Your Expected Return

If you win the big Powerball drawing, you won’t get your 1.3 gigabucks all at once. That’s the payout over 30 years. If you take the net present value payout of the annuity, your winnings after taxes will be much less.

How much less? Your best expected return on your $2 “investment” in a ticket is about $1.79. It’s still a sucker bet.

8 thoughts on “Your Expected Return

  1. I think that only accounts for the big prize, assuming only one winner. And nothing about the taxes the Feds and States take out. Let alone multiple winners. And does not consider all of the minor prizes.

    But if some idiot is going to win, I hope that idiot is me.

    • You at least have the advantage of choosing anonymity in Maryland. Some other states exact an extra price for winners who want to collect anything of the big prize – a trip to hell. So even the payoff is less valuable for them.

      One state south of you is one of the cruelest compulsory-exposure states. One cannot form an LLC or trust, or appoint a representative to collect winnings, The winner(s) must submit to permanent distribution of image and likeness, attached to that name, and must, at the discretion of the lottery agency, participate in a public press conference, where all media are permitted to photograph you and distribute the images.

  2. Eh, lot’s of things are sucker bets, you play to dream not to win.
    I buy $10 in tickets when the jackpot get’s high enough to peak my interest. With the new Powerball odds that’s probably only north of $700mil.
    I buy the occasional Megamillions tickets too (they’re cheaper so I buy $5 worth of those.)

    Total per year spent? Maybe $50 on average. $100 would be rare.
    I spend more on that each year gambling on new styles of beer to try. And honestly the ROI there is about the same given that some stuff that hits the shelves is crap.
    (And that doesn’t even include what I spend brewing my own beer, which so far I’ve had a decent ROI as my batches have turned out pretty good. But at upwards of $50 per 5 gallon batch, it only takes one screwed up recipe to wipe out a year’s worth of powerball playing for me.)

  3. My wife called me from school this morning and told me the teachers were pooling to buy tickets. (My understanding is that it’s a common practice.)

    I told her it’d be hilarious if the school actually hit. It would be awkward for the administration to have to hire an entirely new staff.

  4. $2 cost – $1.79 Expected Return = Net expense of $0.21. I’ve spent more to watch (a) monkey(s) dance.

  5. It’s entertainment, not investment.

    I spent $10 on tickets. Now I get to fantasize about what I would do with all that money if I win.

    Contrast that with $10 spent at Disneyland ($99 for one day entrance to the park). Which is better entertainment value?

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