The Onion shares their scientific poll results for the ever-important retirement question:
Some quick online research reveals that what I thought was just another funny option is all too real – lotto tickets. According to a 1999 survey by the Consumer Federation of America, 40% of Americans with incomes between $25,000 and $35,000 thought their best shot at paying for their retirement was winning the lottery. Along the same lines, a recent Consumerist article has low-income households spending a whopping 9% of their annual income on lottery tickets.
I wonder what would happen if on a certain number of the losing scratch-off cards, scratching off the latex ink won you free personal finance and budget management services.
In most states that have them, lotteries are justified because the revenues goes towards education. But what I’ve seen happen is every $1 that comes from the lottery just means the government can cut $1 of funding from somewhere else. The quality of education stays the same, if not worse. According to this article, a study found that states without lotteries maintained or increased their education spending more than states with lotteries.
Hmm… I got sidetracked on this “fun” post and landed in sad town. Doh!
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The Freakonomics podcast did a series about how you could conceivably use the lottery as a savings mechanism. Definitely worth a listen.
The lottery is a tax on those who do not understand probability. All proceeds should go towards incremental funding of the public school math curriculum.
I saw a news story on one of the big jackpots a few years back. The reporter was interviewing folks standing in line to buy tickets. She asked one person what they thought about their odds of winning. The person responded, “well the way I see it it is 50/50. I either win or I lose.”
One of the assumptions you make here is that more money spent on education means better education. There are a lot of studies that show that isn’t the case. Here’s one, for example. http://www.heritage.org/research/reports/2008/09/does-spending-more-on-education-improve-academic-achievement
I find the same thing happens to me when I look at what, at face value, should be ridiculous statistics. You feel good at first – a little humor and a little superiority – and then you really think about what it means and you become depressed and a little scared for our country’s future.
That being said, I love The Onion. All of the fun with none of the sad.
Rachel beat me to it, but if you can find the podcast (I think it was spread out over a couple of episodes) it’s a very interesting listen. Essentially, there has been considerable success in improving savings rates among lower income family’s in the UK and Africa – especially those who would otherwise be ‘unbanked’ – by allowing them to put their money in lottery-esque accounts that earn little or no interest, but periodically pay out large amounts to a few lucky account holders. The odds improve with increased account balances, as they essentially get another ‘raffle ticket’ for every $X amount they save. The payouts are smaller than Powerball, and there’s still a good chance they’ll get nothing, but unlike the lottery, savers get to keep their principle, and the odds are typically much better than a state lottery. I believe there was a bank system trying it here in the US, though there are many legal barriers to any non-government agency running a lotto here.
We are doing a mix of the graphic and the text. That is: we are having lots of kids and expecting that statistically improves our chances of having a brilliant engineer, inventor or business owner who can support his/her retiring parents. It’s a sorta genetic lottery.
Our fallback is hoping others follow our lead and at least replenish the Social Security ponzi pool of workers.
It is possible for the lottery jackpot to be sufficiently high enough to make the expected value of purchasing a ticket positive. However, people usually purchase more tickets in cases like this, increasing the probability for a split jackpot which makes the expected value negative.
Also, don’t make the mistake of implying that education funding improves education quality. If the former caused the latter, we would lead the world in standardized test scores. The fact is that the correlation between the two is extremely weak.
I wonder what % of the people who said the lottery was their best hope at funding retirement gave that answer not because they really think they’ll win millions on the lottery but more because they thought it was funny and basically more an admission on their part that they thought retirement savings was a futile, lost cause?
I wonder this for a couple reasons. At work we have some polls on our company website and usually one of the options is really just a joke/funny option and it often gets a lot of answers. Also at work people joke about the lottery being their retirement plan, but its not serious. If ‘marry someone rich’ or ‘invent the next iphone’ were options in such a poll they’d get a pretty high % too.
The only time I play the lotto: when a sufficient number of critical people join the office pool. I call it “empty office insurance” — I don’t want to be left behind in a collapsing business if everyone else wins part of the mega-jackpot and quits.
So other day i’m in a local gas station getting cash (my bank’s ATMs are in this station) and I overhear an older man ask the cashier, “So you think my odds are better with my numbers or random numbers?”
Yes, the mid-40s lady working the register at the Valero obviously has it dialed in. She’s the one to ask for investment advice. She must work the job for fun as she broke the lotto code, right?
She tells him most people win with random numbers. He says, “That makes sense” and buys $10 worth of tickets.
I wanted to grab the money and light it on fire. “See that…the energy generated by the burning singles was more than you’ll get out of the lotto!!!!”
True story, one Day Sammy The Bull’s wife asked him for money to play the lotto, he said no way, that’s for fools, that’s how we make our our money, off of fools, he comes home later that night shes waving a ticket and says whos the fool now? She won $800,000.
I like playing the lotto just for the feeling of knowing for the day or two before the drawing that there’s a tiny remote possibility I could be a millionaire. I dread checking the numbers because I know they won’t be mine, so sometimes I prefer to just wait a day or two after the drawing to look. It’s just fun imagining how awesome that life change would be, especially thinking about the crazy sh*t I’d do right after finding out.