If you were to win the lottery...

[b0mbrman]

Originally posted by: amish
time value of money says cash.

That's the right way to think, but the lump sum is always smaller...

 

[K1052]

Originally posted by: chrisms

Originally posted by: K1052

Originally posted by: chrisms
I don't see why it is stupid to take the annuity. If I had $1000/month I'd be set. The lottery pays much more than that usually so I would be completely comfortable. Taking the lump sum, while it may have a greater return, is still a risk I'm not willing to take because the benefits aren't worth it.

It isn't always about getting the highest dollar amount. Sometimes its better just to sit back and know for certain that you've got it made. With the excess money from the annuity I could invest and double the amount of time I'm being supported. By the time that runs out I'm almost dead.

No offense, but how old are you?
$1000 a month won't even cover my mortgage.

I'm 20. I wouldn't want a house if I had a plan that would give me lifetime annuity (assuming like I said I invested the excess to keep it going longer). I travelled for a few months, some places cost $1500 and others cost $500 a month to live good. There is nothing more I'd like than to keep travelling but the problem is having a steady income to support it, which the annuity would solve.

Now lets say, like I'm sure the older folks will tell me, that I eventually want to "settle down" and get a house and kids and all that. Well after 10 years of doing whatever I want, I come back and still get a few thousand a month to get me back on my feet while I find a job to create more of a steady income. Depending on my luck I could get a decent paying career in the travel industry with that experience and if you add on the annuity + investments I should be comfortable until I die.

I know I'm looking to far into this I just didn't want you to blow off my idea of living on an island in the Phillipines sipping on a cold San Miguel

Hey, to each his own. Though I somehow doubt you won't come upon at least some unexpected expenses over the course of a decade.

 

[K1052]

Originally posted by: ElFenix

Originally posted by: dullard
Ok, I did the math for a smallish lottery. Here are my assumptions:
<snip>

progressive income taxes are a bitch, basically.

with the lump sum, almost all of your money is taxed at the highest marginal rates
with the annuity, much less is taxes at the highest rates.

makes sense to me.

Though as he said if the size of the win increases, the advantage sildes more to the cash payout.

Personally, being actually able to control my money has it's own appeal as I might decide to buy a business or a large stake in one with it (I have something specific in mind had I the required funds).

 

[Lumathix]

Cash.
And invest the crap out of it.

 

[mcurphy]

Originally posted by: Icepick

Originally posted by: dullard
Financially speaking only, take the cash.

For virtually all other reasons, you are a moron to take the cash. You are already set for life, so you don't have to worry that you MIGHT make better investments by taking the cash. Look at all those people who did take the cash and how a huge chunk of them had miserable lives and many are now bankrupt. Money corrupts. The only way to avoid it in this situation is to NOT take the cash. Take the annuity if you are smart.

Link please? I'd be interested to know how many lottery winners had their lives changed for the worse after winning.

I'v e heard this before as well. Many times lottery winners have wound up in huge debt and prison within just a few years of winning.

Here's an article I dug up Text

"For many people, sudden money can cause disaster," says Susan Bradley, a certified financial planner in Palm Beach, Fla., and founder of the Sudden Money Institute, a resource center for new money recipients and their advisors.

"In our culture, there is a widely held belief that money solves problems. People think if they had more money, their troubles would be over. When a family receives sudden money, they frequently learn that money can cause as many problems as it solves," she says.

 

[sager66]

Originally posted by: dullard
With the cash out.
[*]Cash out is $2,064,725 (the initial annuity value).
[*]After tax, you have $1,258,991 to invest.

Another investment option . .
Around 7% High-Yield Bond Fund would return roughly $88,000 annually (before taxes and subject to market fluctuations).

 

[Bateluer]

Cash, reinvest after paying off all my current debts.

 

[HardcoreRobot]

depends how much, for me

 

[AStar617]

Originally posted by: vi_edit
Straight cash homey.

"How Randy Moss Paid His NFL Fines" answer FTW. :beer:

 

[Muadib]

Originally posted by: thirdeye
Cash. Reinvest.

 

[Vampirrella]

always take the cash. Upon death, it is not transferrable to next of kin. You only live once, the future is very uncertain lol

 

[bennylong]

Take the cash and put half of it in an Irrevocable Trust so you don't ever have to worry about being poor again like more than half the lottery winners that somehow lose it all in less than 5 years.

 

[bennylong]

Who knows what the tax law will be in 40 years. They might jack up the tax rate to 70% for upper income to support SSI and all those emo kids that are now in their 60's and didn't save for retirement because they spent it on eyeliners.

 

[FreshPrince]

cash

buy nice house in country club

run high-end escort service for $10K a trick

:laugh: J/K!

 

[novasatori]

Originally posted by: dullard
Ok, I did the math for a smallish lottery.

...

so what if you take the lump sum and invest it into tax free bonds

 

[kranky]

I'd take the cash and not worry about screwing it up. But I wouldn't blame anyone who felt better about taking the annuity.

