These days, playing the lottery is easier than ever thanks to global ticket-buying portals like theLotter. With access to multimillion-dollar contests on six continents, these platforms blow your neighborhood convenience store’s lotto counter out of the water. They often promise higher jackpots than what’s available locally too.
But that’s not to say the power of the Internet makes playing the lottery a sure path to early retirement. Nearly the opposite, in fact.
It’s no secret that playing the lottery involves exceptionally long odds, at least when the jackpot is big enough to change the winner’s life. Like all games of chance, lottery games benefit the “house” — in this case, the sponsoring authority — by design. Most players understand that on some level, yet millions upon millions continue to play. Few win anything worth writing home about.
It’s not quite right to say that the best strategy to “win” the lottery is never to play at all. Purchasing an occasional Powerball ticket or scratch-off game can be fun, even thrilling, when you keep your expectations low and spend no more than you can afford to lose. Public lottery proceeds also fund essential state functions, such as education and public safety. But their tangible impact on state budgets is murky and may be overstated, according to a 2016 analysis by CNN Business.
But to be clear, any expectation of winning the lottery, however remote, has no place in your personal financial plan. The lottery is not a path to easy riches or even basic financial security. It exists strictly for your entertainment, to be used sparingly or not at all.
Any objective attempt to answer the question, “Should I play the lottery?” must include a lengthy analysis of the lottery’s shortcomings — a crash course in why you probably shouldn’t play the lottery, at least not very often. The odds aren’t in your favor. The opportunity cost of regular play is high. And on the off chance you do hit it big, you could come to regret your good fortune.
What Are the Real Odds of Winning?
To illustrate the true odds of winning the lottery, let’s take a look at one of the best-known and widely available lotto syndicates in the United States: Powerball.
Powerball is available to players in 45 states, Washington D.C., Puerto Rico, and the U.S. Virgin Islands. Its grand prize jackpot routinely tops $50 million and often tips into nine-figure territory. The biggest jackpot on record hit in January 2016: a whopping $1.59 billion split among three winners in California, Tennessee, and Florida, according to CNN Business.
Powerball’s rules are a bit technical, but the gist is simple: If your ticket matches all six winning numbers in the order they’re drawn, you win the jackpot along with anyone else holding the same winning numbers in the same order. Powerball reserves smaller prizes, if still quite hefty, for tickets matching some of the winning numbers. Each $1 ticket corresponds to one entry.
To put it mildly, the odds of winning the Powerball jackpot are not in your favor. Nor are the odds of winning a smaller Powerball prize — or any significant lotto payout, for that matter.
Want numbers? Powerball’s actual jackpot odds change over time, but they’re always astronomical. According to CNBC, the odds of winning the jackpot in May 2019 were about 1 in 292 million. The odds of drawing five winning numbers needed to score the $1 million second prize were a still-unbelievable 1 in 11.7 million. The odds of winning any prize at all were about 1 in 25.
One way to think about your absurdly long odds of winning the Powerball jackpot is to compare them with your chances of dying in a car accident on the way to your friendly neighborhood lotto retailer. According to Reuters, the National Highway Transportation Safety Board recorded 1.10 deaths per 100 million vehicle miles traveled in the U.S. in 2019. So, on a 2-mile round trip to the store, your odds of dying in traffic are more than 6 times higher than your odds of taking home the winning ticket.
Scratch-off games technically have better odds than Powerball and other high-jackpot drawings, but only relatively speaking. As a random example, the Texas Lottery Commission puts the odds of winning any prize in its Triple 777 scratch-off game at about 1 in 5. But the approximate odds of winning serious money are much lower: 1 in 4,000 for the $100 second prize and 1 in 600,000 for the $1,000 grand prize.
The True Cost of Playing the Lottery
If the lottery’s astronomical odds aren’t enough to discourage you from playing, perhaps the opportunity cost of frequent lottery ticket purchases will do the trick. Even if you’re financially comfortable, a modest lottery habit — say, $20 per month — can add up to a small fortune over a working life: $6,000 over 25 years and $12,000 over 50 years.
That’s money you can’t save for retirement or use to pay off debt quickly. Although you’ll undoubtedly bag some small prizes over a quarter- or half-century playing career, you’re very unlikely to break even (or even come close to doing so).
Let’s say you quit playing the lottery tomorrow and began investing the $20 you would have spent on it each month with a robo-advisor like Betterment. Let’s assume, conservatively, that your funds grow at an average rate of 4% per year over the next 25 years — roughly half the historical rate of long-term equities market returns since 1950. How much would you have in the bank at the end of the period?
The answer is $10,048.33: a return of about 67%.
Even If You Win, You Might Lose in the Long Run
Vanishingly low odds notwithstanding, people do win the lottery. And a few win big — really big. Every time you see a headline about a lucky Powerball or Mega Millions winner, you witness a life forever changed. That much is for sure.
What these changes mean for any given lottery player is not so clear cut. Many lottery winners do use their winnings responsibly: by paying off debt, setting aside a reasonable percentage for charitable causes close to their heart, and investing the lion’s share according to their personal risk tolerance. And they treat their windfall with the gravity it deserves: namely, by putting together a long-term financial plan with the help of a fee-only financial advisor and developing an estate plan that protects their wealth, perhaps, for generations to come.
Sadly, many other winners aren’t so intentional. That isn’t merely a matter of limited financial literacy, though that certainly plays a role. Sudden wealth affects people in strange ways, and despite the high regard we might have for our finance habits, none of us can be sure how we’d react.
A 2011 study published in the Review of Economics and Statistics suggests that for many of us, the answer is “not well.” Comparing the financial trajectories of debt-laden Floridians who won state lottery prizes between $50,000 and $150,000 with those of smaller prizewinners, the authors found that the windfalls only delayed bankruptcy, rather than preventing it entirely. When they did declare bankruptcy, the larger prizewinners’ net assets and debts were similar to the smaller winners’, suggesting their winnings did not meaningfully improve their finances in the long run.
Millions of Americans spend a few bucks here and there on lottery tickets, the vast majority of which are worthless, and suffer no ill effects for their casual gaming habit. Though I haven’t purchased a lottery ticket in many years, I’ve done so in the past. I can still remember the thrill of winning a $30 prize on a $3 scratch-off.
In other words, the lottery is not some great evil to be avoided at all costs. I’d be a hypocrite to suggest otherwise. As long as you treat the lottery as nothing more than a diversion — fleeting entertainment purchased with small amounts of money you can afford to lose — you’ll probably be fine.
But playing the lottery with the expectation that you’ll win or as a literal ticket to quick riches is a fool’s errand. The odds are overwhelming you’ll never win a lottery prize big enough to change your financial situation meaningfully. You could buy multiple lottery tickets every day for the rest of your life and have nothing to show for it but a smaller savings account balance.
Not that you should. A daily lottery routine is far more likely to negatively impact your finances and damage your personal relationships than a stray ticket purchase here and there. Often, the threshold between more or less harmless fun and a problematic gambling habit is only apparent in hindsight.
Do you expect to win the lottery when you play? Or do you play strictly for fun?