Note to Mega Millions lottery winner: Beware! (+video)
Sure, the jackpot for the Mega Millions lottery is an all-time high of $640 million – and ticket sales on Friday are through the roof. But winning brings its own complications. Read on.
(Page 2 of 2)
Hitting the jackpot is not necessarily the salvation from financial problems, at least for those who've won more modest amounts. In a 2009 study of people who had won between $50,000 and $150,000 in the Florida Lottery, three economists found that if a winner had been in dire financial straits beforehand, the lottery money only postponed bankruptcy.Skip to next paragraph
Subscribe Today to the Monitor
“What our study suggests is that bankruptcy is about something other than money,” says Mark Hoekstra, a professor at Texas A&M University in College Station, Texas. “Whatever got you into trouble did not change after you won the lottery – it was not just bad luck.”
One problem for lottery winners, he suggests, may be that many are not adept at managing large sums of money.
That seems to be the case for some of Stoltmann’s clients. He has worked on behalf of four different lottery winners, most of whom got bad financial advice. He counsels winners not to take the lump-sum payment. “If [instead] you take a stream of payments over multiple decades, you can make a catastrophic mistake or mistakes, learn your lesson, and be OK,” he says.
Lottery tickets are not ordinarily considered good investments. But from a purely mathematical standpoint, buying a ticket for $1 is a good investment so long as there are no other winners, says Phil Yates, assistant professor in mathematics at St. Michael’s College in Colchester, Vt. “With the jackpot at $640 million, assuming you are the only one to win, your expected profit is positive,” he says. “Typically these jackpots don’t get this large.”
But Mr. Yates, who has never played the lottery, says he’s not tempted. “I’d rather spend the dollar on something I would enjoy, like a cup of coffee.”
If no one wins the lottery Friday night, the next jackpot will be $975 million or more, according to Bresnahan. But given the blizzard of ticket sales, mathematician Yates says he would be shocked if there's no winner.
The potential drawbacks of winning has indeed dawned upon some lottery players. At the Port Authority, five people who work in the IT department at 1199 SEIU Benefit and Pension Funds each put in $200. All five declined to give their names, saying they wouldn't want their names to be public if they end up winning the jackpot.
Mr. Hoover of Washington and Lee, who acknowledges that he has bought Mega Millions lottery tickets, he says he won’t let many people know if he wins. “My first call is to my wife; my second call is to my lawyer,” he says. “You don’t want to have the risk of kidnapping, charities hounding you, friends asking for money.”
RECOMMENDED: Six ways the rich really do get richer
Get daily or weekly updates from CSMonitor.com delivered to your inbox. Sign up today.