If you play the lottery, your chances of winning are one in 13,983,816. Although these chances are slimmer than slim, thousands of Americans play the lottery on a daily basis. According to LendEDU’s 2018 Lottery Study, the average American will spend $223.04 a year on lottery tickets and seldom be a winner. If this is the case, why do we continue to test our odds?
The modern lottery system dates back to 1934 and has become a significant source of revenue for all the states that offer it. It has raised over $16.7 billion in profits and continues to rise.
Despite countless individuals testing their luck with the lottery in hopes of winning, many winners end up regretful of having been crowned the victor.
Don McNay, a financial consultant for lottery winners, states that many lottery winners “wind up unhappy or wind up broke.” According to the ticket delivery company Lotto Agent, 70 percent of winners end up bankrupt in seven years.
With that said, there is also the supposed ‘curse of the lottery’ where winners find themselves spending their fortunes or meeting tragic ends. Sienna Kossman, a personal finance writer, states that you might not want to win the lottery because “your friends will take advantage [of you], your relationship could fail, you’ll have an increased risk of bankruptcy, you might have to fight off a host of long-lost family members and you’ll be a target with a litany of lawsuits and scams.” Winners of the lottery have fallen victim to substance and drug abuse, fraud scams, depression, anxiety, murder and financial debt.
There are, of course, many advantages to winning the lottery. With the winnings one could become financially free and pay off any debts, mortgages or loans they may have, change their lifestyle, invest, travel and donate to charity.
Lotto Agent also states that “The more money you have, the more of the things you can choose from.” Thus, winning the lottery allows the winner to have more options that might have not been available before.
With winning the lottery also comes the inevitable cut of your fortune in taxes. Lottery winnings are taxed as if they were income, so the IRS taxes 39.6 percent of the money. The government also withholds 25 percent of the lottery money before it even gets to the winner. There are not only national taxes to be paid when having won the lottery but also local taxes. Depending on your state, winners may have to pay between three and nine percent in these taxes. How much you owe, however, depends on how much you have won and how you have chosen to receive that money. Lottery winners have the option of receiving a one-time cash payout or annual payments over the next 30 years. In addition, many financial experts suggest that winners take the one-time payout as tax bills may increase over the next 30 years.
Oct. 23 marked the second highest lottery in the United States with the Mega Millions at $1.537 billion. Although it was only $49 million away from the highest lottery so far (Powerball at 1.586 billion on Jan. 13, 2016), it is still a tremendous amount of money. May the winner be wise with their finances and not fall victim to the supposed “curse of the lottery.”
For more information, visit lendedu.com/blog/how-much-do-americans-spend-on-the-lottery
