Jackpot or Not

Published 1/21/2025

 

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Drew Thomas  0:04  
Fast fact, according to the most recent data from the US Census Bureau, Americans spent $97.8 billion on lottery tickets in 2022. I'm Drew Thomas, and you're listening to Bank Chats.

Drew Thomas  0:44  
Welcome to a new year. Well, we already, I mean, we've already done it 2 Cents this year, but this is our first long-form podcast, I guess you could say for the year. So, it's 2025.

Jeff Matevish  0:53  
Yeah, and you got me back.

Drew Thomas  0:55  
I'm happy about that, because I, honestly, I couldn't do this by myself. I can talk a lot, but it's, it's much better to talk with somebody than, than just into the air.

Jeff Matevish  1:05  
I'm a good listener, too.

Drew Thomas  1:09  
Yeah, so how was your I mean, New Year's good? Everything happy?

Jeff Matevish  1:11  
Oh, yeah. Always good. Awesome. How about you guys?

Drew Thomas  1:14  
Good. Yeah, it was nice. It was nice recently to have a weekend where there was nothing going on. Yes as much as I love the holidays, sometimes it's nice to have a weekend where you don't have a bunch of things happening. And, yeah, January is usually pretty good for that, because the weather around here is very cold. It's frigid right now, where, as we're recording this.

Jeff Matevish  1:33  
Oh yeah, we're supposed to get even more snow, five inches again, or something like that.

Drew Thomas  1:37  
Yeah, yeah. Theoretically, yeah. And it's like single digits overnight, wind chills, negative, yeah, of course, that's most of the country right now, again, as we're recording this in January. But yeah. So, I was thinking about things to talk about that we haven't really talked about. And this may not necessarily directly associate with banks specifically, but it does. We try to do financial education. That's really why we're here, right? And I was thinking about some of this stuff, and recently, in December of last year, there was a one of those multi-state lotteries that was up over a billion dollars. And it got me thinking about people that play the lottery, and whether or not lotteries are really a good idea from a financial perspective, yeah, yeah, right.

Jeff Matevish  2:22  
Sure, did you play that, that lottery?

Drew Thomas  2:25  
Yeah.

Jeff Matevish  2:26  
I, me too.

Drew Thomas  2:27  
I'm still here. Yeah, you're still talking so that, yeah, yeah, little foreshadowing didn't win. Yeah, so, so I thought it might be a good idea to talk about some, some talk about the lottery in a couple of different sort of points of view. Yeah. And now, just to, just as a preamble to this, we're talking about United States lotteries, right? So, if you're listening to this and you're from a different country, some of this may or may not necessarily apply to you, but I would imagine that 99.999% of our listeners are from the United States. So, yeah, so. And I also want to stress at the very beginning here that neither myself or Jeff are endorsing playing the lottery. We're not trying to sell you on this. In fact, by the time this is all said and done, you'll probably find that we're doing the opposite. We're not necessarily trying to convince you one way or the other. We're just having a discussion about what they are and how they work. Yeah, so that being said from a legal perspective, what's a lottery?

Jeff Matevish  3:24  
So, there's different ways of playing the lottery. There's the big games, like where you pay $1 or $2 and you get to pick your numbers, or you get to let the machine pick your numbers. And once a week, or twice a week, you know, they, they go through those numbers and if they match, then you win. The other lotteries are like, scratch off tickets. Here in Pennsylvania, scratch offs are a big thing. There's rip lottery. I mean, there's lots of different lotteries.

Drew Thomas  3:49  
Yeah, absolutely. I mean, and really, you know, one of the things is the definition that I found of a lottery is, and this is literally the definition that I was pulled by, a lottery is a low odds game where winners are selected by random drawing. Okay, right. So that's, that's a lottery. Typically, they're government sanctioned, they're state run, you know. And most legal lotteries, and I stress legal lotteries, are administered by state or federal governments, because there's, there's a history with lotteries in this country, and predating the, predating the country itself, where lotteries were a little rigged and it was bad, yeah, so, but, but there's other types of lotteries. I mean, there's, there's non money lotteries, like, you know, you'll see, like, you know, two football teams have identical bad records. So, they you know, they do a random drawing, or a coin flip or something, to see who's the first in the draft, okay, or something like that. That's technically a lottery.

Jeff Matevish  4:42  
Yes, yes, anything chance, yeah.

Drew Thomas  4:44  
Right, right, yeah. So, history of lotteries, you know, we're not going to go back to ancient Rome. I mean, lotteries go back literally 1000s of years, right? Okay, but lotteries were pretty commonplace in colonial America. Fell out of favor in the 1800s due to some religious and moral reasons. And there, like I said, there were some scandals where people were cheating and rigging the lotteries and stuff so, but so they kind of fell out of favor in the 1800s and then, really up until the mid-1900s the first modern lottery, as we think of them today, as like state lotteries, was conducted by the government in the US. State was New Hampshire in 1964. So, they're really not as old as you might think. No, at least it wasn't as old as I thought.

Jeff Matevish  5:25  
No, huh, definitely not.

