What to do if you win the lottery.” This question is getting more online searches than ever before. But what would you do? The wheels start turning as soon as those lucky numbers get picked. You stare down at your ticket in disbelief. Then, you make sure to match the ticket in your hand to the numbers on the screen. You could be staring at a million or billion-dollar prize, and for a second, most of your financial worries start to slip away, soon to be replaced by a new set of challenges. How will you manage it? How much will you owe back in taxes? Should you take the annual payouts or the lump sum? A better question is, “how do I redeem this thing!?”

The lottery is played by millions across the United States, hoping to get their hands on the winning prize. But how does the lottery work? Where does the money you spend on a ticket go? And do you really have a chance of ever winning? Carolyn Becker from the California State Lottery knows more than most. She’s been working with lottery agencies for years, making sure that winners are genuine players and ensuring that a percentage of the lottery profits go to good causes within the Golden State.

She outlines exactly how the lottery works, how the winning numbers are chosen, the philanthropic side of buying a ticket, and what to do when you win millions or billions of dollars at once. She also drops some tips on better ways to play the lottery and why there’s a higher chance of you winning than you think. So, if you’re buying a ticket in hopes of a billion-dollar jackpot, Carolyn’s advice could help!

Click here to listen on Apple Podcasts.

Listen to the Podcast Here

Read the Transcript Here

Mindy:
Welcome to the BiggerPockets Money Podcast, bonus episode edition, where we interview Carolyn Becker and talk about the lottery.
Hello, hello, hello. My name is Mindy Jensen, and with me, as always, is my not-using-the-lottery-as-part-of-his retirement-plan co-host, Scott Trench.

Scott:
That’s right, Mindy. My winning tickets are real estate and stocks.

Mindy:
Those are good winning tickets. Scott and I are here to make financial independence less scary, less just for somebody else, to introduce you to every money story, because we truly believe financial freedom is attainable for everyone, no matter when or where you are starting.

Scott:
That’s right. Whether you want to retire early and travel the world, going to make big-time investments in assets like real estate, start your own business, or figure out how to responsibly handle winning a lottery jackpot, we’ll help you reach your financial goals and get money out of the way, so you can launch yourself towards your dreams.

Mindy:
Scott, I had a lot of fun speaking with our guest today, Carolyn Becker, who is the Deputy Director for Public Affairs at the California Lottery. She had a lot of information about the concept of lottery, how to play the lottery in general, and I am super excited to talk to her today.
But I want to say a little note to our listeners. This is a fun episode. It’s meant to educate you about the different aspects of the lottery, of playing the lottery, including some history about the concept of the lottery in general. And while we are looking at the lottery in an investigative light, we are not recommending the lottery as a way to generate wealth.

Scott:
Yeah, agreed. Neither Mindy, nor I, plays the lottery in any meaningful extent, other than maybe buying a handful of tickets when the jackpots are really big, for fun. And that’s the absolutely extent that we would really recommend anyone participate in the lottery, if at all. It’s not a way to build wealth in any statistical sense, but it’s a fun thing to explore. I learned a lot, and it made me think a little bit today.

Mindy:
I did. Actually, I learned a ton about all the different ways that I am playing the lottery the wrong way, and how to claim your ticket.
First up, we are going to hear a little bit about the history of the lottery from our producer, Kailyn Bennett.

Kailyn Bennett:
Ever dreamed about becoming the next lottery millionaire? Who hasn’t thought of winning a big and hitting the jackpot? But how does it really work, and what are your actual chances of winning?
I think most of us have probably bought a lottery ticket at some point in their lives and just thought, “What if? What if I got lucky?”
Whether it’s the Powerball or the Mega Millions, you read about people winning huge amounts of cash all the time. So, the rationale here is, “People seem to win. Why not me?”
Before we dig into the odds of winning the lottery, let’s look at the history. We’ve seen different forms of the lottery across the globe, with one of the earliest examples in ancient China, between 205 and 187 BC, and that was with a number game called Keno, and that’s actually still played in casinos today.
Another early example of the lottery was run in ancient Rome, during the rain of Julius Caesar, who commissioned a state-run lottery to help raise money for municipal repairs.
And that’s traditionally the history of the lottery ever since. It was, and often still is, a way to raise money for a state, without having to raise taxes. A state essentially turns a fundraiser into a game with a reward. The lottery still often funds charitable organizations or programs to assist the poor. And, in fact, another early example of a lottery was in Bruges, Belgium in the 15th century, where the lottery was announced as a way to raise money to help the poor. So, the beginnings of the lottery were actually very philanthropic, or at least relating to public interest.
We see a similar pattern of early lotteries in the United States. The first lottery in the US was actually established by King James I, and it was run to help colonial settlers in West Virginia. Lotteries were also run by several American presidents and a couple historical famous figures. In fact, Benjamin Franklin ran a lottery, in order to fund the building of cannons. During the Revolutionary War, lotteries were run to support the colonial army. So, there’s a long history of the lottery in the United States to raise money for good causes.
Now, the beginning of the lottery as a form of gambling, on the other hand, goes back to the 19th century, and it goes back to big cities, and one in particular, New York. Lotteries became a very different beast at that point, when the city was really expanding and developing different communities. New York lotteries became a pastime for the working class people, especially in immigrant communities. For example, there was something known as the Italian lottery and the Cuban lottery.
Gambling on winning numbers is something people did together, and lotteries operated out of something called policy shops. People would play something called number games, so you would pay a small sum of money, as little as just one cent, and pick a number that you thought was going to win.
During this time, there was a lot of moral outrage about policy shops, playing, and betting in general. Number games became associated with poverty and urban crime. So, the 19th century is when we started seeing a lot of legislation against gambling and, ultimately, against lotteries. In fact, they were banned in the United States in the early 20th century, and they weren’t legalized again until 1934, which is when the first legal government-sponsored lottery was established in Puerto Rico. And then New Hampshire followed suit in 1964 by establishing their own.
So, today, government-run lotteries operate at a state level in the US, with 45 out of 50 states running their own lotteries, with the two most popular lotteries being the Powerball and the Mega Millions.
Powerball is one of the best known for its record-breaking jackpot of $1.59 billion, back in 2016. So, you’re probably thinking right now, “What are my actual chances of winning the big jackpot? Is the lottery a good investment? Is it worth my time to be playing it?”
So, let’s look at the Powerball first. Powerball tells you that the odds of winning if you buy a ticket are one in 24.9. Now, that doesn’t sound so bad, right? What they actually don’t tell you, is that that’s your chances of winning the lowest possible prize, which is only $4. So, that puts winning a bit more in perspective. The odds of winning the jackpot in the Powerball are unfortunately one in 292 million.
And the way the Powerball achieves these near-impossible odds is by introducing a vast number of possible winning combinations. In fact, there are over 11 million possible winning number combinations in the Powerball.
Now, what you need to know about the number, is that nearly 10 million of those winning combinations will only give you the minimum payout, which is, once again, $4. And that’s because all those winning combinations include the Powerball number, and either none of the white balls or the Powerball number, and just one of the white balls. This automatically disqualifies you from winning the jackpot. So, the reality is that, winning the jackpot and the Powerball is highly improbable.
Another comparison that we like to look at is that, if you’re swimming in a room filled with white pearls, and the jackpot is a single black pearl hidden in that sea of white pearls, your probability of winning the jackpot in the lottery is about the same as finding the black pearl in a room full of white pearls, completely blindfolded. So, if the math isn’t doing it for you, this visual example will help you see why winning the jackpot is highly unlikely.
And unfortunately, there’s a similar story with the Mega Millions, which is the other biggest US lottery. Your chances of winning the jackpot in the Mega Millions are approximately one in 259 million. Now, some people may think, “Well, you know, if I play a bit more, I have a higher chance of winning. I’ll just spend a bit more.” The truth, though, is that, you’re much more likely to spend money on the lottery than you will see in returns.
So, if you spend $1,000 on the lottery, there’s a 50% chance that you make back $64. There’s a 90% chance that you make back less than $92 and a 99% chance that you’ll make back less than 550. So, you will almost certainly lose money on the lottery. And the question remains, should you still play? Well, if it’s purely for the thrill of winning something, then sure. You do have a one in 24 chance of winning something, $4, to be precise.

