Don’t Make This Bad Bet

Your chances of winning a state lottery jackpot are minuscule.


USA Today recently reported that state lotteries are enjoying record sales, due at least in part to the bad economy. A lot of people faced with lagging paychecks and increasing gas prices feel that taking a flier on their state lottery will give them a ticket out of their financial predicament.

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There are 43 states that run lotteries. At least 28 recorded increased sales in fiscal 2011, and 17 of those states set all-time records. Arizona scored the greatest increase among the states setting records, posting a 6 percent gain in fiscal 2011 over 2010.

Missouri topped $1 billion in lottery sales for the first time. California sales increased a whopping 13.2 percent to reach $3.44 billion, its highest total since it set a record of $3.6 billion during the halcyon days of 2006.

Historically, lottery sales have increased as unemployment increased. The more people are out of work, the more they’re willing to toss a few of their dwindling dollars into the pot. People think, “Well, it’s only $5 or $10 a week, and, who knows, maybe I’ll get lucky. After all, you gotta be in it to win it.”

The trouble is, your chances of hitting a lottery jackpot are minuscule. One rule-of-thumb says your chances of winning are about the same as getting hit by lightning. This has been disputed by some statisticians who claim there are more lottery winners per year than there are lightning victims. But others say it overstates your chances of winning. According to Turtle Trader, the chances of getting killed by lightning are 30,000 to 1. But the chances of a Californian winning the state lottery are 80 million to 1. Citing a CBS News report, the website puts your odds in perspective: “If one person purchases 50 Lotto tickets each week, they will win the jackpot about once every 5,000 years.”

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But it’s only $5 or $10 a week. What’s the big deal? Consider this: Massachusetts is a state that did not set a record, yet the average Bay Stater still spent $700 on lottery tickets last year. In other words, the average player is basically throwing $700 out the window, at the very time they need the money most.

Other forms of gambling are also resistant to recessions, for the same reasons. Desperate people go to desperate measures to try to raise cash, only to find that they’ve made their situation worse. I’ve been to Foxwoods and Mohegan Sun and have seen the busloads of senior citizens coming to gamble away their Social Security checks.

Last year, gambling receipts were down slightly in Las Vegas. That’s largely because most people have to take an expensive airplane trip to get there. But gambling casinos in or near population centers, from Connecticut to the Gulf Coast to the Great Lakes, are raking in more money from financially strapped customers.

The fact is, gambling is for suckers. After all, lotteries were created to make money, not give it away. The same goes for casinos. These are profit-making enterprises. The difference is a typical casino takes 5 to 10 percent off the top. The state lottery takes 30 to 40 percent. On average, for every $100 you put into a state lottery, you only win back $60 or $70 and you lose $30 to $40.

Going to a casino is a better bet than playing the state lottery. If you really want to take a long shot, you could buy stock in a gambling business. International Game Technology (IGT) and Bally Technologies (BYI) are New York Stock Exchange listed companies that make gambling equipment such as video poker machines and lottery terminals. Or you could place your chips on companies that own and operate casinos, like MGM Mirage (MGM ) or Las Vegas Sands (LVS).

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Investing in these stocks is extremely risky, almost as risky as plunking down cash at the corner store for a lottery ticket. Meanwhile, if you want to enjoy the entertainment value of gambling, without losing your shirt, your best bet is to play poker with your friends.

Tom Sightings is a former publishing executive who was eased into early retirement in his mid-50s. He lives in the New York area and blogs at Sightings at 60, where he covers health, finance, retirement, and other concerns of baby boomers who realize that somehow they have grown up.