Drew Thomas  5:26  
So, yeah, so we're, so we're in Pennsylvania, yeah, right. We have, we have a state lottery that benefits older Pennsylvania's somehow, somehow. And I did not know this. Do you know that there are 45 states where lotteries are legal? Do you know the five where they are not?

Jeff Matevish  5:41  
Ooh, no, um, are they? Are they weird? Like, the ones that you wouldn't think?

Drew Thomas  5:48  
There's one in particular that I wouldn't think.

Jeff Matevish  5:50  
Okay, like Arkansas or Alabama or something.

Drew Thomas  5:55  
Alabama's one.

Jeff Matevish  5:56  
Alabama's one.

Drew Thomas  5:58  
If we're going alphabetically, okay.

Jeff Matevish  5:59  
I learned, I learned them alphabetically in elementary school. We had a song that we sung, so, you know.

Drew Thomas  5:59  
Was it, was it the Animaniacs one?

Jeff Matevish  6:03  
No, it was Alabama, Alaska, Arizona, Arkansas.

Drew Thomas  6:09  
Um, okay, so the five where it's illegal, Alabama, Alabama is one, okay. Alaska, huh, Hawaii. Now here's the one that gets me. Nevada.

Jeff Matevish  6:21  
Nevada? Where Sin City, the home of Sin City.

Drew Thomas  6:24  
Nevada does not allow a legal lottery. That's, that's crazy. And then the one that I would probably most expect is Utah. Okay, right? So, so those are the five where there is no lottery.

Jeff Matevish  6:35  
No explanation, just they're not allowed?

Drew Thomas  6:37  
They just don't, yeah, they just never legalized them in those five states.

Jeff Matevish  6:41  
So, they can't participate in in, like, the big lotteries either, like.

Drew Thomas  6:44  
They could not. Oh, now does that mean that people don't drive across the border?

Jeff Matevish  6:49  
I mean, no, you wouldn't be able to, because if you have to be a resident in a state that it's legal.

Drew Thomas  6:55  
I guess, yeah, yeah, I don't know. Maybe residency does matter, that's a good point.

Jeff Matevish  6:59  
Like, we can't go down to like South Carolina and get a scratch off ticket and then cash it back in in Pennsylvania, so.

Drew Thomas  7:06  
Right, yeah, although couldn't you cash it in if you were still in South Carolina?

Jeff Matevish  7:06  
I don't know if you have to be resident.

Drew Thomas  7:11  
I don't know. That's a good question. Yeah, anybody who knows can put it in the comments. Yeah, maybe, you know, maybe you're from South Carolina or some of the other states. I don't know. That's a good question. Yeah, yeah. Now, if you're, if it's one of these multi-state lotteries, like the, like the Mega Millions or Powerball, I guess you can cash to any state that participates I guess you can get your money. Okay, but we'll get to that, okay, yeah, but jumping ahead, well, no, I mean, that's it, you know, it's, it's, it's, again, it's, it's that little tease, yeah, okay, go to dangle the carrot. Gotcha. Yeah, so, so the question, I guess, is those five states don't allow lotteries. Why do the other 45 allow lotteries? Like, what's why? I mean, we kind of talked about it, like, the benefits, older Pennsylvania's part, right?

Jeff Matevish  7:52  
Yeah, so in Pennsylvania, it benefits, older Pennsylvania's, in other states, is it different? Like...

Drew Thomas  7:57  
For the, yeah, I mean, yes and no. I mean, the whole point, I think, behind the lotteries, at least in the New Hampshire one, which then set the precedent for the rest of the country, or the rest of the states that eventually created lotteries, was, was funding. Yeah, right. So, it's pretty easy to go out to your population and say, hey, you give me $1 you have a chance at $500 but half of your dollar actually goes to the state to pay for, you know, whatever. Okay, so I went and looked it up, because, again, we are in Pennsylvania, so I went and looked it up. Now, according to the PA lottery's website, so I'm gonna put attribution there, because this is, you know, the pot explaining itself. Okay, right? But the PA lottery was established by law in 1971 the first ticket was sold in 1972 so we're talking seven, eight years after the very first ones in New Hampshire. So, this is pretty recent, fast follow, yeah, yeah. My parents were alive and in their 20s by the time the PA lottery was established, which I wouldn't have thought, yeah. And again, according to the PA lottery website, it said, the State Lottery has contributed since 1972 more than $36.2 billion to programs that include property tax and rent rebates, free and reduced fare transportation services, low-cost prescription programs, care services and local services provided by 52 area agencies on aging for elderly Pennsylvanians. So, so it's so, they're not you, they're not cutting your grandma a check.

Jeff Matevish  9:27  
Right, right. Rent rebate was, I didn't know that's, that's where that came from, actually, yeah.