Mindy:
All right, huge thanks to Kailyn Bennett. Not only is she our producer, she’s an absolute rockstar in everything she does. She has the Midas Touch. Everything she touches turns to gold.
Before we bring in Carolyn, let’s take a quick break.
And we are back. Our guest today is Carolyn Becker, Deputy Director for Public Affairs for the California Lottery. Carolyn, welcome to the BiggerPockets Money podcast. I’m super excited to talk to you today.

Carolyn:
Thanks for having me. I’m excited too.

Mindy:
Let’s jump right into this. How does the lottery work?

Carolyn:
So, just a reminder, you mentioned it already, but I represent the California Lottery. So, as you guys know, there are 50 states, plus the District of Columbia, Puerto Rico, the U.S. Virgin Islands, and I mention all those jurisdictions because some of those jurisdictions are in the Multi-State lotteries, which I know we’ll talk about.
But here in California, the lottery works in a couple different ways. We have two categories, if you will, draw games, which are the ones that fuel those jackpots, those giant jackpots, we’ve all been watching so much lately. And then we have instant scratch-off tickets, which we call here in California, Scratchers. And I think most people are familiar with those too. You buy them at a gas station. You scratch the special little stuff right off, see the results, and then you know if you’re a winner or not. And those all have different rules. You kind of have to read the fine print to know what you’re looking for when you scratch. But those are the two main categories of games.
For the draw games, Mega Millions, Powerball. Here in California, we run our own draw game, called SuperLotto Plus. We actually have eight draw games total. That’s essentially like a giant statewide lottery, or in the case of Mega Millions or Powerball, national. Everybody’s buying tickets. Most of the money goes into a big pot. The numbers come out of a draw machine and, theoretically, eventually, somebody wins the pot.
I’ve really simplified it. There are different prize tiers. Mega Millions has eight or nine prize tiers, so you don’t have to get the jackpot to be a winner. But I hope that makes sense and answers your question.

Mindy:
It does. And I have a follow-up question. I don’t play the lottery frequently because, frankly, I don’t know how to play. I mean, I know that I go into the gas station. I give them $2. I say, “Pick the numbers for me because I don’t want to be bothered.” And they hand me, what is it, a Quick Pick, and they hand it to me.
But in the past, it used to be a dollar, and then one of the two big lotteries, the Mega Millions and the Powerball, one of them raised their prices to $2, and then the other one followed suit shortly thereafter. So, now, it’s $2 to play. But then you can do a multiplier, and you can do … There’s so many different rules. And for the casual player, you could miss out on a super, super jackpot if you don’t play it right, if you don’t do the multiple.
Is there a place that you can go to find out all of this inside jargon, as a casual player that you wouldn’t know?

