Re: The lottery, The odds, and You
I did some math at work today how big a Mega Millions & Powerball Jackpot must be for a ticket to become EV neutral.
Some things to note in my math:
-Exact odds and payouts were used.
-35% federal tax rate was assumed for jackpot winners,
-33% for $100,000-$250,000 winners,
-25% for $200 to $99,999
-I believe these accuratley reflect the tax bracket an average person will be pushed in after their lottery winnings.
-no taxes were taken out onwinnings under $200, how many people are actually going to claim these winnings?
-3% flat state tax was assumed on all winnings > $200 (I live in Illinois so that's the rate I used)
-I couldn't find any exact #'s on what % is taken out for taking a lump sum prize. Also to consider is lawyer/accountant/financial advisor fees for jackpot winners. I took 20% out of the 'advertised jackpot' for those considerations.
Results:
Mega Millions becomes EV neutral with a jackpot of $284, 958, 993
Powerball at $194, 859, 920.
Saying all that I have $5 worth of tickets in my pocket for tonights $145 Million Big Game which my expected value is sadly less than 60 cents per ticket.
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