Drew Thomas  9:33  
Now, you could argue that they would probably be doing that anyway, but that funding would be coming from somewhere else. So, yeah, you know, the question is, is the I mean, I guess the lottery is paying for it, but, or is it just offsetting money that could be spent elsewhere, I guess is the question. Like, does it go into a general, I guess the question is, does it go into a general fund and then it's just, and they're distributed all over different organizations? And, yeah, yeah, I don't know, but so keep in mind, the states must pay out the prize money first and cover all operating and advertising costs before getting the rest to keep as government revenue. Research says about 60% of the revenue from state lotteries goes directly to the winner. Okay, so the majority of these, I mean, it's really just turning it and handing it back out to somebody who's, who's won the lottery, I guess. Okay, so, yeah. So, that's what Pennsylvania does with their, with their winnings. But I guess other states do other stuff. A lot of them, when I was doing the research, a lot of them put their money back into, like education, as a general rule, like they fund, like their public schools and things like that with it.

Jeff Matevish  10:32  
I'd say that that's a good marketing tactic, you know, to tell people that it goes to education and maybe they'll buy more. But I, I think everybody that plays, you know, they don't need to know what it goes to. They're just gonna play. That was a, that was a cool statistic I found. So, it was, it was talking about, you know, the people that play the lottery, yeah. So, a small minority of heavy players provide most of the lottery revenue. In Minnesota, 20% of lottery players account for 71% of lottery receipts. Well, in Pennsylvania, 29% of players account for 79% of lottery revenue. That's 29% of the people that are playing account for 79% of the revenue that is generated by the lottery.

Drew Thomas  11:12  
So, the question is, who are these people?

Jeff Matevish  11:13  
Yeah, right, and why are they playing?

Drew Thomas  11:15  
Are these well-off people or are these not well off people?

Jeff Matevish  11:19  
Well, and that, so another study found that low-income families make up the, a disproportionate share of the lottery players. Yeah? So, usually it's people that are dreaming big about winning, and, you know, may never hit it, yeah? Statistically, probably not, but.

Drew Thomas  11:36  
See, I think that's what, I think that's what you're playing for in a lot of where a lot of people are playing, yeah, like a lot of people are playing for the dream. Oh, yeah, right. It's, it's fun to sit around and say, hey, you know, if I happen to win this thing tonight, I do it. What would I, what would I do?

Jeff Matevish  11:36  
I mean not that I play the lottery very often, but, yeah, every time I buy a ticket, it's, you know, okay, what would I do tomorrow? What was, what was the first, what's the first thing I would do? You know, what I would I quit my job? Would I, here's another thing that we haven't talked about, if you did happen to win, what would you do with the money if, if a bank is only ensuring you $250,000 if the bank is FDIC insured, do you split that up? Do you invest it in different banks? Yeah, yeah.

Drew Thomas  12:20  
Let's talk about the odds of winning. Okay. Because I think that's what a lot of people get hung up on, right? So, we don't understand the, okay, the state lotteries, they benefit people. And the multi-state lotteries, I guess I don't know. I would imagine that they probably kick back into the states that participate something, because it can't all go to one state. So, I guess I don't know if it's a proportional thing, like if so many people from Pennsylvania play the Mega Millions, does, does Pennsylvania get a kickback or something? I don't know.

Jeff Matevish  12:46  
I don't know, yeah, kind of like, like, if you bought a ticket at a gas station and you won, you know, the gas station gets a kickback, same thing, yeah.

Drew Thomas  12:53  
Okay, yeah. So, I don't know if it would be something like that, but you found some statistics on odds of winning, and so did I Okay, yeah. And I think that the, we could, we could probably go through a couple of these, just because I think it's important to illustrate to people that this is not a strategic investment. No. To your point that, you know, lower income people and families tend to be disproportionately playing the lottery, right? Is it really a way to get out of debt, you know, or are you just putting yourself back into even deeper debt? Right? Right, right. Statistically speaking, it's the latter. You're putting yourself deeper into debt. Yeah, you know for the most part, yeah, so...

Jeff Matevish  12:58  
And the higher the number, that doesn't mean that you have a better chance of winning.

Drew Thomas  13:28  
You mean the jack, the jackpot?

Jeff Matevish  13:31  
Yeah. I mean, we all play, if you're gonna play, we all play like, if the jackpots, you know, hundreds of millions of dollars, but if it's, you know, oh, $10 million, $20 million I'm not gonna play.

Drew Thomas  13:49  
Yeah, I know that's the, that is ridiculous, isn't it? Like, oh, oh, it's only $20 million.

Jeff Matevish  13:55  
Right, right, after taxes, I'm not gonna get, you know, blah, blah, blah.

Drew Thomas  13:59  
Yeah, that's a good point, but so, so you're right the amount of money, it's not like some lotteries, where the, the amount of money is, is, your odds are fixed, right, right? No matter how much money is up for grabs, your odds are fixed. Right. So, you're not getting a percentage of the winnings. You're, you're either winning or you're not. Now, to be fair, most of those lotteries, you can win smaller prizes, right? We're talking about winning the jackpot when we talk about these odds. But you said that, what's the, what did you say the odds are of winning even, even just the the smallest prize on the...

Jeff Matevish  14:30  
You have like a 4, 4.9 or something, percent chance of winning something. And, yeah, that like for the Powerball, that's $4 is the, the minimum.

