Stick with the Safe Bets

04/02/2012 9:15 am EST


Terry Savage

Author, The Savage Truth on Money

Instead of wasting money on lottery tickets, you can wager on retirement plans that pay off a lot more often than 176 million to one, writes personal finance expert Terry Savage.

So you didn’t win the Mega Millions jackpot, but you sure had fun trying! I know, because I bought a few tickets myself. All told, Americans bought $1.5 billion worth of lotto tickets—a relatively cheap dream for a few hours or days.

It made sense at the time, from an emotional point of view, to spend a buck to buy that dream—despite the incredibly long odds of winning. But in reality, we should have focused on the much shorter odds that will impact our lives and our futures.

The Sure Thing
For example, it is a 100% sure thing that we will die. That’s not being morbid; it’s just a fact of life. We are born, we live, and we die. And in between we live our lives.

Most people agree that life would be better with at least a little more money than we have right now. If you’re completely satisfied with the amount of money you have now—and are likely to have when you get older—then you are among the relatively few.

But given the vast majority that would like to have more money—as demonstrated by the lotto-mania—it’s surprising that relatively few people are doing something to improve their odds of success.

And those odds of improving your financial life are a lot shorter than the long shot of the lottery. Behavioral psychologists will tell you that people buy tickets for huge lotto jackpots because the potential reward of the lottery is so awe-inspiring.

But when you think about it, wouldn’t you settle for winning the bet that you’ll have a secure retirement? You have much more control over those odds. Yet many people fail to put the odds on their side.

According to a new study by the Employee Benefit Research Institute, just 14% of workers surveyed are very confident they will have enough money to live comfortably in retirement. And the survey consisted of workers who had access to retirement plan benefits.

And the study shows that way too many employees fail to put the odds on their side:

  • Only 76% of workers offered a 401(k) or similar retirement saving plan at work contribute to the plan. In the survey, the majority of non-users made the excuse that they “couldn’t afford” to contribute. But odds are that many of them bought more lotto tickets than they could reasonably afford.
  • Many corporations report that a significant percentage of workers fail to take full advantage of “matching contributions” because the employee does not contribute enough. How’s that for leaving money on the table?

It’s a strange fact of human nature: People fail to take advantage of a “sure thing” while they ignore reality to pay for a long shot—if the long shot is significantly attractive and life-changing. As if having money in retirement by a regular program of saving wouldn’t be a game-changer. Think about it!

Playing the Odds
There are other financial odds we fail to consider. There are longevity odds, for example. We worry about contracting a dread disease and dying—when the odds say we are likely to live longer. And those odds change as we grow older.

For example, according to the Social Security actuarial tables, a one-year-old male is likely to live 75 years, and today’s one-year-old little girl is likely to live for 80 years.

You might be tempted to think that your odds are worse because you are older. But the reverse is actually true. The longer you live, the greater the odds you will live longer—up to a point!

Odds are today’s 70-year-old male will live another 14 years, longer than the predicted life span of today’s baby. And today’s 70-year-old woman is likely to live another 16 years, according to the actuarial tables. But relatively few people are planning their retirement security to last into their mid-eighties!

Here’s another set of odds you should consider. Once you’ve reached age 65, there is a ten times greater chance that you’ll need some sort of “custodial care” than that your house will burn down. But everyone keeps paying for homeowners’ insurance, while relatively few insure for the greater likelihood of spending a lot of money on non-critical care.

Which brings us back to those incredibly huge odds of the Mega Millions jackpot: 176 million to one. As one unlucky player found out, the odds of being hit by lightning are truly far smaller. After purchasing his lottery ticket, and joking about those odds, a Kansas man was struck by lightning just hours before the drawing. Odds on that: 775,000 to one.

If you’re wondering about odds on something, go to, where you can get the real odds on most things. But knowing the odds won’t help, if you don’t arrange your life to take advantage of them. And that’s The Savage Truth.

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