If you won the lottery...

[oiprocs]

...would you choose one lump sum or annual payments for 26 years?

If you choose lump sum, you get the cash value of the lottery, which is somewhere around 55%, I think. For example, a $46 million lottery would have a one lump sum value of $26 million. You pay a one time 25% tax on that lump sum value, i.e. you would get $19.5 million.

If you choose annual payments, your first payment is 2.6% of the total amount you won, and increases thereafter by .1% each year until the 26th year, at which point you get the final payment at 5.1% of the total amount. You pay tax annually on the payments you receive.

Edit:
Moved to Off Topic
AnandTech Moderator - RebateMonger

 

[oiprocs]

Oops. Move to off topic please?

 

[teclis1023]

payments.

 

[irishScott]

Payments FTW!

 

[secretanchitman]

payments!

 

[randay]

payments if you are young. lump sum if you are old. possibly also lump sum if you are young.

 

[rh71]

I can't pass up the lump sum. Who the hell knows what's going 10-15 years from now. I want to enjoy it all, now.

 

[Ricemarine]

Payments...

having too much money at once is NOT a good thing.

 

[sandorski]

Up here in Canada Lotto winnings are Tax Free, so there's no difference there. However, I'd probably still choose Payments just to protect myself and to keep my spending sane(ish).

 

[Finns14]

I think you get a lump sump and then just make the money work for you through sound investing.

 

[Jeff7181]

I voted for payments because I wouldn't want all the money all at once. If I suddenly have $20 million I'd be more likely to piss it away.

 

[BoomerD]

Once upon a time, I'd have taken the payments, because you do end up getting a larger amount that way, but nowadays, I'm too dammed old, and probably won't be around for 26 more years, so when I play the Lotto, it's for the lump-sum amount.

 

[BigJ]

Lump sum and I'd buy myself a unicorn.

 

[theprodigalrebel]

$1,196,000.00
$1,242,000.00
$1,288,000.00
$1,334,000.00
$1,380,000.00
$1,426,000.00
$1,472,000.00
$1,518,000.00
$1,564,000.00
$1,610,000.00
$1,656,000.00
$1,702,000.00
$1,748,000.00
$1,794,000.00
$1,840,000.00
$1,886,000.00
$1,932,000.00
$1,978,000.00
$2,024,000.00
$2,070,000.00
$2,116,000.00
$2,162,000.00
$2,208,000.00
$2,254,000.00
$2,300,000.00
$2,300,000.00

I'll take these payments up until 2033. (You get the whole $46 million if you choose payments, right?)

 

[compuwiz1]

At almost 50, I'd take the lump. The chances of guys my age being around for 20 years greatly diminishes, with each passing year.

That said, I would invest, then buy as much property that my income from the investment would let me mortgage, never touching the principle. I would take what I could reasonably enjoy, but not to excess. That's how estates are built.

 

[xeemzor]

If you are younger, wouldn't you make more in the end by just investing the lump sum than taking payments?

 

[Bill Brasky]

Originally posted by: theprodigalrebel

$1,196,000.00
$1,242,000.00
$1,288,000.00
$1,334,000.00
$1,380,000.00
$1,426,000.00
$1,472,000.00
$1,518,000.00
$1,564,000.00
$1,610,000.00
$1,656,000.00
$1,702,000.00
$1,748,000.00
$1,794,000.00
$1,840,000.00
$1,886,000.00
$1,932,000.00
$1,978,000.00
$2,024,000.00
$2,070,000.00
$2,116,000.00
$2,162,000.00
$2,208,000.00
$2,254,000.00
$2,300,000.00
$2,300,000.00

I'll take these payments up until 2033. (You get the whole $46 million if you choose payments, right?)

Anybody know what kind of taxes you'd be paying on these amounts?

For the McDonalds monopoly game it was better to take the lump sum because the payments didn't change and more money could be made off the interest of the lump sum.

edit: I would take the payments here though. 20 Million for not being able to wait is ridiculous.

 

[aplefka]

I voted payments for this specific example because it's a large enough amount that inflation wouldn't kill it over the years, plus I hope that I'll be around for another 26 years.

If it was a smaller amount, I would have to reconsider.

 

[xeemzor]

Originally posted by: Zaitsev

Originally posted by: theprodigalrebel

$1,196,000.00
$1,242,000.00
$1,288,000.00
$1,334,000.00
$1,380,000.00
$1,426,000.00
$1,472,000.00
$1,518,000.00
$1,564,000.00
$1,610,000.00
$1,656,000.00
$1,702,000.00
$1,748,000.00
$1,794,000.00
$1,840,000.00
$1,886,000.00
$1,932,000.00
$1,978,000.00
$2,024,000.00
$2,070,000.00
$2,116,000.00
$2,162,000.00
$2,208,000.00
$2,254,000.00
$2,300,000.00
$2,300,000.00

I'll take these payments up until 2033. (You get the whole $46 million if you choose payments, right?)

Anybody know what kind of taxes you'd be paying on these amounts?

For the McDonalds monopoly game it was better to take the lump sum because the payments didn't change and more money could be made off the interest of the lump sum.

edit: I would take the payments here though. 20 Million for not being able to wait is ridiculous.

Over 20 years the money will loose a decent chuck of it's value due to inflation and you also loose out on the opportunity to make gains via investing.

 

[WhoBeDaPlaya]

...I would quit grad school

 

[Falloutboy]

lump sum and chuck it into a safe investment. even 5-10% yearly (which should be fairly doable) would be more than the payout over that length of time even if you spent the 5-10% every year

 

[randay]

Originally posted by: xeemzor
If you are younger, wouldn't you make more in the end by just investing the lump sum than taking payments?

you would probably make much much more by investing the payments instead of the lump sum, you lose 20 mil right off the bat with the lump sum.

 

[nageov3t]

Originally posted by: WhoBeDaPlaya
...I would quit grad school

that's funny, I'd *start* grad school

I'd take the payments... not only would it be less money in the end, I'd have an excuse to tell all the distant family members looking for money to shove off.

I'd probably splurge a bit (buy a vacation house, get a new car do something nice for my parents, sister, and the two cousins I actually like, etc) but invest a good chunk of the rest for my long-term needs (ie: retirement... I don't think I'd retire straight away, but I'd probably get into a low-paying field to do something that I actually enjoyed).

 

[oiprocs]

Originally posted by: Zaitsev

I'll take these payments up until 2033. (You get the whole $46 million if you choose payments, right?)

Anybody know what kind of taxes you'd be paying on these amounts?

No, you don't get the whole $46 million. Normally, tax on an annuity will be less than that on a lump sum, because of the lower rates on lower income brackets. However, you're also gambling on today's tax rates being as high or higher than future tax rates ? any future change in tax rates could screw up your calculations. If you're already in the top bracket (and if you are, why are you buying lottery tickets? ), then the tax treatment for the lottery would be the same, whether lump sum or annuity.

 

[SandEagle]

Originally posted by: WhoBeDaPlaya
...I would quit grad school

i would go to grad school.....all that extra time i'll have on my hands. i'd have the uni name a building after me