Drew Thomas  14:39  
So, you're basically doubling your money right on that one number. Right. But also...

Jeff Matevish  14:41  
If you do win, you only have an 11, 11% chance of winning anything over $5 or something like that. Like it, it's it so small.

Drew Thomas  14:54  
And so, and so many people, when they play stuff like the Powerball or the Mega Millions, they're not buying just one ticket. No. So, you're buying, you know, that's, that's winning $4 on a $2 ticket, right.

Jeff Matevish  15:05  
Now that does increase your odds, but it's so insignificant.

Drew Thomas  15:09  
What buying more numbers, right? Right? Oh, yeah, yeah. Well, I say this all the time, and we'll get into odds here, I think. But I say this all the time, if you bought, like, when these jackpots inevitably hit, you know, 70 750 million, 800 million, a billion dollars. Yeah, it hits the news. It makes national news. Everybody talks about how everybody's playing the lottery, right? Oh, yeah. And you see people that are buying just a crazy number of tickets. And then inevitably, what happens is, usually the next morning, you wake up and nobody won, yeah, right, and the jackpot goes even higher. And I say if you personally had bought every single ticket that was available for sale that night before, you still would have lost. Yeah, yeah. So, buying five numbers versus one number does not make a difference.

Jeff Matevish  15:58  
Wasn't there, there was a company years ago, it was, it was some big tech company that bought its employees one ticket for, for a Powerball.

Drew Thomas  16:06  
Oh, really, I don't think I remember that.

Jeff Matevish  16:07  
It was, like, a decade ago, probably almost, and, yeah, they bought one ticket for each employee. And it was, it came out to, like, I don't know, a million dollars in tickets. Like it was a big tech company, yeah, yeah. Still lost.

Drew Thomas  16:19  
And so, everybody lost. So, that's the thing, you're right. I mean, you got, you got to be realistic about this, you know. So, so let's talk odds, right? So, yeah, so the Mega Millions jackpot odds, and again, we're talking the grand prize, the jackpot prize, right? Okay, the odds are one in 302,575,350.

Jeff Matevish  16:20  
So, there's a chance.

Drew Thomas  16:40  
So, you're saying there's a chance? Nice reference, yeah. The Powerball odds are slightly better. The Powerball jackpot odds are one in 292,201,338. Wow. So, I know you found some examples. Yeah, trying to wrap your brain around numbers that big is just really difficult.

Jeff Matevish  17:08  
Yeah, so, so, what do you got? So, the one I found was, okay, this is from Investopedia, for reference. So, it says assumed you went to the largest stadium in the world, which happens to be in North Korea. Okay, imagine the stadium was filled.

Drew Thomas  17:23  
How do they know? You can't see anything in North Korea. No, go ahead. I'm sorry, I'm sorry, allegedly, go ahead.

Jeff Matevish  17:29  
Okay, so imagine the stadium was filled, to capacity everyone in that, that stadium was entered into a lottery. Okay, that's, you would have one in 150,000 chance of winning that lottery.

Drew Thomas  17:42  
So, the stadium seats 150,000 people. Yes. Okay.

Jeff Matevish  17:45  
Okay. So, to compare that to the Powerball, you would have to fill that stadium 1,947 more times to have the same odds winning the Powerball, which is insane.

Drew Thomas  17:58  
That is insane, so I have a stadium related version as well. Okay, so imagine walking into an NFL sized stadium, okay, you can pick your, pick your poison, right? And you, you are handed a penny, okay? And you are asked to walk into the stadium and place that penny somewhere on the field. Okay, okay. Now, once you've done that, you come back out of the stadium and you and, okay, I have asked you do this. You have gone inside, okay, and placed a penny somewhere on the field. Sure. You come back out of the stadium, and you say to me, Drew, I'm going to blindfold you. I'm going to send you into the stadium blindfolded with a penny. Okay? And you have to place your penny directly on top of my penny. Okay, okay, I have 15 times more likelihood of doing that than winning the power. Wow, wow. Yeah, it's, I mean, some of these odds are just, they're just, they're just insane. Yeah, they're just insane. The other one that I, well do,

Jeff Matevish  18:00  
I have a couple more random ones, yeah. Give me another one. Yeah. To put it in perspective, you have a one in 186,978 chance of death or injury from a lightning strike in a given year, compared to the Powerball drawing of one in 292.2 million.

Drew Thomas  19:23  
So, there's a better chance of being struck by lightning, what like 80 times? Yeah. Is that right? Yeah.

Jeff Matevish  19:29  
And those chances go up even higher for, you know, dying from a hornet or wasp sting or cataclysmic storm or, yeah.

Drew Thomas  19:41  
Yeah, I, this was another one that I thought kind of put some perspective on it for me. Imagine that I gave you a calendar, okay, that included the next 570 years on it. Wow. Okay, okay, and you have to pick, and I'm gonna choose. I'm gonna choose, not just a year, not just a month, not just a day.

Jeff Matevish  20:02  
An hour.