Carolyn:
It’s interesting you talk about casual players because I think those are the players who play sort of infrequently, maybe when the jackpot hits a certain threshold, but they’re not every week, religious, so to speak, players. And, so, those are the folks, casual players, who I think don’t necessarily know the jargon and the ins and outs of the rules and the multipliers and all of that. Whereas I think our core players, who are appointment players, if you will, let’s say Mega Millions, they buy tickets every Tuesday and Friday, they may know more about it.
And, so, just using Mega Millions as an example, that’s the one that just was hit this past Friday night, the jackpot, up over a billion dollars. And I know we’ll talk about that. Megapliers exist in states outside of California for that game, so I actually can’t tell you exactly how that works for Mega Millions.
But there’s a website. It’s not hard to remember, megamillions.com. And I imagine, on various links on that page, there are different places players can look for the rules, the ins and outs.
But going back to casual players, it’s actually quite simple, if you want it to be. Right? If you don’t really care to pay attention to those options and those details, you mentioned, we call that a Quick Pick, where you want the computer to pick the numbers. You hand over your $2, or maybe you’re buying 10 tickets for $20, all Quick Picks. You get this little piece of paper that kind of looks like a receipt. We call it a play slip, and it has your series of six numbers on each line. If it’s just one ticket, it’s just one line of numbers.
And then, that night, there’s a draw that quite literally involves balls rolling around in a machine, and the machine randomly draws … drops a series of six numbers. That sixth number is the mega number, so the first five numbers, and then the mega number. And in theory, all you have to do is compare your play slip, or your ticket, to what numbers came out of the machine, and figure out if you’re a winner.
I equate that sort of, I don’t know how many of your listeners might play Craps in Vegas, let’s say, you can walk up to a Craps table and be super overwhelmed because there’s so many games, all with one roll of the dice. So, kind of to your point, it can be overwhelming. But if you say, “Hey, I just want to play the odds,” and the dealer might help you understand how to just play one game with the roll of the dice, you can keep it really simple if you want to.

Mindy:
Oh, I didn’t even know that there were more than one game on the Craps table.

Carolyn:
It’s overwhelming.

Scott:
I will admit that I host this podcast on personal financial responsibility, and yet, I’m also a sucker for Craps and have been known to lose 100, 200, $300 at a Craps table from time to time on there. So. yes, I can totally relate.

Carolyn:
And there’s different odds with every game. Right? And that’s kind of like the lottery too, again, using Mega Millions as an example. Of course, everybody dreams about winning the jackpot, especially when it’s up over a billion, which is just a really hard number to wrap your brain around. But who doesn’t sit around and think, “What would I do with a billion dollars?”
The odds of winning the jackpot are, quite honestly, not in your favor. They’re about one in 300 million or so. But the odds of winning any prize on that game, of which, like I said, there’s eight or nine different tiers, are about one in 24, one in 25. So, you might get your $2 back, as the lowest prize tier. Maybe you hit a few numbers and win a couple 100 bucks. But there’s more than one way to win.
And, so, while all the focus is on the jackpot, there are quite literally in California, with every Mega Millions draw, there are thousands, if not tens or hundreds of thousands of winners, every time the game draws, just not always the jackpot.

Scott:
I have a question. Can you increase those odds if you pick your own numbers, versus get them randomly assigned by the computer? Or is there any truth to that, that there’s a way to kind of predict it a little bit and pick your own numbers? Or is that all …

Carolyn:
It’s a really, really, really good question, and the answer might blow your mind a little bit. The odds stay the same, no matter whether it’s a Quick Pick, you pick your own numbers, no matter whether the jackpot is a dollar or a billion dollars, no matter whether 10 people play or 10 million people play. The odds are quite literally the number of combinations that those numbers can make when the balls fall out of the machine.
So, when I say the odds are one in 302 million or so, it’s because that’s how many possible combinations of numbers there are. So, while more people play with big jackpots, there are more people vying for those odds. Or if you buy, like I said earlier, if you buy 10 tickets, you’re taking 10 chances on the odds, you’re increasing your chances at the odds, but the odds never change. The odds of the game are the odds of the game, no matter what.
And to your point about Quick Quick versus custom numbers, no, the balls are dropped randomly. The security, by the way, that goes into this and the integrity of the draw is really, really a serious subject. The balls are carefully weighted. Here in California, the draw games that we run, we have independent auditors in the room as witnesses. We have video and audio on our draws. We want everyone to know that we take the integrity of the game, meaning the fairness, really, really seriously. And I know I can speak for the other jurisdictions that do that as well.
You guys might recall just a few months ago that 10-hour delay for Powerball, because one of the states happened to be Minnesota, and they wrote a beautiful blog about it, by the way, on their website, there was a computer failure, essentially, a software failure. And they had to manually reconcile all of their ticket sales, to make sure everybody that bought a ticket for that draw got in on it. And that’s how serious we take the integrity of the game and the fairness.
If you buy a ticket, you think you have a chance at the jackpot, and you do, because of all those protocols that take place. So, when there’s a delay, I know it creates kind of an anxiety across players, but it’s also … It’s a good thing because it means we’re going over every step, with essentially, a microscope, if that makes sense.

Scott:
So, those stories about the guy who’s like, “Yeah, the ink on the balls changes the weight such-and-such and allows it to be more probable.” That guy, either that that’s been changed and dealt with, or that was never true to begin with?

Carolyn:
I haven’t heard that specific claim, but it doesn’t surprise me. People always think they have theories about why it’s not fair or what have you. But I promise, promise, promise, with a capital P, not just here in California, that all of that is rigorously checked, thoroughly vetted, like I said, in some cases, maybe all cases audited. It’s very serious. I mean, we’re talking about billions of dollars. Right?

Mindy:
I do need to make a clarification. I said that I have never won the lottery. And you said that there are multiple hundreds of people that win every time it’s drawn. I did win $5 in the lottery once, so I rescind my blatant, bold-faced lie of earlier. I have actually won the lottery,

Carolyn:
But you’ve never won the jackpot. And I think that’s what most people fantasize.

Mindy:
I’ve never won the great big jackpot. However, in my mind, I have convinced myself, as soon as I buy that ticket, I can convince myself that this is the winning lottery. And I am shocked when those numbers don’t match up to the ones on the TV screen.

