People spend about $100 billion a year on lottery tickets. Whether or not that’s a good idea, the fact is that we have lotteries everywhere, from the scratch-off tickets bought at the gas station to the megamillions drawn in big cities and states. States promote the idea that these aren’t just random acts of gambling – they’re a way to support schools and roads, for instance.
But that’s not the whole picture. Lotteries also give hope, an irrational, mathematically impossible hope. For many people, especially those who don’t see much opportunity in the economy, it can feel like their only chance to get up out of poverty.
It’s also worth noting that while the money people pay for these tickets isn’t a drop in the bucket, it does add up over time. And if you’re one of those who do win, there are tax implications that can eat into your windfall and make it smaller than you might think.
When a lottery advertises a jackpot, such as the $1.765 billion prize for Powerball in October 2023, that figure doesn’t really mean what it might seem to. That’s because a winning ticket doesn’t have that sum sitting in a vault waiting to be handed to you. Instead, you’d receive an annuity for three decades that would yield 29 annual payments — each increasing by 5% — before the final lump-sum payment would be made. If you died before all those annual payments were paid, the rest of the sum would become part of your estate.