Drew Thomas  20:03  
I'm going to choose a minute, a minute, wow. And then you have to choose the same minute that I do, wow. That's, that's the equivalent of winning the Mega Millions or the Power Ball. So, I think the message I think we're sending here is this can be fun to dream, yeah, and inevitably, what's the argument?

Jeff Matevish  20:25  
It's only a couple bucks. I might win.

Drew Thomas  20:29  
That, but, but what's the argument everybody throws out there? Somebody has to win. Yeah? Well, technically, but I mean eventually, somebody eventually, yes, right? Yeah, but it's somebody in a country of 300 million people, and, you know, I mean, like, eventually, like, you know. So, I think the message we're trying to throw out there is that, or that I'm trying to throw out there, I guess, is that the lottery is not, is not a financial, a sound financial investment. Now, if you are, you know, if you are, as you point out, if you are sort of down on your luck right now, you're not, you're not making a ton of money, if your family's a little bit behind on bills, things like that, the likelihood that your investment in a lottery ticket is going to be your ticket out of there, out of that situation, you're, you're far more further ahead of the game to take that money and put it into a savings account. Oh yeah, or some others kind of investment vehicle with your bank or your or a trusted financial advisor, then you are giving it to, to a lottery.

Jeff Matevish  21:30  
Yeah, I had some numbers on that to add to that. So, spending $5 per week on lottery ticket adds up to $260 a year. Okay, over 20 years, a typical long-term investment horizon for stocks and bonds, the total spend on lottery tickets would be $5,200. Putting $260 per year into stocks and assuming annual return of 7% would give you $11,015 after 20 years. But if you just spent the money on lottery tickets, you'd be left with whatever you'd won on the prize, which is probably statistically low, negligible. Yeah, right, but you know, to play it even safer, so consider someone who contributes $250 annually to an IRA instead of spending money on lottery ticket after 30 years, and assuming a conservative average annual return of 4% the account would be worth $15,392 after 40 years, that number would jump up to more than $25,000.

Drew Thomas  22:23  
Right. So, yeah, so I think the, the other thing here, and what I'm, what I'm hearing from that, is people don't want to wait the time. Yeah. I mean, that's what I want it down to. I want it now, right? And the lottery gives you that ability to think, well, I could have this Tuesday, Yeah, but you're just, realistically speaking, you are far better, and that's a pretty safe investment, an IRA, right? I mean, an IRA is an incredibly safe investment, right. And, you know, and therefore your rate of return is probably less than you would get if you were to go with some other types of investments that are conceivably out there, sure. That, being said, much like a lottery, investments are not guaranteed.

Jeff Matevish  22:58  
Right they're not.

Drew Thomas  22:59  
Right, so you could theoretically lose money on some of those things, but you are statistically less likely to lose money on a traditional investment, like an IRA than you are on a lottery, right? I mean, I mean significant, but it is fun to dream. I mean, and I think that's what it comes down to, yeah, you know, that's, that's what they're selling. They're selling the dream of being able to buy that ticket, and between now and whatever time that night it the, the lottery is drawn, you know, you can imagine a world where you get to read the same numbers on your ticket as what's on the TV screen and, and that's, that's what you're, that's what you're buying. You're buying that dream. You know, yeah.

Jeff Matevish  23:38  
I totally agree, yeah.

Drew Thomas  23:39  
What would you do if you just out of curiosity, what would you do if you hit the lottery? Oh, now I'm talking like a big lottery. I'm not talking like the daily number where you get 500 bucks. You can say you'd quit your job. That's okay.

Jeff Matevish  23:50  
No, I mean I, I wouldn't care about my job as much. I wouldn't quit. I couldn't do nothing. But, you know, we had talked about this off, off mic. Mic, yeah, the other day, and you had said that you would, you would do volunteer work and stuff like that, and that's probably what I would do as well. But would you okay, so here's, here's another question along those lines, would you remain anonymous? There are some states that allow you some anonymity. What would you do with the money? Right?

Drew Thomas  24:20  
I would really try to stay as anonymous as I possibly could. Okay. I really would, and not just because of, first of all, I don't need the fame like some people want the cameras and the streamers and the balloons and the fawning and all that. I really don't. I couldn't care less about any of that stuff, but I've seen what has happened to some people that have won big lotteries like that, that have made themselves known and been very public about it. And man, every person comes out of the woodwork asking for money. I mean, oh yes, yes, you know. And cousins you didn't know existed, friends from high school that you didn't like, yeah, just everything. It's you know, and complete strangers that think that, well, you have all this money, why can't you give me some? I mean, it's just, it's a dangerous situation, I think.

Jeff Matevish  25:07  
Well, and taking a lump sum versus an annuity that, that yeah, plays into that as well, like, if you take an annuity, then you don't have necessarily that money that people were asking for. And that kind of, yeah, can tame that, you know that wants and needs from everybody else around you a little bit.

Drew Thomas  25:24  
Yeah. So, so, all right, so this, this leads very nicely into this. So, let's, let's pretend for just a minute that you have beaten the incredible odds against you and, and won.