Carolyn:
Well, it’s funny you say that, Mindy, because me and my colleagues in the Public Affairs team in California, we get to talk to big winners all the time. And the number one, by far, number one emotion, that they express is disbelief. And, so, it’s funny you say you’re in disbelief that you didn’t win. They’re in disbelief that they did. In fact, I’ve heard stories about winners taking their ticket to six different stores to scan them, just to make sure that they’re getting the same valid win at every stor, just because they’re in disbelief. They’re literally having the ticket checked over and over and over, to make sure their eyes aren’t deceiving them.

Scott:
Awesome. Kailyn informed us in our intro, that the first lotteries were really philanthropic efforts. We’re going to raise a pool of money from folks, somebody will win, but the rest of the proceeds will go to a good cause. Is that still true with today’s lottery system, to any extent?

Carolyn:
It’s different in every state, although I’m sure that most states would tell you it’s a good cause, but I can’t speak for other states. I think there are some states where lottery revenues support the General Fund, which, depending on your point of view, may or may not be a good cause. I think some states might have beneficiaries, like veterans programs.
But here in California, and this is common in other states as well, our sole mission, the reason the lottery was created in the ’80s, was to support public education. But I want to be very clear, and this is written into the language, it’s to generate supplemental funding for public education, and I mean kindergarten, all the way through the university level.
And I think it would be no surprise to anybody to hear that it takes a lot of money to run a school district, a lot. So, the lottery raises supplemental funding, which I sometimes just refer to as bonus money. It’s a great cause. It might pay for, here in California, our revenues might pay for two computers in the library at a school that doesn’t have them, or perhaps the band, the school band, gets a half a dozen clarinets for their students to learn music. These are just some of the ways schools here in California spend lottery money.
But it is the sole reason we exist. It’s the reason we come to work every day, and the reason we make decisions, business decisions, that save on operating expenses. If we think that there’s a solution for whatever business challenge we’re facing that will actually save us money, that drives our decision-making, because any savings goes right back into the pot of money for our beneficiary, which here in California, is public schools.
So, to the extent that schools can use every penny, it’s absolutely a good cause. But by no means do we replace a school budget because those are massive.

Scott:
If I spend $10 on Mega Millions or Powerball tickets, how does that money get allocated to the pot, to profits, if any, for these massive corporations into the school districts in California?

Carolyn:
So, let’s take Powerball as an example because that’s the one that set the record a few months ago with a $2.04 billion jackpot. So, most of that money, $2 ticket, about … most of that money fuels the prize. That’s how we pay the winners, is most of that ticket money. But here in California, 80 cents of that $2, or 40 cents on every dollar for any draw game, goes into the fund for our beneficiary, public schools. So, those are the big two pots of money that come out of your two bucks.
Obviously, a little bit of money is needed to run the game, overhead, if you will. But there’s another decent-size bucket, which is that we incentivize our retail partners to sell our tickets. Here, in California, we have over 23,000 locations where somebody can buy a lottery ticket. So, for a Multi-State game like that, the sales here in California benefit schools, no matter what.
In fact, I know we did have the jackpot-winning ticket in Southern California for that giant Powerball jackpot, but even if we hadn’t, we raised, in that sequence of jackpots, when it kept growing and growing and growing and rolled 40 times, we would’ve raised record amounts of public schools, even if somebody in another state won.

Scott:
What is that kind of ballpark of that number that we raised for schools in the 40 rollovers of this?

Carolyn:
Yeah, it was a historic run for us, and I don’t have the exact figure, but I’m confident, it’s 156.3 million or something like that. So, it was up over 150 million. And when I say it’s historic, that’s, by nowhere, by no stretch of the imagination, the total we raised for schools. That’s just Powerball, just from that sequence of draws.
So, it was historic in that one, we call it a jackpot sequence, when it starts in 20 and keeps growing and growing and growing and growing. And I think, in that case, it was growing for over three months. That’s one jackpot sequence. So, when I say we raised a record amount, 150 something million for schools, that’s just sales, related to that game, not Scratchers, not Mega Millions, not any other game. And we have dozens of Scratchers games. So, it’s an impressive number, but we raise a whole lot more money than that.

Scott:
Awesome. And would you say that, I know you cannot speak for other states, but would you say that your understanding is that it’s generally true that something to a similar effect is going on in many other states and perhaps most other states?

Carolyn:
Yes, and I would even take it a step further and say a lot of them are education, public education. So, that’s a very common theme. I know it’s not all of them.

Scott:
Got it. Thank you.

Carolyn:
And we want our players to feel good about that. Right? Even if you don’t win, like Mindy, you’re still supporting a good cause, and maybe that’s not your incentive to buy the ticket. The incentive is the hopes and dreams of being a millionaire. But hopefully, you don’t feel too bad if you don’t win, because 80 cents of those two bucks went right back to the public education I mentioned.

Mindy:
So, you mentioned a giant lottery recently. There was the $2 billion lottery in California that was won by a ticket purchased in California, a single ticket by the way, which is insane. And in 2022, and then just barely into 2023, we had yet another billion-dollar lottery that was just one on Friday the 13th. I didn’t even know it was up to a billion. I might have played.
So, we’ve seen huge increases in these billion-dollar pots. Can you explain why we’re seeing so many large lotteries? I mean, it’s in addition to the billion dollars, there’s a lot of multiple $100,000 lotteries.

