Powerball at 400 Million
Poll
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62 members have voted
Quote: WizardI continue to maintain it is a myth that the state/lottery will pocket all unpaid payments if the winner dies.
You are correct that it is a myth. From the Powerball FAQ:
WHAT HAPPENS IF AN ANNUITY PRIZE WINNER DIES?
The estate will handle the lottery prize. A lottery annuity prize is just like any other asset. You can pass any remaining annuity payments on to your heirs or to anyone else. The Powerball game will even cash out an annuity prize for an estate. This may make it easier for the estate to distribute the prize. It also may be necessary to cash out the annuity to pay Federal estate taxes. We will sell some or all of the securities at competitive bid or will even just transfer the securities to the estate. We do not charge a fee of any kind. We often hear people complain that the jackpot should not go back to "the state" when a winner dies. It does not. I think that this misunderstanding may come from the response that the prize "goes to the Estate" and some people hear "goes to the State."
How much would the 20 year annuity, or whatever, actually pay out? I know the lump sum is smarter because you can put the money to work for you and make more over that time, but if the jackpot is that big that the annuity is like $30,000,000 per year, then why the hell not make it a guaranteed 30 mill/year for the next 30 years? Can't do enough with that?
Or missed out on having the 1 winning ticket. You'll never know.Quote: RomesI forgot to buy my 1 ticket for the drawing last Saturday... SAVED $2!!
Yes, it's a well-known phenomena called "jackpot fatigue."Quote: WizardofnothingDoes anyone think that these large jackpots in effect hurt the lottery as the threshold becomes higher until people pay attention to them-
http://bfy.tw/3fd6
Or was that losing 30 hands of blackjack in a row
Quote: BozUSA Today quoted a mathematician from University of Buffalo today who stated winning was equal to flipping heads on a coin 28 times in a row.
That is easy to work out. Let n be the number of flips.
(1/2)^n = 1/(combin(69,5)*26)
2^n = combin(69,5)*26
2^n = 292,201,338
log(2^n)=log(292201338)
n*log(2)=log(292201338)
n = log(292201338)/log(2)
n = 28.1224
So, 28 is the closest integer. The probability of 28 correct flips in a row is 1 in 268,435,456.
In case anybody is wondering about the same thing for throwing yos in craps, the answer is 6.7441 times.
Quote: BozWizard needs to reach out to the media for some free publicity this week.
No inquiries yet. Usually I get one or two when the jackpot gets really big. I'd be happy to help anybody in the media who asks.
Funny, isn't it? Last time the jackpot got to the all-time largest dollar figure, I got several of them. It's crickets.Quote: WizardNo inquiries yet. Usually I get one or two when the jackpot gets really big. I'd be happy to help anybody in the media who asks.
http://time.com/money/4172196/powerball-math-odds-advantage/
However, I disagree with picking 44,43,42,41,40. Any pattern is usually going to be chosen by a couple of people who think no one will choose a pattern.
Quote: teliot..Any pattern is usually going to be chosen by a couple of people who think no one will choose a pattern.
Source?
Quote: teliotI am not sure if anyone else linked to this yet in this thread, but it's very good:
http://time.com/money/4172196/powerball-math-odds-advantage/
However, I disagree with picking 44,43,42,41,40. Any pattern is usually going to be chosen by a couple of people who think no one will choose a pattern.
I'm with you on this one. I bet at least 100 people will decide to buy the last drawing's winning numbers. It would be interesting to get some real data from the lottery on this.
A conversation I had with Mike several years back. I am not sure I can defend it, without direct access to the lottery database. But as I recall, Mike wanted to talk me out of choosing numerical patterns. Maybe he could comment.Quote: AyecarumbaSource?
I bet the fortune slips have not been updated to go up to #69, yet. There may be some extra value in picking the higher numbers! :)
I will keep using the same numbers until the jackpot is won.
I have a better chance of winning this than duplicating the feat of someone rolling 18 yo's in a row.
Thanks. Intuitively, I think some patterns will be chosen by a majority of the pickers (birthday digits from 1-12 and 1-31), but I don't know about sequences. I expect most folks would shy away from picking consecutive numbers, believing their chances of hitting are better with a "shotgun" spread, but I don't have any data one way or the other. a look into the actual numbers selected by players would be very interesting.Quote: teliotA conversation I had with Mike several years back. I am not sure I can defend it, without direct access to the lottery database. But as I recall, Mike wanted to talk me out of choosing numerical patterns. Maybe he could comment.
Who's playing 65, 66, 67, 68, 69, PB 26?
Quote: IbeatyouracesUp a bit to $1.4 billion.
Who's playing 65, 66, 67, 68, 69, PB 26?
If you are playing there is no way I am with your 4 to a royal luck. In fact please post all of your combos so we can be warned.
As for the Power Ball, I would consider picking the number 4, as that number is very unlucky in Chinese culture, so it may get less demand. Then again, just the fact that I thought of this may be indicative of millions of other people thinking the same thing.