Jeff Matevish  25:37  
No Drew, you can't have any money.

Drew Thomas  25:41  
Fair enough. All right. So, what, what should you do? So, the, I was looking and according to Forbes, okay, right, so these are, these are people better than me and Jeff, right? According to Forbes, you should first of all sign your ticket and keep it in a very safe place. I mean, because if you don't sign it and claim it, you haven't won anything, right? So, you have to sign the ticket, put it in a safe place and get ready to claim it with, with whoever your lottery officials are. Yeah, right. The next thing Forbes says is be very choosy about who you tell. They also recommend obtaining the services of a reputable estate planning lawyer as well as an financial advisor that has experience working with high net worth families. Okay, so again, you want to try to protect this. I mean, you don't, and most people, myself included, are probably not, we just have no experience dealing with that amount of money. Yeah, just like you know, trying to wrap your brain around the odds of winning, trying to wrap your brain around actually having a billion dollars in your bank account is just, I don't know what you do with that. Yeah, you know, Elon Musk might know, but I don't. Some of these people, some of these billionaires, might know, but I don't, right. So, so there's that. Then it says this, to your point, decide whether to take the lump sum or annuity. So, I don't know which one would be better. I guess it depends on your age.

Jeff Matevish  27:05  
Yeah, your age, yeah. I mean, you're, you're, how much you win. I mean, yeah, that's gonna play into your, your taxing on your, your because it's gonna be income tax.

Drew Thomas  27:16  
yeah, yeah. So that's, so that's a good point. So, you have to remember, too that this is not just free money. I mean, yes, you've won the lottery, and it is free to you, but it's taxed as income in every state and at the federal level, right? The states that it's legal, obviously. So, you're going to pay state income tax, you're going to pay federal income tax, and you're going to pay it at a rate that is much higher than what you're probably used to. Oh, yeah, if you know, if you're making $50,000 a year, and you're paying, uh, whatever your tax bracket is, and then suddenly you have a billion dollars in your account, your tax bracket just got a lot higher, yeah, so...

Jeff Matevish  27:51  
But you can decrease that a little bit if you take an annuity versus lump sum, yeah, right?

Drew Thomas  27:54  
True. Yeah. Now the question becomes, though, the annuity, I don't know how that works, so, like, I guess it would be one of those things where, like, if you will, use a billion dollars, because it's a nice round number, and a billion dollars, it when they when they list those jackpots in the media, it is the annuity that they're talking about. They're right, not talking about the lump sum, right? So, a billion dollars in an annuity might only be $500-$600 million, if you get the lump sum. Yeah, right, yeah. So, you're potentially leaving what $400 million, a lot of money on the table. Yeah, right. But the plus side of that is you can't spend it all at once. Can't spend it all at once. Yeah, right. So, you're sort of relying on the government to sort of spoon feed your money to you.

Jeff Matevish  27:54  
You're protecting yourself from yourself.

Drew Thomas  28:25  
Yeah, yeah. You know, on the other hand, if you do get the lump sum, you could and which, which, believe it or not, a lot of people do who, who I've read, who do win the lottery. A lot of people do this. They do find a good estate planning lawyer. They do find a good financial advisor. And if you invest that money, you could potentially make way more, yeah, because if you're not, if you're not spending it foolishly, and you're, you're putting $500 million into different investments, you know, what did you say the annual, what did you say the, the average return is on the stock market, like 7% on average?

Jeff Matevish  29:20  
Seven on average.

Drew Thomas  29:22  
Some years less, some years more, right, on average. So, if you're making 7% on, on $500 million you're, you're, you're gonna be able to probably live just on what you earn. Yeah, you don't even have to touch the original $500 million, if you don't want to, sure. So, I don't know. I guess it would depend. And then too, I mean, honestly, I don't know how annuities work. Like, can you transfer that?

Jeff Matevish  29:43  
So, usually when, like, at least for like, the big, the big games, the Powerball and Mega Millions, if you would pass away and you had an annuity, that money would be converted to one lump sum to your heir. Okay, so whoever is below you. So, the people that are they're taking one lump sum, a lot of times its they don't have family, or they don't have someone that they want to, you know, leave that money to, you know, after they pass.

Drew Thomas  30:10  
Okay, yeah, so the annuity theoretically would go to like, my wife, or right kids or something like that, right? Depending on your family, sometimes that's not the greatest. Sometimes you don't want to do that. I mean, that's why there's trust, that's why trust companies exist and stuff and like trust departments and stuff, because, you know, sometimes the kids don't understand fully what it took to earn that money in the first place, and so they, they spend it. Yeah.

Jeff Matevish  30:35  
But yeah, I guess there's, there's advantages to both, yeah, a lump sum and annuity, and your, your financial advisor would know a lot better than you or I.

