Question about the lottery
June 25, 2015 at 12:02 pm #134851ozobParticipant
It seems like when most win the big PowerBall or Mega-whatever lotteries
they chose the lump sum that is roughly half the value of the total prize.
It seems to me that taking the 20-30 year annuity option would make more sense.
You get a much larger total payout. You don’t have to try to figure out how to invest all the money at once, hoping it will grow as much as the annuity would. There would be less temptation for your heirs to want to talk you out of a good chunk of your winnings for their ‘can’t loose’ investments. 🙂
If you are stupid and blow it the first payment or get conned out of it, you still have the remaining money you will get over the following years to use.
What do you think?
If you won 100 million lottery, how would you want to receive the money? and why?June 25, 2015 at 3:53 pm #134915Dan SchointuchKeymaster
It’d depend on how exactly the math works out, but I’d probably take the lump sum and invest it myself in low-fee passively managed index funds. And I’d try to withdraw no more than 2% of the value each year to allow it to continue to grow.June 25, 2015 at 5:36 pm #134941CynicFan0329Participant
Most people who win big file bankruptcy within 8 years because they change their lifestyle. The best and hardest thing to do is to wait one calendar year after taking the money to figure out what you want to do. Get financial guidance from Fee Only advisors-stay a long way from anyone who is commission.
The problem with the long term payout is that if something happens, the rest of the money is gone, unless you set up a perpetual trust to receive the income. So a car accident, a bad ski trip, etc and the money stream is gone, not given to your estate, it just stops. That is the biggest reason to take the money now.June 30, 2015 at 11:41 am #135503JWilkesParticipant
I would take the lump sum payout. Pay the taxes up front, payoff any and all debt, invest the balance and live off the interest. If I won $100 million / take the $50 million pay the government say 40%, this leaves $30 million to invest. At a meager 4% that is $1.2 million per year in interest. I can’t image needing that much money every year to live and have fun on. I am always amazed how people can spend all that money. It’s not about spending everything its about being able to really enjoy life and have great experiences.July 21, 2015 at 6:48 pm #138195ozobParticipant
I am pretty sure the annuity payments are part of your estate after you die.
So you can will them to whoever you want. The money doesn’t just go poof when you die.
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