Cash up front would let me take care of some family who could use the help.

 

[Icepick]

Originally posted by: mcurphy

Originally posted by: Icepick

Originally posted by: dullard
Financially speaking only, take the cash.

For virtually all other reasons, you are a moron to take the cash. You are already set for life, so you don't have to worry that you MIGHT make better investments by taking the cash. Look at all those people who did take the cash and how a huge chunk of them had miserable lives and many are now bankrupt. Money corrupts. The only way to avoid it in this situation is to NOT take the cash. Take the annuity if you are smart.

Link please? I'd be interested to know how many lottery winners had their lives changed for the worse after winning.

I'v e heard this before as well. Many times lottery winners have wound up in huge debt and prison within just a few years of winning.

Here's an article I dug up Text

"For many people, sudden money can cause disaster," says Susan Bradley, a certified financial planner in Palm Beach, Fla., and founder of the Sudden Money Institute, a resource center for new money recipients and their advisors.

"In our culture, there is a widely held belief that money solves problems. People think if they had more money, their troubles would be over. When a family receives sudden money, they frequently learn that money can cause as many problems as it solves," she says.

Great link. Thanks!:thumbsup:

 

[TheVrolok]

Not even a question. Cash.

 

[BoomerD]

At my age...CASH NOW! Once upon a time, I thought it made sense to take it as an annuity. Consider how they do it in Kahleeforneeya...

Cash Option
If you select the Cash Option, you will receive an amount equal to the net proceeds of the sale of bonds purchased to fund the 26 annual payments for that prize. This will be a single lump sum payment and is estimated at 45% to 55% of the jackpot amount.

Annual payments
If you choose the annual payments option, you'll receive the SuperLotto Plus jackpot in 26 graduated annual payments.

Taxes.
There is no state tax on Lottery winnings. If you choose "Cash Value," federal tax will be withheld from your winnings at the rate of 25% for US citizens and 30% for all others. If you choose the "Annual Payment" option you will be responsible for paying federal tax on an annual basis and the rate will vary year to year.


So, if you take the cash value, you get between 45% and 55% of the advertised jackpot, PLUS, you have to pay federal taxes on that amount. Using $10 million as an example, you'd get $4,500,000 to $5,500,000 BEFORE they take out the 25% tax witholding, leaving you with $3375000 to $412500. Taking it as an annual annuity, you'd get the entire $10 million spread out over 26 years, and you just have to pay the annual taxes (which you still have to pay on the lump sum)... Pretty substantial difference, again, providing nothing changes, and you live to collect it all...

 

[mithrandir2001]

Annuity.

Getting all the cash at once will ruin you. It is very easy to squander away.

With an annuity, you gain exactly what you should hope to get from winning the lottery: peace of mind and freedom. Those checks will come in for years so if you "blow it" at first, at least you get many other shots. Having a steady stream of income for much of your life allows you to focus on things that are important to you, without worrying about money.

If you get all the money at once you have the added worry of wealth management and preservation...and people hounding you for a piece of it.

With an annuity you have less to consider; it's more like auto-pilot. You also pay less taxes because you don't receive one huge windfall of cash.

 

[everman]

The smartest way to go is to take the cash. If you want to make sure there's some left for your kids, spouse, etc., even if you go crazy some day, just set up an irrevocable trust for that portion. IE: set up an irrevocable trust for your children for a few million, all invested very securely and managed by professionals. They will be allotted money based on instructions in the trust, such as education expenses and whatnot. Now you don't have to worry about wasting money you wanted to give to them.

I think the problem is that people who win often are blinded by their newfound wealth and feel like it can go on forever.

 

[silverpig]

Originally posted by: dullard
Financially speaking only, take the cash.

For virtually all other reasons, you are a moron to take the cash. You are already set for life, so you don't have to worry that you MIGHT make better investments by taking the cash. Look at all those people who did take the cash and how a huge chunk of them had miserable lives and many are now bankrupt. Money corrupts. The only way to avoid it in this situation is to NOT take the cash. Take the annuity if you are smart.

It still doesn't work. There was a story recently of a guy who took the annuity and then got greedy. He did a loan type thing where he basically sold the annuity payments to a company for an even crappier lump sum. He blew through it all, and there ya go.

Taking the annuity won't prevent stupidity. If someone's an idiot anyways, they'll find a way to spend it.

 

[AlienCraft]

cASH MONEY!

 

[sager66]

Originally posted by: BoomerD
If you choose "Cash Value," federal tax will be withheld from your winnings at the rate of 25% for US citizens and 30% for all others.

Depending on amount, Federal tax obligation may be up to 35% . . Tax Rate Schedules

 

[wiredspider]

Cash of course, technically it's all suppose to come out the same, but I would prefer having it all now to do with whatever I want. There's no telling what happens a year from now and all...