Powerball lump sum???

[kornbread]

I just saw a Powerball winner on the morning news. He won 141 Million dollars. He took the lump sum and got 47 Million after taxes. Thats a 94 Million dollar difference.

I'm not sure what percentage of that 94 Mil was taxes, but that's a BIG difference. I've never looked into it myself, but I'm wondering why people give up so much money just to take a lump sum payment?

 

[Beerrific]

I would not look at it as losing $94 million but, I mean, $47 million is a lot. Even with less than smart management of that money, it will go a long, long way.

I would take a lump sum, open a brewery, and bury the rest.

 

[dataz722]

The lump sum is actually half of the annuity payout. So it should have been right around 70 million. I would assume the 47 was after taxes from the 70.

If I ever won I would always take the lump sum. The way the annuity works is you get a set amount per year, no matter what the total winnings were, the they pay the remaining lump sum after 30 years. The biggest problem with that is you are the only one that can collect it. If you die someone can't inherit it.


Plus with the lump sum you can then invest it and get earning off of it yourself instead of the state keeping that.

 

[Bobby_M]

A lot of people are never introduced to the concept of future value of money and that's why a reduced lump looks like a ripoff. Money in your hands right now is worth a lot more than the same amount in the future. Well... unless you suck with money. If you're the type of person who thinks getting a big tax refund every year is a great idea, you might want to take the annuity.

 

[david_42]

Taking the annuity only makes sense if you are A. Bad with money (and I suspect most people who buy lotto tickets fall into this category) B. likely to live that long. The only two couples I've known that won "big" both ended up in bankruptcy within 18 months.

You can take the lump sum and buy your own annuity. Your total take is less, but there's no limit on the time AND the money is available to your heirs.

There's a local who hit for $6M. He took the annuity, since he's only 35 and has two young kids. He is also smart enough that he's putting 50% into investment funds every year. I bet his ex is kicking herself.

 

[johnnyboy1965]

Please can you explain this. If you win do you get the option of xxx amount straight away or you can have xxx amount over xxx years?

 

[johnnyboy1965]

Sorry, Ive just read dataz722 reply

 

[dataz722]

Please can you explain this. If you win do you get the option of xxx amount straight away or you can have xxx amount over xxx years?

Yeah, pretty much with the only difference being that the amount of money you get every year is not Dependant on the total amount, it is decided by your state. Then after 30 years you get whatever is left in a lump sum.

 

[adx]

The lump sum is always the better option. You know what you're getting now and not 30 years down the line.

The taxes usually work out to be around 40-45% depending upon the state you're in.

 

[remilard]

If you are young, in the current interest rate environment, the annuity has a higher market value. This doesn't really help you much if you want all the money now, as you are not allowed to sell the annuity. You would not be able to find an investment with a guaranteed return sufficient to make those payments to yourself, however.

 

[weirdboy]

Frankly I think if you win a jackpot that large, the lump sum is meaningless. What can you do with a lump sum $47 million that you couldn't do with a $2+ million guaranteed annuity?

The only answers I can think of involve a lot of stupidity.

 

[McKBrew]

Yeah, it's funny. You think you are getting ripped off by taking the lump sum, but really I'm pretty sure $47 million dollars would take care of things just fine.

 

[dataz722]

Frankly I think if you win a jackpot that large, the lump sum is meaningless. What can you do with a lump sum $47 million that you couldn't do with a $2+ million guaranteed annuity?

The only answers I can think of involve a lot of stupidity.

I think the max annuity is $500,000. I don't know about you but if I hit the powerball I would want to buy a house worth more than $500,000 and I wouldn't want to take a loan.

 

[caver95]

I would have my lawyer take the lump some on my behalf. I would not tell anyone, but they might know something is up when I quit working, and travel all over the world.

 

[Houblon]

Take the lumpsum and leave the country never to seen again

 

[ChshreCat]

I sat down once and did the math and if you took the lump sum you could invest it, withdraw the interest from it each year and roll the principle over. The interest would be close to if not the same as the annual annuity payments but after 30 years you would still have the lump sum and the payments would continue instead of stopping. That made the choice obvious.

 

[Beerrific]

I sat down once and did the math and if you took the lump sum you could invest it, withdraw the interest from it each year and roll the principle over. The interest would be close to if not the same as the annual annuity payments but after 30 years you would still have the lump sum and the payments would continue instead of stopping. That made the choice obvious.

