As crazy as this sounds, according to the Financial Planning Association 2006 Survey, 21% of those surveyed agree that winning the lottery is the most practical way to fund retirement. This number jumps to 38% for those making $25,000 or less per year (Note: $25,000 annual income breaks down to about $12 per hour if you worked 40 hours per week and 50 weeks per year).
I live in California and lottery tickets sales in this state seem to support these survey results. According to the California State Lottery 2010-2011 fiscal year-end report Californians spent $3.44 billion on lottery tickets which was an increase of 13% over prior year even though the population only grew by 1.2% during that same time frame.
What I found even more disturbing was only 55.4% of all the money generated from ticket sales went back to the players in the form of winnings (i.e. a payout ratio of 55.4%). Compare that number to the 75% legal minimum payout ratio for Las Vegas slot machines.
“Lose All the Weight You Want Simply By Taking This Pill/Powder/Shake/Etc”
What makes these diet programs, as well as state Lottery tickets, so easy to sell is they promise a potentially large reward while asking for very little change in the buyer’s behavior. This is quite different the “put down the donut and go to the gym” approach of losing weight or the “you need to cut back on your spending and save more money” approach to building a retirement account.
What Do You Believe In?
If you believe your best bet for saving for retirement is to spend your money on lottery tickets then do you tend to not focus your time, energy or money on other retirement building steps such as contributing to a 401k/IRA, saving more, spending less, etc?
If you believe the stock market is poised to either go up or down then how much energy will you focus on finding and reviewing evidence pointing to the contrary?
If you believe the stock market will provide you the best chance for a comfortable retirement then what percent of your money will you invest in bonds or vice versa?
Whatever investment strategy you have decided to follow please keep the fine print that is on all diet ads in mind “results may not be typical.”
*Editor’s Note* This is sad but I totally believe it. I’ve been known to buy a scratch off ticket from time to time for entertainment value. If you look on the back there are normally some horrendous odds printed somewhere on the ticket. It seems to be a 1 in 3 to 1 in 5 shot at winning anything (even just your money back) on the scratch off tickets in Florida.
Do you ever buy lottery tickets or scratch off tickets for entertainment? I hope you don’t buy them for investments!
About the Guest Poster: I am a small business owner who believes most Wall Street produced financial writings fall into one of two categories: propaganda or painfully dull. I am offering an alternative by creating educational and entertaining articles people can relate to. For more information please visit Your Wealth Effect.