Will the Lottery Fund Your Retirement? Don’t Bet On It

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40 percent of Americans with incomes between $25,000 and $35,000 think their best shot at paying for their retirement is winning the lottery. Their odds of winning an academy award are much greater.

Imagine this: As you’re reading these words, you’re struck dead by a bolt of lightning. What are the odds?

Well, actually, the odds are 2,320,000 to 1. So you should be feeling pretty safe right now. But if you play the lottery, you’re getting burned. That’s because the odds of winning a state lottery are about 18 million to 1, while multiple state lotteries have odds as high as 120 million to 1.

Here’s how the lottery stacks up against some other unlikely events, collected from this site as well as a few others from around the web.

  • Odds of winning the PowerBall: 80,089,128 to 1
  • Odds of being an astronaut: 13,200,000 to 1
  • Odds of drowning in a bathtub: 685,000 to 1
  • Odds of dating a supermodel: 88,000 to 1
  • Odds of writing a New York Times best seller: 220 to 1
  • Odds of becoming a pro athlete: 22,000 to 1
  • Odds that the pilot of your airliner is a convicted drunk driver: 117 to 1
  • Odds of bowling a 300 game: 11,500 to 1
  • Odds of dying from Snake, Bee or other Venomous Bite or Sting 100,000 to 1
  • Odds of getting a royal flush in poker with the first five cards dealt: 649,740 to 1.
  • Odds of winning an Academy Award: 11,500 to 1.
  • Odds of being struck by lightning: 576,000 to 1
  • Odds of actual death by lightning: 2,320,000 to 1
  • Odds of being considered possessed by Satan: 7,000 to 1

Granted, some of these odds are, well, odd.  For example, the odds of writing a bestseller would have to be higher than 220 to 1 if you never write, and the odds of bowling a 300 game would be nonexistent if you never bowl.  Presumably, these odds are derived by dividing the number of people in the world by the number of occurrences – not a very way accurate way to determine some of these things. But the point is still glaring: winning the lottery – especially the big, multi-state kind – is such an unlikely event,  the odds are practically zero.

As odd as those odds are, here’s something even more odd

As I mention in the video above, a 1999 survey by the Consumer Federation of America and financial services firm Primerica found that 40 percent of Americans with incomes between $25,000 and $35,000 thought their best shot at paying for their retirement was winning the lottery. And 27 percent said their best chance to save $500,000 in their lifetime was with a lottery score. And that survey was conducted before the recent recession – according to media reports, lottery fever is only getting worse.

That’s not only odd, it’s sad. What’s worse, the money these folks are spending on the lottery can add up to real savings. As I said in the video, if you’re 25, save $5 a day and invest it at 10%, by the time you’re 55 you can have nearly $500,000. I realize that earning a guaranteed 10% these days is also against the odds, but it can be done: check out my stock portfolio. Besides, interest rates on savings won’t remain low forever.  In the meantime, to find the best savings rates, check out our savings search tool.

Another better use for the money that goes to purchase tickets might be to pay down credit card debt – if you’re paying 18 percent, that’s like earning 18 percent, risk-free and tax-free.

Finally, here’s a sobering thought: Even if you beat the odds and win the lottery, you could still go broke. One example? Andrew Cicero of Muskego, Wisconsin, won $5.5 million in 1995 – 12 years later he was broke. “I thought I was set for life,” Cicero told his local newspaper. “But it didn’t work out that way.”

Here’s an article with 8 more examples of people who won the lottery, then lost it all.

Of course, losing your winnings isn’t the worst thing that can happen. Consider the story of Abraham Shakespeare. Just three years ago this Florida resident won $17 million in a lottery. This past January his body was discovered buried under a concrete slab – a  woman who befriended him after he won was arrested as an accessory to his murder.  Shakespeare’s brother told the Associated Press that Shakespeare often told him that he wished he hadn’t won the money and that would have been been better off broke. He was right.

Bottom line? There are several great messages here:

  1. The lottery is exceedingly unlikely to make you rich.
  2. Even if you win the lottery, without some education, you could very easily end up broke again – or worse.
  3. If you can put just a few dollars together on a regular basis, your odds of accumulating a big nest-egg are excellent.

Nobody’s suggesting you shouldn’t have fun, and if you consider the lottery fun, go for it. But as a substitute for a consistent savings plan? You’re better off planning on a career as a pro athlete or looking online for a super-model to marry.

Stacy Johnson

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