Wheel of Fortune Could Spin Too Late

Question: Apropos of the California Lottery, which you have written about several times:

Let’s say a man in his mid-90s wins a million dollars at the spin of the Big Wheel. Legally, this man has been a “death statistic” for more than 20 years. But he is assured by all officials and the media that he is “a new millionaire.”

Yet, they give him just 1/20th of his winnings and then apparently invest the balance, $950,000, at interest, receiving from this investment close to the amount that the state owes the man over the 20-year period!

Let’s say all they ever pay the poor fellow (who would have to live until he’s about 114 years old to collect his winnings) is the first installment of $50,000.

My question is two-pronged: Isn’t this discrimination against the elderly? Isn’t this also a monumental fraud against all citizens of California?--S.R.

Answer: “Discrimination,” word-wise, sounds a little strong for a fluke of timing. If a state lottery were to be completely “fair” (in some people’s eyes) you could make a strong argument for restricting the winners to those people who are truly desperate for the money.

Also, if you’re going to tie potential winnings to the actuarial tables, then wouldn’t it be just as logical to have an age cutoff for the buyers of lottery tickets? That is, what about prohibiting the sale of lottery tickets to men older than 52 and women older than 58 because, statistically, anyone over those ages is unlikely to collect all of his or her winnings?

It would seem fairly obvious that anyone older than, say, 70 or 75 who buys lottery tickets does so with the nagging thought at the back of his mind that if he does hit it big on the Big Spin he may be benefitting his heirs more than he is himself. That’s life.

The pertinent issue, as John Schade, assistant director of public affairs for the Lottery Commission in Sacramento, points out, is that for every $1 million won $1 million is paid out.

“We know, statistically, about how many $1-million winners we’re going to have at every Big Spin,” he adds.

And, for every $1-million winner, an annuity is bought by the state “for about $400,000 or so,” which will pay out the million dollars over 20 years. If our hypothetical 95-year-old winner, sure enough, collects only the first annual installment of $50,000 and then promptly turns up his toes, the $50,000 will continue to be paid annually for the next 19 years to his heirs (and, if necessary, to their heirs).

As a matter of fact, Schade adds, your hypothetical example has come within a hair of realization already: One of the biggest winners to date, $4.625 million, went to an 85-year-old woman. And, if she were distressed at coming into so much money so late in life, she managed to conceal it very adroitly.

As this is written, he continues, 504 people have had a crack at the Big Spin, and 39 of them have walked away with $1 million or more. Of the million-dollar winners, about 13 (34%) have been older than 50 and about half of them have been older than 60--putting all of them in their twilight years before the full jackpot has been paid out. The youngest million-dollar winner was a 19-year-old, and the biggest winner to date ($6 million-plus) was a 24-year-old. But even this is about to change since the kitty as this is written is already up to $8.3 million.

Among those who dutifully buy tickets on a regular basis, Schade adds, 16% are between ages 20 and 29, and 26% are between ages 30 and 39, which leaves the majority of buyers--58%--nudging middle age (at least).

While almost every state that now has a lottery operates it the same way California does--with the million-dollar-and-over winners collecting the payoff over a flat 20 years--there are occasional exceptions where being young does, indeed, have a definite advantage that goes beyond the mere satisfaction of collecting and spending it all yourself.

When Arizona launched its lottery about four years ago, for instance, the first few games had as the top prize $50,000 a year for life with $1 million guaranteed. And, sure enough, a couple of early winners were in their early 20s with, actuarially, a life span of 50 or more years ahead of them--during which time they had the potential of walking off with 2 1/2 times the guaranteed million dollars.

As long as we’re debating the ethics of crowning a 95-year-old man a “millionaire” when he isn’t likely to collect more than a fraction of it, let’s explore the other side of this coin: Take the case of another hypothetical $1-million winner on the Big Spin--a 19-year-old, in this case. For the next 20 years the world is his oyster--fancy cars, European vacations, the works.

Then, at age 39, the spigot shuts off. Who has had the dirtier trick played on him, the 95-year-old, who, at least, had a flamboyant year or two and died knowing that he left heirs in good shape, or the 39-year-old (no longer all that young) who has to relearn the fine art of making a living?

But, of course, it’s all theory. It wouldn’t happen that way. The 19-year-old will invest his $50,000 a year wisely, and, when the lottery winnings wind down at age 39, he won’t even miss the money.

As long as we’re talking theory, that is.