Drew Thomas  30:42  
And then, as you already pointed out, plan on paying a bunch of income taxes. And then the last thing that Forbes recommended was just pace yourself on spending. You don't need to rush out and buy three, $200 million homes, right? Because there are costs, and we've talked about this in other episodes of the podcast, there are costs associated with things that you don't always think of, sure, you know. So, you go out and you buy yourself a $200 million house. Now you've got to pay taxes on it, right, property taxes, and you got to maintain it. Yeah, you have to pay insurance on it. You probably have a house that big, you probably have to pay staff to keep up with it, because you're probably not doing it, you know, not a DIY deal when you've got a, you know, 30-bedroom mansion or something.

Jeff Matevish  31:29  
Yeah. And if you didn't remain anonymous, you got to pay for security. And, yeah. I mean, not that, not that...

Drew Thomas  31:36  
If you, don't remain anonymous, you still want security.

Jeff Matevish  31:38  
And not that, not that you have to, but I mean, people get a little upset if you don't donate some of your money. Sure. I mean...

Drew Thomas  31:38  
Yeah, and well, and they do say that that's probably the second biggest thing that most people do when they hit big on the lottery is, they donate, they donate to churches, they donate to charities, right? Which gives you hope for humanity that most people do want to give back a little bit, right. But, yeah, there's, there's costs associated with all that stuff that you don't always think about. You're like, oh, I'm gonna buy a Maserati. Okay, you gotta put gas in it. You gotta insure it. You gotta garage it. And, I mean, what are you gonna do with it? You know, how many times you gonna drive it? Yeah. So, be, be careful and thoughtful about how you spend your money. Your money's not going anywhere, you know, think about it before you go and spend whatever you're gonna spend. Yeah. You know, most of us have dreamt about it too, but I don't know that most people dream about, man, if I hit the lottery, I'm gonna get myself a lawyer. Oh, yeah, you know.

Jeff Matevish  32:32  
It's not, how am I gonna get my ducks in a line? Yeah, you know.

Drew Thomas  32:36  
What estate planning service am I going to hire? You know. But those are the things you really should be thinking, oh, if you, if you do happen to beat the odds and win, yeah, you know. One final thing that I want to sort of touch on, and we've touched on this with the guys from Saint Francis and different fraud stuff and identity theft and so forth, is when it comes to lotteries, lotteries are also used quite a bit as bait for fraud. They really are. And so please keep in mind, like, first of all, you can't win a lottery you never entered. Yeah, you know, if you get an email or a text message or a phone call or a letter in the mail saying you've won whatever lottery and you never entered any such lottery, you didn't win.

Jeff Matevish  33:17  
Yes, that's social engineering at its finest, yeah, yeah.

Drew Thomas  33:21  
Precisely. The second thing is, winning lotteries from another country, you can't, right? So, if you're not a citizen of the UK, you cannot win a lottery based in the UK. So, again, if you get a phone call, a text message, a letter, whatever, saying, hey, you've won some lottery in the UK. No, you didn't.

Jeff Matevish  33:40  
That scammer got your location incorrect.

Drew Thomas  33:42  
Yeah, please don't give out your information and all that stuff thinking you won such, such a thing, right. And then you know, going back to that whole telling as few people as possible that you're a winner, I think that you know, when it comes to fraud, I guarantee you that lottery winners have to experience a level of fraud that you and I could only, I wouldn't say dream of but nightmare of, oh yeah, that's, if that's a verb, because once your name's out there and people know you have money, they're going to come at you, you know, and they're going to try to swindle it out of you any way they can. So, you've got to be so, so careful, but, but particularly about just not falling for lotteries that you didn't enter or didn't win, don't, don't fall for it. You said something earlier that made me you said, if it wasn't, what did you say if...

Jeff Matevish  34:27  
Yeah, you wouldn't click a link for $5 why would you click a link for $5 million knowing that you didn't enter a lottery.

Drew Thomas  34:27  
Yeah, yeah, and knowing that you're gonna win less than anything they put out. If it said $5, you're not gonna win $5 so you might as well not even, yeah, don't fall for it. Yeah. You know, look, I, I, I understand the appeal of wanting to play the lottery. I totally do. And I'm not saying I never have, because I totally have bought tickets for the lottery, but I think that...

Jeff Matevish  34:52  
It does go to a, to a good cause, for the most part.

Drew Thomas  34:55  
Some of it does, yeah, at least. But I think the, the important thing is to, to make sure that, just like pacing yourself if you happen to win, I think just understanding that it is a game, it's a game you're not likely to win. If you keep your risk reward low, then sure, have fun with it. You know, as long as it's a legal lottery, if it's your state lottery, if it's a multi-state lottery in the United States or something, and it's legal to play and you throw $2 at it a week, you know, chances are, and me, I, there was a time in my life when I couldn't have afforded $2 per week. But chances are, you're probably, that's probably not going to be what breaks your budget, right? Throwing and $2 to win a billion, that's a good risk reward ratio. Yeah, right. Don't get suckered into buying 500 tickets, 1,000 tickets, 10,000 tickets, yeah, whatever it is, like, you know, you see...

Jeff Matevish  35:48  
Don't let it lead to something worse.

