I’ve always considered the lottery to be a stupid tax. 1 in 175 million are some of the worst odds out there, and even 1 in 46 of getting your money back is worst than any casino game. However, I have a new coworker who has lotto fever - he spends $100 a week on Mega Millions tickets, and says he hits a $5000 enough to justify it. He started encouraging ME to buy some tickets with him last week, and I got to thinking how $5 here and there on tickets is probably better than spending $5 on a fast food splurge, and while I am by no means rich, I can afford to burn $5 from my paycheck every week ($100 on the other hand…)

Anyway, there are two things I’ve been thinking about, which should both have factual answers:

For Mega Millions, you choose 5 numbers in any order from 1-56 and a bonus number (which gets drawn from a seperate tumbler) from 1-46. When playing 5 games, is it better to choose the same bonus number for each game, or choose 5 different numbers, statistically?

If the impossible happened and I won the jackpot, I have the choice of lump sum or 26 year annuality, which must be declared when buying the ticket. Which is the better choice for a responsible, non-drug-or-shopping addicted person? I know I will get a larger portion over 26 years, but rather than letting the lottery invest, would I be able to make more investing the lump myself? Not like $25 mil vs $75 mil would even be that much of a change for my life, but only getting $1 or $2 mil up front wouldn’t be too fun.

The neat thing about the annual payments is, you can’t blow it all in one shot. At least here in CA you only get 50% of the jackpot if you take lump sum payout. So in a nutshell, 100mil jackpot, 50 mil now or an average of 4 mil or so a year for 26 years.

Also I will leave the details to the more financially inclined but if you take payments you have alot more options for mitigating taxes over the long haul. Those taxes at these income levels are brutal. Just avoiding even a portion of that would be advantageous especially if you plan to start a business or something like that.

Under the assumption that the number of winners doesn’t affect the payout, then picking the same numbers over and over makes no difference. If you get $5 for hitting a yellow ball, picking the same or different yellow ball number doesn’t affect anything on odds of winning or payout.

But, some aspects of lotteries are based on splitting a shared pool. Especially the big payout itself. So it sometimes happens that a person buys two tickets with the same numbers, wins big, and then splits the pot with him/herself. No double the winnings.

Check for your individual game the payout rules, and see how that affects your picks.

As for lump sum vs. annuity:

There is a small tax advantage to annuity. Spreading the tax load over several years helps, but not a lot.

The real danger of an annuity is what happens if inflation goes way up. You’ve locked your money into into something returning less than 5% when inflation is going 15%. If you run the investment yourself, you can choose the risk/return plan that suits your mentality.

If you die, your estate has to pay taxes on the remaining lump sum value. Since the estate probably doesn’t have that much cash, the annuity will be sold. (The people who buy annuities are not in it for charity. They are going to profit on the deal.) So the estate takes an extra hit.

I’d take the lump sum payment and never look back.

Of course the risks with the lump sum payment are that you either blow the money, get cheated out of it, or fail to invest it wisely (not as easy as it sounds). The annuity payments do have a low investment return but they are guaranteed. One problem, though, if you die prior to the end of the payments, your estate may immediately owe taxes on the future payments.

The rule of thumb that I heard is that if you were bad at money management prior to winning the lottery (running up credit cards, spending $100 per week on lottery tickets, etc), you’re likely to do a poor job of handling the windfall.

I’m not nesessarily good with money, but I’m SMART (not spending huge amounts of my earnings on gambling being the first thing). I’ve read plenty of horror stories (and watch Entourage) about celebrities and winners who have no concept of what they are spending. If I could quit my job and not have to worry about paying bills or groceries ever again, and be able to buy a nice apartment in NYC, i’ll be pretty happy.

I’m not saying buy ALL the same #'s 5 times. Just the bonus number 5 times and 5 different combinations of the 5 random regular numbers. I’m asking if it is statistically better to stick with one bonus number and hope that comes up (1 in 46 but 5 shots if I get it right vs 5 in 46 but only one shot if that is the bonus #) or try different combinations of the regular numbers, or to make each ticket totally different. Except for the jackpot, prizes do not get split between winners.

And yes, I do know that it makes no ounce of difference if I play the same or different numbers from week to week.

Bear in mind that with mega millions, you break even getting just the bonus #, and then get consolation prizes with 1 or more random + bonus, or at least 3 random without the bonus.

In the first case you will be five times more likely to get the bonus number in any given week. In the second case, you’ll make five times as much when you do hit it.

It depends on the game. If the payout is fixed regardless of number of winners, then whether you buy 500 exact same tickets for a game or 500 different tickets, it doesn’t matter. The expected payout is the same. If the winners share a prize pool, then buying multiples for the same game dilutes your winnings.

If you can’t figure it out, choose different numbers.