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Ithaca, New York 14850
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Question Of The Month –April, 2009

Should I Rely On The Lottery Or Invest

For My Retirement?

Matt Bednar lives on Binghamton, New York’s West Side and buys lottery tickets at nearby Cavanaugh's Grocery & Delicatessen.

He estimates that he spends about $20 per week on $1 and $2 "scratch-off" games like Amazing 8's, and Wild Hearts, which offer smaller prizes than the marquee names, but promise instant results and better odds. A $2 ticket for Wild Hearts, for example, pays up to $25,000; the odds of winning the top prize are 1.5 million to 1.

Instead of spending about $20 a week for the scratch-off game, let’s suggest that Mike invest that $20 a week in the S&P 500 Index Fund in his 401(k) account. What could happen?

After 20 years, Mike would have about $75,000 in his investment account. After 30 years, Mike would have about $244,000 --- and after 40 years, he would have about ¾ of a million dollars --- $748,000.

But Mike and millions of other game players cannot resist the hype. Lottery games have become woven into the fabric of New Yorkers' daily lives, with brightly colored displays and flashing sales terminals in about 16,000 delicatessens, gas stations, corner stores and supermarkets across the state. Aggressive marketing campaigns also made catchphrases out of advertising slogans such as "You've got to be in it to win it" and "All you need is a dollar and a dream.”

By the way the New York Lotto jackpot has even larger odds to beat. A jackpot in January 2007 was $28.5 million; the odds of winning that on a $1 ticket are 22.5 million to 1.

What choice do you make--- a 1 in 1.5 million chance of winning or do you opt for the 1 in 22.5 million chance of winning? By the way, most state and national lotteries have from about 1 in 5 million to about 1 in 80 million odds of winning.

They say, "You have a better chance of being hit by lightning than wining the lottery." The fallacy of this argument is: "Who in their right mind would pay a buck for a chance to get hit by lightning?"