Drew Thomas  35:49  
Yeah, because you're not statistically, just not gonna win, right. It's not gonna pay off for you, even, even you know, you see about a lot of times you see in workplaces, they'll, they'll do a lottery pool or something like that, you know. And the idea being, you're all paying for it, you know, and you split. I mean, that's a whole other legal thing though, you know, to think about, like, how you gonna make sure that everybody that's on board all wants the lump sum, all is gonna be willing, to split it evenly, that's true.

Jeff Matevish  35:49  
That's true, yeah, you know, I used to play that at my last job. And, yeah, yeah, I never thought of that, yeah.

Drew Thomas  36:06  
I mean, there's, there's that kind of thought too where you got to think, okay, well, I mean, it'd be great problem to have, I guess.

Jeff Matevish  36:29  
I guess we just assumed we weren't going to win. So, yeah, don't worry about it. Worry about when it comes up, yeah, yeah.

Drew Thomas  36:34  
Yeah, but, but you have that thought, you know, but even in that, don't, don't let somebody at work coax you into like, oh, we're all throwing 100 bucks in or something like that. If you can't afford it, then just say no, yeah, right, because that $100 isn't statistically any more likely to win you that prize than if you went and bought your own $2 ticket, right? I mean, that's what it comes down to, you know. All right.

Jeff Matevish  36:57  
That was, that was a good one.

Drew Thomas  36:59  
I think that was pretty decent, yeah.

Jeff Matevish  37:00  
Not gonna go play the lottery tonight, though.

Drew Thomas  37:02  
Yeah, I don't know. I might. I don't want to have to edit this.

Jeff Matevish  37:07  
All right, maybe I'll see you tomorrow.

Drew Thomas  37:08  
You always do the editing anyway. I win the lottery every day, on that one. Yeah, so what was the last thing you said?

Jeff Matevish  37:14  
This article sums it up really, really nicely, and it said, if you really care about maximizing your wealth, the only winning move is not to play. So, I think we can end up with that.

Drew Thomas  37:24  
I agree. Thanks, Jeff.

Jeff Matevish  37:27  
Thanks, Drew.

Drew Thomas  37:36  
This podcast focuses on having valuable conversations on various topics related to banking and financial health. The podcast is grounded in having open conversations with professionals and experts with the goal of helping to take some of the mystery out of financial and related topics, as learning about financial products and services can help you make more informed financial decisions. Please keep in mind that the information contained within this podcast and any resources available for download from our website or other resources relating to Bank Chats is not intended and should not be understood or interpreted to be financial advice. The host, guests, and production staff of Bank Chats expressly recommend that you seek advice from a trusted financial professional before making financial decisions. The host of Bank Chats is not an attorney, accountant, or financial advisor, and the program is simply intended as one source of information. The podcast is not a substitute for a financial professional who is aware of the facts and circumstances of your individual situation. There's an old joke about a man who is asked what he would do with his life if he won the lottery, and he responds by saying he'd sit on the beach all day doing nothing. The punchline is that it doesn't cost anything to sit on the beach all day doing nothing, but it's no joke that you'd eventually want to go home, eat food, use your cell phone, see a doctor. It's fun to dream about what you might do if you won the lottery, but in the end, you're statistically much further ahead financially if you simply don't play. The odds of winning are stacked against you so heavily that it's hard to even comprehend. If you are going to play and you can afford it, buy one ticket and take your chances. And if you do win, take steps to protect yourself and your winnings. AmeriServ Presents: Bank Chats is produced and distributed by AmeriServ Financial Incorporated. Music by Rattlesnake, Millo, and Andrey Kalitkin. Production and editing by Jeffrey Matevish. Please take a moment to subscribe to the show on your favorite podcast app and drop us a comment, let us know how you enjoyed the show. For now, I'm Drew Thomas, so long.

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Many of us dream of a day when the numbers on the piece of paper we hold in our hands match the numbers on the TV screen. What would you do if you won the lottery, and your life changed overnight? The lottery industry in the US is massive, but is it a sound financial plan or investment? Drew and Jeff chat about everything jackpot in this episode of Bank Chats.

Credits:
An AmeriServ Financial, Inc. Production
Music by Rattlesnake, Millo, and Andrey Kalitkin
Hosted by Drew Thomas and Jeff Matevish

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      DISCLAIMER

      This podcast focuses on having valuable conversations on various topics related to banking and financial health. The podcast is grounded in having open conversations with professionals and experts, with the goal of helping to take some of the mystery out of financial and related topics; as learning about financial products and services can help you make more informed financial decisions. Please keep in mind that the information contained within this podcast, and any resources available for download from our website or other resources relating to Bank Chats is not intended, and should not be understood or interpreted to be, financial advice. The host, guests, and production staff of Bank Chats expressly recommend that you seek advice from a trusted financial professional before making financial decisions. The host of Bank Chats is not an attorney, accountant, or financial advisor, and the program is simply intended as one source of information. The podcast is not a substitute for a financial professional who is aware of the facts and circumstances of your individual situation. AmeriServ Presents: Bank Chats is produced and distributed by AmeriServ Financial, Incorporated.