Carolyn:
And don’t sleep on Powerball right now. It’s creeping up to half-a-billion dollars, as we speak. So, it seems like billion is almost the new million. You mentioned the historic Powerball, 2.04 billion. By the way, 0.04 seems like a small decimal. In that case, that’s $40 million. And then just this last one, the Friday the 13th, where the ticket was hit in Maine. But you might remember in July of 2022, Mega Millions was up over a billion, and a ticket in Illinois hit that.
So, we’ve had three billion-dollar-plus jackpots, that all started in 2022. This most recent one wasn’t hit, of course, until January ’23. But yeah, so there’s a couple factors. The most recent factor, believe it or not, is related to the economy and inflation. As we all know, the Federal Reserve, the Federal Reserve Bank, has raised interest rates several times to combat inflation recently and try to slow the economy.
And that gives us, as the State lottery, more purchasing power for the bonds, the US Treasury Bonds, that we buy on behalf of the jackpot winner, if they choose the annual payments.
So, let’s back up to that for just a second. Any big draw game lottery winner, as most people know, has a choice. They can take the lump sum, also sometimes called the cash value, or they can take the annual payments. Most of them take the lump sum, because I think the thinking is that you can invest that in a riskier way, and the yield will give you more money in the end than the investments we’re going to make on your behalf. We make really, really, really safe investments, which are US Treasury Bonds.
So, most people do choose the lump sum. The lump sum is what is supported by the sales. That’s the only money that exists, is that lump sum. One point whatever billion doesn’t exist. That’s what will exist over 30 annual payments. So, the interest rates, having been raised several times lately, give us more purchasing power. The value of a dollar, in 30 years’ time, goes up. I’m not an economist, so I’m hoping I’m explaining this in a tangible way, but it gives us better purchasing power when interest rates are higher.
So, the advertised jackpot, which is that one-plus billion, is what the winner would get if they take the annual payments, not the cash value. So, inflation does not affect the cash value. Does that make sense?

Scott:
Yeah. I think another way of saying what you said there is it just makes the tickets relatively more affordable, so folks buy more of them, to a certain extent. Right?

Carolyn:
I mean, kind of. We’re not advertising jackpots. We’re not making these numbers up. We have financial experts across a lot of states looking at this stuff, quite literally analyzing the numbers. And they are economists, so to speak. They’re financial experts.
And, so, this most recent jackpot that we just talked about for Friday the 13th was 1.3 billion, I think. That’s what was advertised, to try to get you to buy tickets. And that will hold. If that winner, whoever it may be, comes forward and says, “Yes, I want the annual payments,” then in 30 years’ time, that’ll add up to about 1.3 billion.
So, the cash value is only what is supported by the transactions happening in every state that participates. And that’s not at all affected by interest rates because that’s just a payout in a lump sum. But we’re able to advertise higher jackpots when the interest rates are high, because over 30 years, our purchasing power goes up when the interest rates are high.
The other factor, and this is very valid, but not quite the most recent phenomenon, in the 2000-teens. Can we we say that? 2000 teens?

Scott:
2010s. 2020-teens, yeah.

Carolyn:
Yeah, the 2020-teens, that’s my term for that decade. Both games, both Multi-State games, changed what’s called the matrix, and that’s lottery jargon, Mindy, to your question earlier. But what that means is, the number of numbers you can choose from on a ticket, that was tinkered with. They changed the matrixes, the matrices, for each game.
By the way, these games are run by two different … in two ways. So, it’s not the same organization running both games, but a lot of states participate in both. California certainly is one of them.
But by coincidence, both in the same decade, they tinkered with, what we call the matrix, which is the number of numbers you can choose from. And they did that by design, to try to fuel higher jackpots. And it did make the odds harder to win the jackpot. For Mega Millions, for example, it made the odds of winning the jackpot longer for any one player, but it actually helped the odds of winning the second prize. So, overall, it was a bit of a wash on the odds, but it was designed to fuel excitement and to increase these jackpots.
So, those are the two biggest reasons, the most recent phenomenon being the economy and the interest rates, that we can point to for saying, “Yeah, look at this. In about six months, we had three billion-dollar jackpots.” That’s never happened before.

Mindy:
So, going back to the lump sum versus the 30 years.

Carolyn:
Yes.

Mindy:
Is there any chance that my money that I win, and I choose to take the 30-year payout, is there any chance that you would run out of money or that the money wouldn’t be there in 30 years, barring a catastrophe?

Carolyn:
So, like I said, the US Treasury Bonds that we buy on your behalf, if you take that option, the 30 installments, are really safe investments. Again, I’m not a financial expert or I’m not even a numbers whiz. You’d think I’m slowly becoming one working for the lottery, and I am, but by no means am I a financial expert.
But those investments are really safe, and that’s why most people take a lump sum, is because they probably can hire a financial advisor who will figure out a way to yield more money at the end of the day. But our investments are really safe.
So, I think the short answer, Mindy, is yes, but it is an investment. So, I don’t know that it’s ever happened. And so few players take that option. The safe answer, the short answer, is yes,

Mindy:
Okay, and if I win the lottery and pass on-

Carolyn:
When you win.

Mindy:
When I win and pass on, and I’ve taken the 30-year lump sum … or 30-year payments, that is, can I write that into my will-able? Can I write that into my will to give to Scott?

Carolyn:
I don’t know if it’s your will or your trust or what mechanism it is, but we have a lot of language in our regulations, and, again, I’m speaking exclusively for California, so your listeners may need to look into this in other states. But there’s language in our regulations here in California that explains all of that. You would’ve had needed to do to put Scott in, memorialized him into some paperwork, like a trust. And, ultimately, a judge does have to get involved. But if you do your job right, as a new lottery millionaire, let’s say, then you’ve got through all that, with the financial experts you’ve inevitably hired, because most of us lay people don’t know what we would do if we won a billion dollars.
I mean, it’s life changing. That’s not meant to scare anybody, but certainly, you have now, you have the means to hire people who know better than you do or even than we do, how to navigate your wealth like that. But yes, unfortunately, if you win the lottery and pass on, it doesn’t mean we cut you off.

Scott:
Awesome. So, if you become a winner, what is the best way to protect your ticket and your anonymity, if you can? What are all the steps that you would recommend for someone who does win?

Carolyn:
And I assume, Scott, your question is about these giant numbers, not Mindy’s $5, that she won a few years back?

