In a small-town American village, it’s lottery day. The villagers have gathered to take their chances—or at least, they think they’re taking their chances. The prize money is massive—a whole lot of zeros—and, as a marketing campaign explains, “Somebody’s got to win it.” The message is clear: If you don’t buy your ticket, you’re missing out. But is it really that simple?
Lottery is a game of chance, and there’s no strategy that can improve your odds. Winning numbers are selected by randomization, either through a physical system of spinning out balls with numbers on them or by using computerized systems that assign each eligible number an equal chance of being drawn. It’s meant to ensure fairness. But even so, people still play. They buy tickets, they dream of winning, and they spend a lot of money on a game that has no guarantee of winning.
The reason that so many people are willing to spend so much money on a chance they might win is because there’s an appeal to the idea of instant wealth in our age of inequality and limited social mobility. In addition, the winners—or at least those who win big—are disproportionately low-income, less educated, nonwhite and male.
When it comes to cashing in, the big question is whether to take a lump sum or annuity payments. A financial advisor can help you weigh the pros and cons of each option, including how your taxes will be withheld. In general, choosing annuity payments can reduce your tax liability and allow you to invest the proceeds so they will grow over time.