if one single person were to win, just one winning ticket being sold for this new jackpot, approximately how much would the gov't grab for protection money? Going by lump sum.


My understanding is if you take the lump sum, you take home about 1/3 of the total prize (rough estimate).
 
2012-11-27 03:26:33 AM  
After reading this article I feel so depressed and worthless. I bought a ticket and I dread the fact that I may win and only walk away with tens of millions of dollars after taxes. I'm going into the bathroom where I will spend the next 48 hours sticking my head in the toilet bowl and flushing it.
 
2012-11-27 03:27:42 AM  
This is how Monopoly gets turned into 'OMG why am I still playing this farking game at 3 in the morning?'

Just play by the rules on the back of the box and don't try to liven the game up by adding a Free Parking lottery.
 
2012-11-27 03:27:58 AM  

Soupysales: robohobo: So, if one single person were to win, just one winning ticket being sold for this new jackpot, approximately how much would the gov't grab for protection money? Going by lump sum.

My understanding is if you take the lump sum, you take home about 1/3 of the total prize (rough estimate).


I've heard that and also half. Too lazy to google but I'd take either.
Anyone know the difference of taxes on lump sum versus payment option?
That's assuming there is one of course.
 
2012-11-27 03:31:46 AM  
I've thrown away money on a lot worse. So if I were to drive 40 miles to buy a ticket, I couldn't use the "wasted $2" excuse.
 
2012-11-27 03:34:28 AM  

Devmapall: Soupysales: robohobo: So, if one single person were to win, just one winning ticket being sold for this new jackpot, approximately how much would the gov't grab for protection money? Going by lump sum.

My understanding is if you take the lump sum, you take home about 1/3 of the total prize (rough estimate).

I've heard that and also half. Too lazy to google but I'd take either.
Anyone know the difference of taxes on lump sum versus payment option?
That's assuming there is one of course.


its roughly 50% of the jackpot before taxes so right now

$425 Million

$278.3 Million Cash Value

well worth my $2 investment
 
2012-11-27 03:35:28 AM  

ExcaliburPrime111: Your calculation only works if you are the only one holding the winning ticket. Even if you have to share with one other person, then you only "win" $212.5 Million, while paying $350 Million to buy all the tickets, ending up with a massive net loss.


*ahem*

I can't believe I'm the first to pull you up on this, but how can it be possible for one other person to win if you hold all the tickets?
 
2012-11-27 03:45:46 AM  

lindseyp: ExcaliburPrime111: Your calculation only works if you are the only one holding the winning ticket. Even if you have to share with one other person, then you only "win" $212.5 Million, while paying $350 Million to buy all the tickets, ending up with a massive net loss.

*ahem*

I can't believe I'm the first to pull you up on this, but how can it be possible for one other person to win if you hold all the tickets?


because when you pick a set of numbers...it doesn't take them out of contention for other people to also pick those same numbers
 
2012-11-27 03:47:38 AM  
My wife and I make about $175,000 a year, so I feel I can afford to blow about $50 a year on the lottery.
When the jackpot is over $100 mil I purchase 1 ticket
over $200 mil 2 tickets
$300 mil 3 tickets
I believe this is the first time I have purchased 4 tickets.
It is more for the entertainment factor than thinking I'm really going to win. Just like the few times a year I go to a casino, I really don't plan on walking out with more money than I went in with, even though that has happened a few times. It is more like, "how long can I be entertained on this 100 bucks"
As far as it being a "tax on the stupid" I don't believe that is so if you know the odds and play reasonably.
I also believe in user fees for parks and the like. We camp a lot and why should somebody be taxed to subsidize my entertainment. If I am using the parks more, I should pay more. Living on the state border and doing most of my camping "out of state" I have to pay three times what a state resident pays. That's the breaks if those are the parks I choose to go to.
Also living right on the state border I always try to purchase gas in my state so the state gas tax goes towards goes towards my state roads.
So I guess what I am saying is as long as you know what you are doing, what it costs and where the money goes, have fun. Spend your money any way you see fit.
 
2012-11-27 03:49:48 AM  
I'd be happy to split the pot with three or four people. I could live quite comfortably with that fact because I'm not a greedy prick.
 
2012-11-27 03:56:40 AM  
I would happily split it with 4 people. I would even be happy to take the annual installments so I don't piss it all away in a few years. Hell, I'd be happy to split it with 424 other people.
 
2012-11-27 03:58:42 AM  

lindseyp: ExcaliburPrime111: Your calculation only works if you are the only one holding the winning ticket. Even if you have to share with one other person, then you only "win" $212.5 Million, while paying $350 Million to buy all the tickets, ending up with a massive net loss.

*ahem*

I can't believe I'm the first to pull you up on this, but how can it be possible for one other person to win if you hold all the tickets?