Scott:
I’m winning a newsworthy amount of money. Yeah. Let’s call it an excess of a million dollars.

Carolyn:
We have what we call a Big Winner’s Handbook on our website. I imagine some other states have similar tools, that offers all kinds of advice, but it is just that, it’s advice. It’s not law. We highly recommend you arm yourself, with your newfound riches, with a financial advisor, maybe, depending on how sizable your jackpot win is, maybe somebody who can help you set up a family foundation, certainly an attorney, depending on a person’s circumstances, maybe even a therapist. I’m not kidding. This is, like I said, it’s life-changing.
So, we highly recommend, for those really large winners, that they hire the right experts to navigate what it means to come into wealth like that. And frankly, I know the money is not in their bank account before they come forward but, ideally, they have some of those people already in place when they come forward to claim the prize.

Scott:
You wonder what’s going through the therapist’s head in those sessions.

Carolyn:
Well, you just hear so many stories about long-lost high school friends that come out of the woodwork. Maybe you lose your ability to trust. I’ll never know this because I’m not allowed to play. But even your own family, depending on how far out on the family tree you’re talking about, you might start really suspecting why Uncle Larry is calling you. I don’t know.

Mindy:
I wouldn’t suspect my Uncle Larry’s calling me if I won a $200 million lottery. I think I’d know exactly.

Carolyn:
Right. Right. And, so, that must feel, again, I cannot speak with first person knowledge here, but that must feel like a kind of … I mean, it’s great you won the money, but what a sort of negative way to live when you’re always being so skeptical of everyone who gives you a call.
And, so, if you can have these experts, whether it’s a therapist, a financial advisor, attorney, et cetera, we highly recommend it.

Mindy:
Did anybody claim that 2 million, $2 billion jackpot in California? I can’t even say billion. It just feels like million.

Carolyn:
Well, as I said, billion is the new million, it seems like, so get used to it. So, here in California we don’t publicly acknowledge or announce when someone claims, and I’ll tell you why. We actually call that person a claimant, which is not a very friendly word. It’s kind of a wonky word.
But when a big winner comes forward, or a claimant, in California, to claim the prize, there’s a packet they have to fill out, with Mega Millions and Powerball. Really, with all the games, you really should have your original ticket. But for Powerball, specifically, and Mega Millions, you have to have that original ticket or too bad.
We spend quite a bit of time vetting this person because, or this group, if it’s a group claim, because we want to make sure the rightful winner is, indeed, the actual winner, meaning we actually have a security and law enforcement team, sworn peace officers in California, who work for the lottery who say, “So, Scott, you say you’re the winner. Tell us, what day did you buy that ticket? Okay, did you buy one ticket or 10 tickets? Was it a Quick Pick or did you choose your own numbers?”
Because our computer systems know all of that, right? It’s a computer, so we already have the answers, and we want to make sure you’re corroborating them. A lot of our retail partners have security footage, so we’ll probably take a look at that to say, “Oh yeah, that looks like Scott.”
Our team goes through a diligent process, that we tell people can take weeks, or sometimes even months, depending on the circumstance, to make sure the winner is the winner. Because otherwise, we’re either going to be scammed or the process would be, or the claim would be invalidated for some reason. And I can talk about some of the things that do go awry, but we don’t want to announce, “Hey, Joe Smith came forward for that $2 billion prize.”
All the media that you saw that day at the gas station would report it, only to find out, “Oh, shoot, that’s not the actual winner.” We would have to walk that back. The media would have to walk it back. So, we wait until our security team says, “Yep, this is the rightful winner.”
So, I won’t answer your question about whether that person has come forward or not, because it would be dangerous practice to acknowledge whether there’s somebody in the process of being vetted.
Now, keep in mind, though, with Powerball and Mega millions, a winner has a year to come forward. So, we’re only talking a couple months since that jackpot was hit.

Mindy:
Okay. So, I would imagine that a historic jackpot like that, you would do even more due diligence. So, it’s entirely possible, theoretically, you are not confirming this, but it’s entirely possible that somebody has said, “Hey, I’ve got the ticket,” and you’re in the process of verifying before announcing.
Now, is California one of the states, where the claimant can claim anonymously, or are you required to announce that there was … that Scott Trench won the $2 billion lottery?

Carolyn:
Yeah, no. In California, the short answer is no. You cannot stay anonymous. And I’ll tell you why. We balance transparency with privacy. So, we recognize that somebody that comes into that kind of money is going to have extra attention. That’s a mild way of saying it. Right? So, we want to make sure we’re not exposing them in a way that is irresponsible when it comes to public safety and things like that.
But your name, and only your name, only your name, is part of public record in California. Reporters and journalists in California are familiar with something called the Public Records Act. At the Federal level, it’s called a FOIA, Freedom of Information Act. But in California, part of our law that created the lottery is that your name is subject to public record. So, not your age, not your address, not even whether you’re a Californian. Maybe you came in from another state or another country. We don’t have to disclose that. Not your religion, not your race, not your favorite ice cream, or how many family members you have. Right? Nothing personal, except for your name.
Now, do we have to announce it? No. But in the case of a world record, historic jackpot, happened two months ago, as you know, little more than now. Every day, we still, almost every day, we still get a question or two from a journalist or three, saying, “Hey, has so-and-so come forward yet?” And I always answer the question in the same way I shared with you guys, that we don’t acknowledge it until the vetting process is over, but the interest in this particular winner is already massive. So, it’s already being submitted, if you will, as a public record request. And, so, there will be no getting around it.
And no, the eventual winner can’t set up a trust that’s vague. I mean, they can set up a trust. That’s certainly allowed and maybe even recommended by a lot of financial advisors, but their name is very much still a part of public record, but just the name. So, we always really want to make that clear.
A lot of states, a handful, I don’t think it’s even a dozen. I don’t have that memorized, but a handful of states, you can stay anonymous. I do know Illinois is one of them, because that first billion-dollar jackpot in 2022 that happened in the summer, somebody won and stayed anonymous.
I think we like to put a name to it to prove that real people win every day. In fact, in 2022, California made well over 100 millionaires in 2022. So, we have millionaires that are made every day. We’re obviously the most populous state. But I know there’s other states, where there’s more information that’s made public. So, we’re kind of in the middle with just your name. Can’t stay anonymous, but we don’t give up anything else besides your legal name.

