Our baseline from the Michigan Lottery games will be the Michigan Lottery Daily 3.  A “straight” ticket means you have to pick three numbers, in order, and the pool of numbers continually replenishes itself.  By that, I mean that you could draw a “1″ three times in a row.  When you get into some of the bigger games that’s not always the case.

It’s pretty simple to figure out that our chance of drawing any one of the ten numbers on the first try is 1 in 10, or 10%.  Now, since order maters, to get two correct numbers we need to factor in our chances of drawing the first one correctly, which we already know to be 10%.  Since the chance of drawing the second number correctly is also 10%, all we need to do is multiply the two probabilities by each other to come up with our overall odds, 1 in 100 or 1%.

To continue down the line we simply continue to multiply.  We find our chance of picking the winning number is 1 in 1000.  Pretty good odds in the lottery world.

Let’s look at this another way, though.  If we play the Daily 3 with a ticket called a box 6-way, that essentially means we’ve picked three different numbers and can win if they are picked in any order.  So, a ticket with 1-2-3 will win if 1, 2, and 3 are drawn in any order.  The 6-way comes from the fact that there’s 6 different ways 3 numbers can combine to form a unique group.  If we had four unique numbers, they could combine in 24 different ways.

So the way we calculate order-irrelevant tickets is to find the number of different possible combinations for that set and divide the ordered probability.  For a Daily 3 where order doesn’t matter, that means we start with our probability of 1 in 1000, and divide it by 6, giving us a 1 in 133 chance.

We’ll delve into some more complicated systems in the next post.

So what’s the time limit to claim your Michigan lottery ticket winnings?  The answer is one year, and you must claim the ticket in the state where you purchased it (in the case of multi-state lotteries).  So if you bought your mega millions lottery ticket in Michigan, you have to claim it there.  And watch out, if you’re from another state the time limit is different, so make sure to check it out for yourself.

So let’s look at the numbers.  If you play Mega Millions you have a 1 in 175 million chance of winning from one ticket.  Those are the longest odds in the Michigan Lottery.  Let’s compare that with Euro Millions, which is a 5/50 + 2/9 game – meaning you have to pick 5 correct numbers from 0-50, and 2 correct number from 0-9.  You’re odds of winning on a single ticket for this game are 1 in 76 million.  That’s 10x easier to win than the Mega Millions!

I know, the jackpot is also about 1/10 the size.  But let’s be honest, if you were offered the chance to pick a number from 1-10 to win $10 million, or 1-100 to win $100 million, which one would you go for?  I think most people would try for the 1 in 10 chance to win a lesser amount, because it would still be more money than they knew what to do with.  A bird in the hand (or potentially in the hand, in this case).

Another way to look at it is to ask yourself what a life-changing amount of money would be?  Enough to pay off your HELOC?  Enough to pay off your car, your house, or maybe your student loans?  Think it over and look for a game with the best odds of winning a jackpot of that size.  For some people, winning $10,000 in the Michigan Lottery would change their lives.  Others might look to larger jackpots of $100,000 or $250,000.

So what’s the easiest way to dramatically increase your odds of winning at the Michigan Lottery?  Maybe play a different game.  Classic Lotto 47 is a 6/47 game, and that puts your odds at about 1 in 10 million, with a payout for matching all 6 numbers at around $1.5 million.  Sure, the jackpots aren’t as big, but the odds of winning them are so much higher you could almost convince yourself it’s a sure thing..!

Eliminate One Number

The payout for a straight ticket is $250.  You won’t be quitting your day job, but it’s nothing to scoff at.  If we take the approach of ensuring that we have at least on number right, we’ll need to buy 10 tickets that have each number, 0-9, in one spot once. To put it another way, we buy our first ticket with a 0 in the first position, our second ticket with a 1 in the first position, and so on.  At $0.50 each, we’ve spent $5.00 on our plan so far.