Good work on the math. Now you just need to win....

 

[remilard]

I sat down once and did the math and if you took the lump sum you could invest it, withdraw the interest from it each year and roll the principle over. The interest would be close to if not the same as the annual annuity payments but after 30 years you would still have the lump sum and the payments would continue instead of stopping. That made the choice obvious.

No way, not even close. That would require about 7% after tax return. If you could do that 30 years in a row, you wouldn't need a lottery ticket to be a millionaire.

 

[caver95]

No way, not even close. That would require about 7% after tax return. If you could do that 30 years in a row, you wouldn't need a lottery ticket to be a millionaire.

I can do it, Would you like to invest in the Leone small cap fund?

 

[HoppyDaze]

Frankly I think if you win a jackpot that large, the lump sum is meaningless. What can you do with a lump sum $47 million that you couldn't do with a $2+ million guaranteed annuity?

The only answers I can think of involve a lot of stupidity.

Don't quit your day job....

 

[weirdboy]

I think the max annuity is $500,000. I don't know about you but if I hit the powerball I would want to buy a house worth more than $500,000 and I wouldn't want to take a loan.

First off, I don't think the limit on the annuity is true, at least according to the powerball website.

Second, I don't see much difference between taking a loan against a guaranteed annuity, and buying the house outright. Most people pay for houses with loans. And, it might help to keep you from buying a much larger house than you can afford if a bank refuses your application for that $30 million estate.

And there's nothing that says you cannot pay down the loan earlier, thereby saving you most of the interest costs.

 

[ChshreCat]

I'd think that with that much cash/income you could get a killer interest rate on a loan. Then invest the money you'd spend on the house in something with a higher return than your interest rate. When the loan's paid off, you still have the cash you set aside for the house.

 

[dataz722]

First off, I don't think the limit on the annuity is true, at least according to the powerball website.

I just looked again and that 500k was for the 20 million jackpot. I can't find how it is calculated. That 500k is also if your state doesn't tax lottery winnings.

 

[McKBrew]

When I win the lottery this week, I'll let you all give me advice on how to invest it. :rockin:

 

[samc]

One of the issues with the annuity is that the government might have spent the money and gone broke before you see it.

 

[HPDrifter]

Here's the CRAP part of it. The cash payout is $70 Million, but you have to pay $23 MILLION in taxes... Trouble is that every single penny that you won had JUST had taxes paid on it before people bought the tickets. Of course it will have taxes paid on it AGAIN as soon as you spend it... Buy a $1 million Boat, then ask the seller if he's going to pay taxes on it. Lovely system eh?

At least in AUS, the winnings are tax free....

 

[johnnyboy1965]

All winnings in the UK are tax free as well.
What does make me smile is that if you ask anyone, any nationality, what they would do the answer is allways the same. ..."quit work, quit the country and buy a big house"

Where on earth do all these rich b******s go?

 

[caver95]

All winnings in the UK are tax free as well.
What does make me smile is that if you ask anyone, any nationality, what they would do the answer is allways the same. ..."quit work, quit the country and buy a big house"

Where on earth do all these rich b******s go?

I think the likely hood of anyone on this board with the only winning the power ball ticket is about as likely as me drinking 5 gallons of the stout I just bottled, a few onces of Chinook and pissing out DFH 90.

But if anyone does win, I would like to do to North Western's JD/MBA program it is only around 100k per year for four years, I could be a nice tax write off

 

[Houblon]

Where on earth do all these rich b******s go?

I recall this guy from AUS who won and then went to Thailand to become a professional gambler and got even richer.

 

[adx]

Buy a $1 million Boat, then ask the seller if he's going to pay taxes on it. Lovely system eh?

Actually he would. Or he might be able to claim it as a loss.

 

[homebrewer_99]

The way I see it is there are two benefits when taking a lump sum.

One's already been mentioned...1) take the money and run before the State runs out of the $$$, and 2) after you've paid your taxes what remains is all yours never to be taxed again...unless you buy those taxable luxury items such are cars, houses and boats, etc.

Of course with #2 you'll only need to pay taxes on your gained interest...and only a percentage of that.

 

[McKBrew]

My Nigerian banker friend keeps trying to get me to claim my winnings every day.