Mindy:
Okay. So, I have two questions, following up all of that, and thank you so much because that was really, really helpful. And I assume that this $2 billion was one of the Multi-State, the Powerball or the Mega million?

Carolyn:
It was Power.

Mindy:
It wasn’t the-

Carolyn:
Powerball.

Mindy:
Okay.

Carolyn:
Yep.

Mindy:
So, since that’s played in multiple states, if I bought the ticket in California, do I have to claim it in California or can I claim it in any state?

Carolyn:
That’s a great question. The answer is yes, you have to claim it in California. But let’s say you were visiting from the East Coast, you do have one option, that I don’t think many people would exercise, but I’ll share it with you anyway. You can put it in the mail.

Mindy:
Oh my God, no.

Carolyn:
Right. That’s why I say I don’t think-

Mindy:
Don’t ever put your lottery ticket in the mail. Sorry, U.S. Postal Service, but no.

Carolyn:
They could do that. It is an option, if they don’t want to get on a plane and head west. But no, you have to claim it in California. And here, in the Golden State, we have offices all up and down California. We’re not a small state, so we try to make it convenient for people. Obviously, we have a bunch of offices in Southern California, where our greatest numbers of people are. But we have offices all over the state, and so, theoretically, someone will walk into one of our regional district offices and claim that way, but technically, they don’t have to. They could mail it. I doubt they will, but we’ll see.

Mindy:
I read a story about somebody who had won the lottery, and they had 365 days to claim it, and they mailed it on day 364 or something, and it arrived afterwards, but it still counted because of the postmark. And I’m like, “Have you ever gotten a letter where the postmark is smeared, and you can’t read? Why would you chance that?” It was enough to make a difference. I mean, a dollar’s enough to make a difference, but holy cow.

Carolyn:
I don’t know if we have any postmark smudge stories. I don’t know. But speaking just personally now, I can’t imagine somebody putting it in the mail. I know I wouldn’t put it in the mail, even tracking it. But yes, the postmark, at least here, the postmark does count. But that just seems like a really risky way to claim a giant prize.

Mindy:
Yes, it does. Okay, well, my follow-up was, hey, can’t you just buy a house in a different state and claim it there? So, if your state requires you to disclose your name, could you just collect it in a different … Okay, so then where I buy my lottery ticket matters-

Carolyn:
Yes.

Mindy:
… more than my residence?

Carolyn:
And by the way, it also matters, two things to just chase what you said, it also matters for tax implications. In California, if you’re a California resident, we don’t take state taxes on your lottery win. The Federal government does, so you still have to pay Uncle Sam, but it’s pretty unique here in California.
I think, again, we’re only one of a handful of states where we don’t tax at the state or local level. So, you’ll win more in California in that sense. But if you are, let’s say you cross the border in from Arizona and buy a ticket in California, for whatever reason, because they play these games too, then you’re paying Arizona State tax because it’s part of your income picture, if that makes sense. Even though you bought your ticket in California, you’re paying the tax based on where you live.
But the second thing I was going to say about this whole notion of moving out of state is, remember what I said a few minutes ago about how thorough our vetting process is. Let’s say, you claim your prize on a Monday, well, maybe our vetting process takes four weeks. You can move during that time. We’re still going to release your name, but any journalist or internet sleuth, looking to find you using property records, because those are a lot easy to find on the internet these days too, those may be moot.
So, four weeks is a decent enough time to move to another state or to another country if you really want to lay low.

Mindy:
You have given us a lot to think about, and I have learned a lot, including not to buy a ticket in California if I have to disclose my name now.

Scott:
No, no. You buy a ticket in California because it’s for the kids and it supports the school system. That’s why you buy a ticket in California.

Mindy:
Well, yes. I mean, you buy a lottery ticket because it supports the school. I think it supports the school in every state.

Scott:
And if you win the major jackpot, somebody’s going to figure out who you are, even if you’re in one of these anonymous states, probably. Right?

Carolyn:
I mean, with the internet and social media now, I think Scott’s got something there.

Mindy:
Yes. I mean, it depends on, can you keep your mouth shut? Can you-

Carolyn:
Totally.

Mindy:
Can you prevent that?

Carolyn:
It’s also, know where you play. The rules in California are, and I don’t mean the rules of the game, the rules of the game are, of course, the same in every state that plays any one game, like Mega or Power, but the rules about what happens if you win, including, by the way, let’s just talk about that second prize for a minute. You match five numbers, but miss the Mega number or the Power number, in California, that’s not a fixed million dollars, like it is for all the other Mega Million state. That’s a fixed prize in every Mega Million state.
In California, we have this funky set-up. We pay prizes, paramutually. Again, kind of a wonky word, but what that means is that second prize essentially acts like a jackpot. It’s entirely fueled by sales. The July Mega Millions, where the ticket in Illinois won over a billion dollars, we had a second prize winner in California who won 4 million. And at first, she thought it was just a million, because that’s what megamillions.com will tell you. But if you look at their fine print, they basically say, except California. And so, she was like, “Oh my gosh, I was elated to win a million, only to find out it was 4 million.”
Sometimes, it’s not even a million because it kind of rolls over. So, when someone hits five numbers, it kind of rolls over the jackpot. So, our second prize fluctuates. Point being though, that’s a really long example, long-winded example of, if you’re playing in a certain state, you might want to do a little homework about the rules if you win.

