Round-Up: Lottery Tickets vs. Retirement Quantified

by JT McGee

Most of the statistics on this blog are made up, if not properly cited. However, when I threw out the $1,000 number in a post about lottery tickets I wanted to be sure it was right.

It was close, but no cigar.

Using Bloomberg’s retirement calculator I compared two datasets. I assumed annual returns of 6% per year with annual contributions from age 25 to age 65.

The person who opts out of lottery tickets would save $16,500 per year. The person who opts-in would save $16,480 per year, and spend $20 on lottery tickets. The number was based on the current 401k maximum annual contribution.

The results were as follows:

  • “Lottery ticket buyer” would amass a nest egg worth $2,553,572.43.
  • “Non-lotto buyer” would amass a nest egg worth $2,550,477.19.

So, in total, 20 years of consistent lottery ticket purchases would cost you $3,095.24. However, upside potential for the lottery ticket buyer would be $200 million, making his possible gain 100 times that of the non-lotto buyer.

Yep. I’m still buying tickets.

Cool stuff this week

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On MoneyMamba the past few weeks were posts about:

Locavesting – A new trend in funding local small businesses.
Prescription Drug Prices – Drug prices are in decline as patents expire.
The Power of Looking Ahead – Why clarity is the best policy.
Monty Hall Problem – A classic case of mathematics made fun.
Small Retail Stores – How giants like Walmart, Best Buy, and Target reinvent store profiles.
Retirement Planning – Retirement planning is apparently so complicated that Wharton MBAs can’t figure it out.

Photo by: Lisa Brewster

{ 3 comments… read them below or add one }

krantcents August 19, 2011 at 14:43

Don’t feel bad for living at home, you are still young. Thanks for the mention. I am in good company.

Reply

retirebyforty August 19, 2011 at 16:53

Nice research. I’m going to buy some lotto today. I’ve been on a lucky streak lately so I’d better take advantage of it.

Reply

Darwin's Money August 21, 2011 at 19:29

Thanks for the mention! I don’t play the lottery for fear of winning – it ruins lives!

Reply

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