I'm sure you've heard plenty of examples of bad financial decisions, some of which can be hard to believe. But this one may beat them all: stealing millions from the boss, only to blow it on the lottery.
In New York state, a woman named Annie Donnelly worked as a bookkeeper at a physician's office, embezzling $2.3 million over the past few years. So far, so good, right? I mean, I can sort of imagine how, if I had no scruples and no conscience and a few other deficiencies, that might seem like a sensible thing to do. After all, $2.3 million could shrink your financial worries considerably, I'd think.
But Ms. Donnelly thought differently. With that accumulated $2.3 million in hand, she risked it all for more. That's right -- $2.3 million wasn't enough. She used it to play the lottery, spending as much as $6,000 per day on lotto and scratch-off games.
Permit me a little digression here. If you've ever thought it was a shame that you were only spending $5 or even $50 on lottery tickets, and that with more money played, you'd surely win more, think again. Donnelly bought more than $2 million worth of tickets, but had little to show for it. Investigations suggest that she might have won a few tens of thousands of dollars, but that still represents a major net loss.
Now imagine playing Powerball, where the jackpot's odds are around 1 in 146 million. If you bought two million tickets, your chance of victory would not be suddenly very compelling. If each of the two million tickets had a different number, your odds would become 1 in 73. Much better? Yes. Likely to win? Hardly. And you'd be out $2 million! (OK, perhaps you'd end up winning $1 million in dribs and drabs, on which you'd be taxed.)
So let's return to Ms. Donnelly now. Imagine if you had $2.3 million. If you opted to invest it in the stock market, and you earned the historic average annual return of about 10%, it would turn into nearly $6 million in just 10 years. In 15 years, it would grow to close to $10 million. In 20 years, more than $15 million. In 25 years, about $25 million. In 30 years . $40 million!
If you didn't have the patience to wait just 10 years, you could still get a lot out of $2.3 million -- that's what retirees do, after all, with their nest eggs. If you withdrew 4% per year from that sum, you'd have a whopping $92,000 in the first year alone. That seems like a generous amount to live on, considering you didn't even work much for the money.
Sidestep the lottery on your way to security
So what's a good takeaway from this madness? Well, let's scratch crime, theft, and dastardliness off our list of retirement-planning strategies, for starters. Next, realize that you probably still have enough time to make your retirement much more comfy. To learn more about how to make smart retirement-planning decisions, check out our Rule Your Retirement newsletter, my most frequent source of retirement guidance, which you can try for free.
Here's a sampling of useful articles from past issues:
- In the January 2006 issue, newsletter editor Robert Brokamp tackled asset allocation, explaining how we can "avoid Uncle Sam's grabby hands." He listed a host of popular investments, such as bonds and dividend-paying stocks, in order of tax efficiency.
- In the May 2005 issue, readers were taught how to withdraw money prudently in retirement, in order to make it last.
- The October 2005 issue delved into dividends and offered some recommended dividend payers. (Robert also discussed dividends in this article and this one, mentioning firms such as Intel
(NASDAQ:INTC), Home Depot (NYSE:HD), American International Group (NYSE:AIG), Coca-Cola (NYSE:KO), and Harley-Davidson (NYSE:HOG).)
These articles may also be of interest:
- Can You Retire in 2016?
- Prepare for a Gruesome Retirement
- $1 Million May Not Be Enough
- 9 Retirement Killers