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
Intel, Coca-Cola, and Home Depot are all Motley Fool Inside Value recommendations. To find more of the best companies in Wall Street's bargain bin, try our newsletter free for 30 days.
Longtime Fool contributor Selena Maranjian owns shares of Home Depot and Coca-Cola. You never have to bet on The Motley Fool's disclosure policy.