Let’s look at the numbers now.  Since we know we have one number right, we only have to match the other two (in order).  That puts our odds at 1 in 100, or in other words we’ve increased the probability that we’re going to win $250 by 7.2 times by spending an additional $4.50.  If we look at it from the standpoint of marginal gain, each additional $0.50 is buying us just shy of a 1x greater probability of winning.

Box 3-Way

Another ticket you can play in the Michigan Lottery is the box 3-way.  That means to win you still need to match all three winning numbers, but order no longer matters. So buying a 1-2-3 ticket, you’ll win with 1-2-3, 2-1-3, 3-1-2, 1-3-2, 3-2-1, and 2-3-1.  Just taking order out of the equation gives you an immediate boost to your odds of winning, which are 1 in 120.  The ticket is still $0.50, but the payout is significantly less at $83.  If you use the same method outlined above and eliminate one number, your odds rise to an impressive 1 in 45.

Eliminate Matched Numbers

If you look at the Michigan Lottery results, almost 70% of the Daily 3 winning numbers are unmatched. This means that picking 0-0-0 or 1-1-1 will significantly reduce your odds of winning.  Or, if we take it a step further, picking unmatched numbers will increase your odds of winning. Combine this little nugget of information with your box betting and number elimination and you’ll be well on your way to winning the Michigan Lottery

The Michigan Lottery Mega Millions is what’s known as a 5/56 + 1/46 lottery. The odds of picking the winning number in this system are about 1 in 176 million, or in other words, you’re more likely to be stuck by lightning twice in one day. But by understanding the probabilities and statistics behind the Michigan lottery odds, you can significantly increase your chances.

A Basic Lottery System

Let’s start by trying to simplify things a bit. If you were to buy 11 tickets, you could make sure that you have every number, 1 through 56, on one if your tickets. Leaving the mega ball out of the equation, you would without a doubt have at least one ticket with one winning number on it. Guaranteed. This would cost you 11 dollars – an amount that some people play on a weekly basis anyway. In this scenario, you only have to match 4 other lottery balls and the mega ball. Your odds of winning the Michigan Lottery Mega Millions increase drastically to 1 in 16,895,340. This represents over a 10x increase of your likelihood to win. That’s a huge increase in probability. Granted, you’re still in the neighborhood of a single lightning strike, but you’re getting closer. Let’s take it a little further, though.

Based on statistical studies, the most probable outcome for a Michigan Lottery drawing is three odd numbers and three even numbers. In other words, when everything is said and done, 33% of the time there are three even numbered balls and three odd numbered balls on the tray. Also a lottery result with all non-consecutive numbers occurs just once every other week on average, and you can further increase the Michigan lottery odds by picking tickets with three high and three low number selections. This is also another common denominator in winning numbers over the years.

Finally, one of the biggest advantages you can give yourself is to know what the numbers were for the previous two weeks. The most probable combination will have no lottery numbers from the previous week, and no two numbers from the week before that. This immediately narrows your choices down and gives you some constraints within which to operate. While the odds are still astronomical, they’re not quite as bad as they were to start out with. Apply these tips, and your chance of winning the Michigan Lottery will be higher than ever.

The problem is that lottery sales seem to be dwindling. Growth for the past ten years has averaged 2%, with some years actually logging less sales than the year before. In 2003, Michigan Lottery contribution to the public school budget was $27 million less than it was in 2002. Why? Competition, for one. Private casinos are on the rise, along with internet gambling and sports wagering. For another, the Michigan economy is having big problems right now, and that leaves less money for “extras” such a Michigan Lottery tickets.

The issue with privatization is that it would severely limit the future revenues that the state would see from the lottery in trade for a one-time, huge infusion of money from its sale. Some estimates have that number in the billions, while others think more along the lines of a billion without the “s”. Some revenue could be replaced by applying the state sales tax the sale of Michigan Lottery tickets, but it would certainly never reach the level that we currently see.

