Every few years as a financial advisor I get one outstanding math question:

Should I buy a Mega Millions ticket?

The Mega Millions Lottery is interesting because it boils down to a simple math and statistics problem.

At some jackpot level, every ticket is theoretically worth MORE than it’s $2 cost.

We can have a little fun with numbers to decide at what point the ticket is worth MORE than it’s face value:

The devil is always in the details:

-The Lump sum payout is about 60% of the total jackpot (If you want the full value, it’s structured as an annuity and paid out over time.)

-Uncle Sam always gets his piece of the pie: Federal taxes on lottery winnings are roughly 37% (California surprisingly doesn’t charge tax if you buy your ticket here)…

The winning combination (one of a possible 302,575,350) it would appear the ticket is worth $2 or more when the after tax lump sum jackpot value is over roughly $605 million or higher.

Meaning the Mega Millions Lottery has to be over $1.57 Billion after the lump sum and taxes are taken, to be plus value on every ticket.

Of course, there’s a very real chance you could split the prize with someone, which immediately cuts your win in half and the math goes out the window.

There are less substantial prizes available, and the overall odds of hitting one of those is about 1/24 according to the Mega Millions site (https://www.megamillions.com/how-to-play)

Finally, it should go without saying that this isn’t financial advice. If you need help managing your investment accounts of stocks and bonds, or putting together a financial plan, we’re happy to help.