Quote: AyecarumbaThanks. Intuitively, I think some patterns will be chosen by a majority of the pickers (birthday digits from 1-12 and 1-31), but I don't know about sequences. I expect most folks would shy away from picking consecutive numbers, believing their chances of hitting are better with a "shotgun" spread, but I don't have any data one way or the other. a look into the actual numbers selected by players would be very interesting.
I think the worst choices will be those numbers which make visible patterns, such as 1 8 15 22 29 (assuming all cards look like the one I found online). It only takes a very small portion of the people to choose patterns in order to make them a worse bet.
Quote: WizardI think a good strategy would be to pick five random numbers from 32 to 69. Do not try to pick them yourself, as humans are terrible random number generators. As anybody to pick a random number between 1 and 10 and you'll get the number 7 about 40% of the time it seems, and almost never anything less than 5.
As for the Power Ball, I would consider picking the number 4, as that number is very unlucky in Chinese culture, so it may get less demand. Then again, just the fact that I thought of this may be indicative of millions of other people thinking the same thing.
Uh-uh-uh. I though of that one too.
Quote: GWAEIf you are playing there is no way I am with your 4 to a royal luck. In fact please post all of your combos so we can be warned.
LOL!
Edit: I am NOT playing!
I think the worst combinations are those that have either 19 or 20 in them, a number between 1 and 12 and a number between 1 and 31. For example, 2, 14, 19, 59, x, x or 3, 17, 20, 12, x, xQuote: CrystalMathI think the worst choices will be those numbers which make visible patterns, such as 1 8 15 22 29 (assuming all cards look like the one I found online). It only takes a very small portion of the people to choose patterns in order to make them a worse bet.
I think it's all about how much self-control you (may or may not) have. Age, too, of course.Quote: RomesHow much would the 20 year annuity, or whatever, actually pay out? I know the lump sum is smarter because you can put the money to work for you and make more over that time, but if the jackpot is that big that the annuity is like $30,000,000 per year, then why the hell not make it a guaranteed 30 mill/year for the next 30 years? Can't do enough with that?
I think it's also a good out for people blasting you for money too. If you have $900 million in the bank, people will blast blast blast. If you have 30 mill, sure people will blast, but you can say "I have the annuity so I don't have even a fraction of the money yet!" and technically not be lying while you wouldn't have to just say "No"... which is probably what I would do, for the most part.Quote: teddysI think it's all about how much self-control you (may or may not) have.
Quote: RomesI think it's also a good out for people blasting you for money too. If you have $900 million in the bank, people will blast blast blast. If you have 30 mill, sure people will blast, but you can say "I have the annuity so I don't have even a fraction of the money yet!" and technically not be lying while you wouldn't have to just say "No"... which is probably what I would do, for the most part.
There are other people? (variation of "there are other players at the table?") :)
I can tell you that I would not make such based on a better 'excuse' for people asking for money. :/
But, I guess that would be a nice problem to face. I'll cross that bridge, when I have the winning ticket in hand. lol.
If you take the annuity over the lump sum, you are losing hundreds of millions (a billion if you invested all of it on day 0). The last payment is over 4 times your initial payment, meaning you don't even get a whole lot of interest growth over 29 years. Anyone who takes the annuity (for a jackpot this large) is a moron.
Edit: Moron from a financial perspective.
Do you have the Wizard's old job with the SSA?Quote: ahiromuhttps://www.usamega.com/powerball-jackpot-annuity.asp?state=CA
If you take the annuity over the lump sum, you are losing hundreds of millions (a billion if you invested all of it on day 0). The last payment is over 4 times your initial payment, meaning you don't even get a whole lot of interest growth over 29 years. Anyone who takes the annuity (for a jackpot this large) is a moron.
Edit: Moron from a financial perspective.
But true, you could probably take the lump sum and give it to the guys at Brown Brothers Harriman and they could structure a nice investment trust for you that would do far better than the annuity.
Oh I agree, as mentioned in my first message you can obviously put the money to work for 30 years instead of waiting 30 years to get it and it would be much more lucrative...Quote: ahiromuhttps://www.usamega.com/powerball-jackpot-annuity.asp?state=CA
If you take the annuity over the lump sum, you are losing hundreds of millions (a billion if you invested all of it on day 0). The last payment is over 4 times your initial payment, meaning you don't even get a whole lot of interest growth over 29 years. Anyone who takes the annuity (for a jackpot this large) is a moron.
Edit: Moron from a financial perspective.
My question I guess is this: How much would the annuity even be over 30 years? Is it paid once per year, monthly, and apparently the payments get larger over time?
Obviously if you take the lump sum and invest it with some minimal return, you will do better in the long run. And this particular case is probably a bad example because it has grown SO high, and the annual payments would still total tens of million per year (high tax rate). But in a lesser scenario of say 5 or 6 million lump sum vs 300,000 grand a year for 30 years, wouldn't the tax rate be significantly different? Just wondering if that is considered in these 'opinions'.
Quote: teddysDo you have the Wizard's old job with the SSA?