So the main argument against privatizing the Michigan Lottery is that it’s a bandaid fix to a long term problem. A huge cash influx that could cover budget shortfalls for the next two or three years would get the current government off the hot seat, but we all know it’s only temporary, and we’ll be dealing with the same problem down the road. Except this time, the state will have comparatively little lottery revenue and no lump-sum cash from the sale to fix the problem.

The Michigan Lottery has contributed over $14 billion to the public school system over the past 34 years, and slowing growth or not, that’s a huge amount of money. To raise that magnitude of funding with our 6% sales tax, a privatized Michigan Lottery would have to sell $12.5 billion worth of tickets. Compare that with their 2007 ticket sales of $2.3 billion, run the numbers, and decide for yourself.

How Much Do I Need to Pay in Taxes?

Depending on what your financial situation is, you could pay as much as 50% in taxes on your lottery winnings. That includes state, local, and federal taxes. If you opt to receive your payout in installments, you must account for annual payments and any amount marked as interest on the unpaid portion of installments in income, as received. If you elect to receive the payout as a lump sum, you must include the entire lump sum in income in the year received. By law, if you win $5000 or more in the Michigan Lottery, 28% must be withheld for federal income tax purposes.

Huh?

That’s right, it’s a complicated mess when you win a lot of money from the state lottery. And it gets even worse if you bought the ticket with a group of people and want to distribute the money after the fact. If you’re not careful, you’ll get taxed for the initial winnings, and then the disbursement as charitable gifts. This is why it’s very important to properly form a lottery club if you regularly purchase tickets with a group of people.

Estate Tax on Michigan Lottery Winnings

With huge jackpots it gets even more complicated, as the payout may be over a logn period of time. If a lottery winner were to pass away near the beginning of that payout period, their estate would be valued at the present value of the total of all lottery winning payments yet to come. That means, it’s possible that your family may have to pay a huge amount of estate taxes on lottery winnings that they won’t have access to. You can see the problem – they may not have the means to pay the taxes.

Proper Planning

The bottom line is, know what you’re doing. If you’ve won a large payout, get professional help from an estate planner and tax attorney. The IRS does not accept any excuse when it comes to tax payments, and will have no mercy when prosecuting you to get the money they believe you owe.

While $750 million sounds like, and is, a huge amount of money to contribute to the state school system, in the big picture it’s only a fraction of the Michigan Department of Education’s annual operating budget.  In fact, based on a 180 day operating schedule, $750 million would pay for less than 20 days of operating expenses in 2007.  The remainder of the education budget is funded through the state’s sales tax, income tax, and property taxes that are specifically earmarked for education.

The Michigan Lottery offers eleven direct-games for players, Mega Millions, Classic Lotto 47, Fantasy 5, Keno!, Daily 3, Daily 4, Millionaire Raffle, Super Raffle, Club Keno, Pull Tabs, and Instants.  Online-only games include Millionaire Raffle and Super Raffle, and many second chance and raffle opportunities.

The vast majority of revenue (over 60%) for the Michigan Lottery comes from two sources:  Daily Games and Instant Games.  Following at a distant second and third are Club Keno and Mega Millions, at a combined 30%.

Retail Commission Structure

Michigan Lottery retailers receive a 6% commission on all tickets sold.  There is a somewhat-involved earning structure on winning tickets sold, the highest being a Mega Millions winner at a $50,000 commission for the retailer.  Depending on the game and the size of the payout, commissions can either be a percentage or a flat rate.

Online Lottery

The Michigan Lottery has an online lottery presence called Player City.  They offer numerous games there, both first and second chance.  They claim almost 150,000 users of the website, which includes coupons offers, chat opportunities, and member rewards.

Claiming Prizes

Prizes up to $600 may be claimed at your local lottery retailer, while prizes above that must be claimed at your regional lottery office.  These can be found in Detroit, Lansing, Saginaw, Wyoming, Sterling Heights and Dearborn Heights.  If your prize is greater than $50,000 you must claim it at the Michigan Lottery headquarters in Lansing.