You can't buy all the tickets, you can only buy every possible combination.
This doesn't prevent someone else from also holding the winning combination.
That's not even the dumbest mistake, though...


brantgoose: Step three: Pre-tax profit: $425,000,000 minus $350,000,000 in outlay leaves $75,000,000 in pre-tax profits. Even divided by four, this makes $18,750,000 each. Pay about 60% in taxes, remaining after-tax profit: $7,500,000 EACH.


Why are you removing your own costs before taking out the taxes???
The lottery doesn't give a shiat if you spent 350 million dollars on tickets; if you win all $425 Million, they're going to tax you on THAT amount, NOT on your $75 Million net profit. The same thing for your "divided by four" numbers -- they're going to split the entire $425 Million between four people, not the $75 Million leftover after whatever preposterous amount you spent on tickets.

Assuming your 60% tax rate...
If you and 4 people win, you get (425 Million / 4) * 0.4 = 42.5 Million, which puts you 307.5 Million in the hole.
If ONLY you win, you get 425 Million * 0.4 = 170 Million which puts you "only" 180 Million in the hole.

There is no scenario in which this is a good idea.
 
2012-11-27 04:07:42 AM  

Gawdzila: Why are you removing your own costs before taking out the taxes???
The lottery doesn't give a shiat if you spent 350 million dollars on tickets; if you win all $425 Million, they're going to tax you on THAT amount, NOT on your $75 Million net profit.


If you keep the millions of losing tickets, you can write them off as $349,999,998 worth of gambling loss. But only if you win.
 
2012-11-27 04:09:53 AM  

IlGreven: Gawdzila: Why are you removing your own costs before taking out the taxes???
The lottery doesn't give a shiat if you spent 350 million dollars on tickets; if you win all $425 Million, they're going to tax you on THAT amount, NOT on your $75 Million net profit.

If you keep the millions of losing tickets, you can write them off as $349,999,998 worth of gambling loss. But only if you win.


...and win solo. Otherwise, your gambling loss can only neutralize what you won.
 
2012-11-27 04:14:02 AM  
With $425 million in cash, you could finance the U.S. budget deficit for three hours (not including interest). But just keep printing more money, America: what could go wrong?
 
2012-11-27 04:24:51 AM  

IlGreven: Gawdzila: Why are you removing your own costs before taking out the taxes???
The lottery doesn't give a shiat if you spent 350 million dollars on tickets; if you win all $425 Million, they're going to tax you on THAT amount, NOT on your $75 Million net profit.

If you keep the millions of losing tickets, you can write them off as $349,999,998 worth of gambling loss. But only if you win.


Lol, are you being serious? I wouldn't have imagined that you could write off that much gambling loss, but okay.
Even then, it still only works if you're the only winner. If 4 people win they will split the entire pool, not your post-expenditures pool, which makes your winnings about $106M. Since you can only claim losses up to the amount of your winnings, that still puts you way into the hole.
 
2012-11-27 04:25:31 AM  

IlGreven: ...and win solo. Otherwise, your gambling loss can only neutralize what you won.


Oop beat me to it.
 
2012-11-27 04:34:36 AM  

CowboyUpCowgirlDown: With $425 million in cash, you could finance the U.S. budget deficit for three hours (not including interest). But just keep printing more money, America: what could go wrong?


Shoo. Go back to the YouTube comments.
 
2012-11-27 04:37:28 AM  
Federal tax on lottery winnings is 25%

State tax varies.

My state is 6.5% so if I won taxes would be 31.5% of the lump sum.

No one in their right mind would take the 30 year payment plan but taxes are the same for it as well.
 
2012-11-27 05:11:33 AM  
I have seen this "buy every combination" idea before. It is impossible for one machine to print out every combination in between drawings. Plus you have to fill out the little circles to tell them what numbers you want. It would take a massive coordinated effort of many people filling out the "pick the number forms" and many, many machines printing 24 hours a day to get all the combinations. Then as others have stated you are still not guaranteed to be the only winner. Your odds of winning, on any one ticket, are the same as the person who only bought one ticket.
 
2012-11-27 05:20:04 AM  
Well that does it, I'm not playing. The one thing I learned from fiscal conservatives is that being rich isn't worth it if you have to pay any taxes on it and I am better off getting free stuff like welfare and food stamps.
 
2012-11-27 05:25:03 AM  

Zoomaster: I have seen this "buy every combination" idea before. It is impossible for one machine to print out every combination in between drawings. Plus you have to fill out the little circles to tell them what numbers you want. It would take a massive coordinated effort of many people filling out the "pick the number forms" and many, many machines printing 24 hours a day to get all the combinations. Then as others have stated you are still not guaranteed to be the only winner. Your odds of winning, on any one ticket, are the same as the person who only bought one ticket.


If you recruited 150 of your best friends, it would take (estimating 5 seconds to fill in one permutation) about 1,620 hours, or about 67 days, to complete. Assuming the same 5 seconds to run each ticket through the machine, it would then take Ahmed at the bodega about 27 years to process.
 
2012-11-27 05:26:22 AM  
huh huh... "semi"...

epguides.com
 
2012-11-27 05:27:49 AM  
I want my two dollars!
 
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