I live in Arkansas, which has no lottery at all. However, I live about an hour and a half from Missouri (a Powerball state); and Illinois (a MegaMillions state) is only another hour away. I just started playing the lottery, making a ticket-buying trip every seven weeks. Lotteries make no sense as gambling (the odds are way too low); but, if someone is giving away millions of dollars several times a week, it makes no sense not to buy a ticket. 1:135,145,920 is infinitely better odds than 0 -- a point that lottery-bashers frequently overlook -- and a few bucks a week is practically nothing. I spend about $10 per week, gas included, buying 15-week multidraw tickets in both multi-state lotteries and in the lotto game in each state.
I hope Tennessee passes the lottery referendum in November!
When I calculate the expected value of a ticket, I take into account both the cash option for the jackpot (est. 55%) and the tax bite (est. 40%, federal, state & local). It's not realistic not to. Thus, I figure I'll get to keep about a third of any jackpot I win. When you do this, the jackpots have to be immense for the expected value of a ticket to equal the $1 purchase price. The Missouri Lotto game starts with a jackpot of $1 million and increases about $100,000 every draw until it's won; and the expected value of a ticket doesn't reach $1 until the jackpot is just over $28 million. For the MegaMillions lottery, the jackpot has to reach about $365 million.
How much can you live on? It depends on your goals. Do you want to keep your principal? Do you want your money to grow? One source states that, over the long term, the stock market increases 10.2% per year, while inflation is 3.9% per year. This means your money has to grow at least 3.9% per year on the average just to maintain its value. I use the following approach in my dreaming:
Assume 10.2% annual growth & 3.9% annual inflation (net 6.3% annual growth). Now, set aside another 3.9% for real growth, so that the principal will double in real worth every 20 years or so. Whatever is left (2.4%) is available to live on. Using the "first in, first out" rule, I assume I won't be paying taxes on my withdrawals. So, if I want to live on $5,000 per month, I need a starting principal of $2,657,440. About $3 million net -- i.e., cash option, after taxes. For me, this means a $9 million jackpot.