But true, you could probably take the lump sum and give it to the guys at Brown Brothers Harriman and they could structure a nice investment trust for you that would do far better than the annuity.
Heh, patent examiner, just a few miles away.
Yeah, take something like 20% off the top and invest the rest. Two thirds of the payout is in the last 15 payments, that just pisses me off, absolutely nobody's going to take it... it's only there as advertisement.
I think the right move for most people would be to take the lump sum and then purchase an annuity over x years just so they have some security. I could see myself taking it over 10 years.
Quote: RomesHow much would the annuity even be over 30 years? Is it paid once per year, monthly, and apparently the payments get larger over time?
30 annual payments, starting with year 0. It's all on the link, for this jackpot, it ramps up 4x+ initial. Your initial payment is a little over 1.5% of the jackpot value.
I can't find verification on the powerball website for the annuity payment information. However, this is not the first time I've heard that it ramps up.
Edit: http://www.powerball.com/pb_contact.asp
"Both annuity options are graduated." - Nothing on specifics, but some quick math (via the usamega site) shows it to be a 5% growth every payment.
Thanks WIZ, my plan was to hire you to figure this out on Thursday after I win on Wednesday !Quote: WizardYou would need to beat an interest rate of 3.54% to come out ahead taking the lump sum, before considering the income you'll pay on capital gains. Assuming you'll be in the 39.6% tax bracket, you'll need to beat 5.86%.
https://www.usamega.com/powerball-jackpot.asp
If you weren’t happy yesterday you won’t be happy tomorrow. It’s money. It’s not happiness.
If you were happy yesterday, you are going to be a lot happier tomorrow. It’s money. Life gets easier when you don’t have to worry about the bills.
21072009*sum(1.05^n*1.028^(29-n),n,0,29)
Invest 100%, lump sump:
868000000*1.028^29
I come up with 2.8% as the interest rate you have to beat, ignoring taxes. Considering 21 million is already 40x the maximum bracket, I think this is a safe assumption.
Edit: I'm completely ignoring capital gains.
Quote: JohnnyQThanks WIZ, my plan was to hire you to figure this out on Thursday after I win on Wednesday !
Wait, I didn't know the payments started low and ended high. My previous post, which I deleted, was based on equal payments. Let me redo this...
21072009*((sum(1.05^n*1.033^(29-n),n,0,29)-sum(1.05^n,n,0,29))*.8+sum(1.05^n,n,0,29))
If my previous one was wrong, then this one is wrong, but it really isn't that much different than a retirement calculation. I found the difference between the cumulative total and subtracted it by the sum of the cumulative annual payments... multiplied that by (1-CAPGAINS) then added back in the annual payments.
100% lump sum with cap gains:
868000000*((1.033^29-1)×0.8+1)
I come up with 3.3%. I put absolutely ZERO credence into the annuity option equation, but I'm pretty sure the lump sum one is right.
Edit: I have assumed tax rates will be equivalent and it is important to note that any money spent by either party in the first few years would have a similar effect on the outcome. For example, if the lump sum person went to Vegas and lost 50 million right off the bat, the future value would have an equivalent value as an annuity person who lost their first 50 million over the first few years.
LA TIMES Article
"With each $2 Powerball ticket purchased in California, about 80 cents goes toward education... The money is divided among K-12 schools and community colleges and universities".
Comparing that to Scratch-off tickets:
"But scratchers are more expensive to make. They require glossy print, thicker paper and material to cover numbers... Because of these expenses, less than a quarter of each dollar spent goes toward education". Ouch !
The article goes on to say:
"Powerball, Mega Millions and Super Lotto tickets, on the other hand, are cheap..... About 50 cents of every dollar goes toward the jackpot, leaving about 40 cents for education and the remaining for agency costs".
Let's also remember that the long term capital gains rate for those in the highest tax bracket is 20%.
That said, before considering taxes, I show you need to be able to beat an interest rate of 2.84% for the lump sum to be the better choice.
After considering long term capital gains, I should you need to beat 3.92%.
How many places would you let handle that kind of money. I would think splitting it up would be wise so you don't get taken. But if you split it up then you run the risk of some of it being taken.
Last question. Does the 3.92 stay the same if you blow 10 million in the first month. Less to invest would have to change the long term financials, no?
Quote: GWAELast question. Does the 3.92 stay the same if you blow 10 million in the first month. Less to invest would have to change the long term financials, no?
I was saying that if you achieved a constant interest rate, it would need to exceed 3.92%. If your rate of return went up and down like a roller coaster, like mine does, then things would be different.
I'm not one to give advice on what to invest in. My track record picking stocks is almost as bad as my golf swing.
Quote: WizardofnothingTalk about cash in a safety deposit box - I learned that the hard way- when I worked at the World Trade Center- there were two banks downstairs - citi and chase and they limited the amount of cash you could withdraw daily without notice from the teller so I kept a safety deposit box with 6 figures plus in it- hugeeeeeeeeee mistake
This sound like quite a story -- rivaling my misfortune of keeping money in Cyprus banks.