Mindy:
Absolutely. This has been so much fun and so educational. I’ve actually learned a lot about this, about playing the lottery. And now that I know that there’s a 500 million jackpot creeping up, I might go figure out, first, which one it is, and second, how to play, and drop a couple of dollars, maybe even three whole dollars, on a ticket and see if I win.

Scott:
It’ll have to be either two or four, Mindy.

Carolyn:
It’s Powerball.

Mindy:
Oh, does it have to be two or four? Okay. Ooh, it’s Powerball. Great. One question answered. Now, I got to go research all of that, probably powerball.com?

Carolyn:
I don’t remember the URL. Powerball is run by organization called the Multi-State Lottery Association. So, you could Google that, but if you google Powerball rules, you’ll probably find it. Megamillions.com is obviously very easy to remember. And it might be powerball.com, so …

Scott:
It’s powerball.com.

Carolyn:
Okay. Thank you, Scott, for looking that up while we talk. I don’t know why the Mega Millions is more fresh because of the jackpot that just happened Friday night.

Mindy:
Perfect. Well, I am going to go check out all of this information and, hopefully, become a new multi-multi-multi-millionaire next week, when they pull my numbers. Fingers crossed. Everybody. Cross your fingers for me.

Scott:
If Mindy wins, we’re going to rebrand as the MegaPockets Money podcast.

Mindy:
No, PowerPockets.

Scott:
PowerPockets. Great. Yes. Okay. Carolyn, thank you so much for coming on the show today. This was fascinating, and we really appreciate the inside look at the lottery.

Carolyn:
My pleasure. It was fun chatting with you both, and hopefully everybody learns a little something.

Scott:
Awesome. Well, thank you very much and have a good one.

Mindy:
All right. That was Carolyn Becker from the California Lottery.
Scott, I’ve learned a ton from this episode, including all the things that I’m doing wrong when I play the lottery. No wonder I haven’t won anything more than five bucks.

Scott:
Yeah, no. Yeah, I thought it was really interesting. And to me, one of the biggest takeaways was just the percentage of the profits of a lottery. Right? When you buy a ticket, a lot of it obviously goes in the jackpot, but a huge percentage goes, in many states, to a good cause, like the public school systems. So, that was really interesting to me.
I know that there are controversies associated with that. Right? What types of people, for example, are essentially paying that tax to fund our school system or the supplemental stuff, for example, that we did not touch on today, and definitely want to acknowledge those. But I still think it’s a really fun and interesting topic to learn about the lottery systems, and how they’re set up and how they work, what to do if you win, and how the proceeds, at least some of them, can go to some good causes.

Mindy:
Yeah. I learned quite a bit today, and I’m really glad we had her on. I thought this was a super fun episode.

Scott:
Absolutely. Mindy, what would you do if you won the lottery?

Mindy:
Oh, I would buy a beach house. I would buy a mountain ski inn and ski outhouse, probably my own airplane. No, I’m kidding. I wouldn’t buy my own airplane. I have such bad eyesight that I am not allowed to even take flying lessons. I would never be able to get my pilot’s license, which is probably good. I don’t want to crash-land. What would you do, Scott?

Scott:
I’d probably buy a couple of businesses and some real estate and then figure out a way to upgrade the lifestyle. So, I find it really hard to imagine what really … I’d probably sell my Corolla, finally, and buy a Tesla. That would happen there.
But yeah, I need to get more imaginative and figure out more in depth with what I’d do with a billion dollars or hundreds of millions of dollars. That’s a fun thought exercise that I haven’t really worked all the way through.
So, you always say, Mindy, have a plan. I think this is one of those exceptions, where, if you happen to win the Powerball by playing 10 or $20, it’s okay not to have a plan because it’s so unlikely. But it’s fun to think about.

Mindy:
Yes, it’s okay to not have a plan right now, but before you collect it, before you spend any of it, talk to a financial advisor, talk to a tax professional, talk to somebody who works with high net-worth individuals, and talk to an attorney. Like Carolyn said, the lottery gives you a winner’s guidebook. Go through there and talk to everybody, a therapist. Talk to people and get guidance for how to handle this newfound wealth because it’s going to be overwhelming and life-changing, and you want to do it right.

Scott:
Yeah. And if you’ve won the lottery and listen to the BiggerPockets Money Show podcast, please reach out to us. We’d love to hear about your experience.

Mindy:
Send me a million dollars. I’ll say thanks. I’ll shout you out on the show.
All right, that wraps up this episode of The BiggerPockets Money Podcast. He is Scott Trench. And I am Mindy Jensen, saying, bye-bye, butterfly.

Scott:
If you enjoyed today’s episode, please give us a five-star review on Spotify or Apple. And if you’re looking for even more money content, feel free to visit our YouTube channel at youtube.com/biggerpocketsmoney.

Mindy:
BiggerPockets Money was created by Mindy Jensen and Scott Trench. It is produced by Kailyn Bennett. Research and Writing by Anna Cottrell. Additional Research and Writing by Kailyn Bennett. Editing by Exodus Media. Copywriting by Nate Weintraub. Lastly, a big thank you to the BiggerPockets team for making this show possible.

Watch the Podcast Here

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In This Episode We Cover

  • The history of the lottery and using ticket sales to fund philanthropic causes 
  • Why Mega Millions and Powerball jackpots are hitting the billion-dollar mark 
  • The actual odds of winning the lottery and the chance of you getting a cash prize
  • Interest rates and the Federal Reserve’s effect on lottery jackpots 
  • What to do if you win the lottery and why a financial advisor should be your first hire
  • The “lottery curse” and why so many winners blow their money after hitting a big win
  • And So Much More!

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Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.

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