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Old 01-05-2014, 05:11 AM   #21
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Those aren't the numbers though. Even with higher interest rates I think you got at least half the money in a lump sum (unless by 100+ you really mean 150 or so). With much lower interest rates it's a lot more. Mega Millions Lottery Jackpot: Should You Take the Lump Sum or Annuity? - ABC News says that a $500M jackpot less than 2 years ago would pay $359M lump sum--both amounts before taxes. Spreading the amount over multiple years doesn't help that much with taxes since nearly all of it will be in the top bracket each year anyway. That article says it's a no-brainer to take the lump sum from a financial standpoint. You could argue that people would probably manage the money better getting 1/20th each year, but you also hear of people who wind up selling off their future payments to pay debts, probably at an even worse rate.
Ah that makes sense now. I was thinking the discount rate was a around 4% since 30 year treasury bonds are at 4%, but if the interest rate is based on the Fed discount rate than yes I see why you'd take the money up front.
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Old 01-06-2014, 10:20 AM   #22
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The thing that amazes me is why do almost all the lotto winners take the lump sum? I've never done that math and maybe the interest rate they offer on the annuities is awful. But if you won $20 million, $1 million a year should be plenty for anyone and if you screw up and spend it all in the first couple of year hopefully by year 5 or so you'll get a clue about being rich.

So when we are talking $300 million or $15 million a year why you would elect to the $100+ million lump sum (and pay all the taxes up front) is incomprehensible to me.
For me, I'd take the lump sum. Mainly because I've always been a "bird in the hand is worth two in the bush" kind of person. For example, I'd rather have $5 million today than $10 million a couple years from now.

A lot can change in a few years, including somebody's health, and I'd want everything up front so I can enjoy it now, and invest it myself, rather than waiting 20 years (or whatever the average lottery annuity runs for) to collect. Also, I'd worry about whether the company that's providing the payments would go bankrupt, out of business, etc, and leave me with nothing. I'd hate to get only a couple years payments and then find out the annuity was owned by a Bernie Madoff type company that went belly-up.

However...I'd bet the vast majority of people would be better off with an annuity if they're bad financial planners. Like you said, the first few years of payments gives them a chance to learn how to handle it (hopefully), so the remaining years aren't blown.
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Old 01-06-2014, 12:51 PM   #23
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Call me a stick in the mud, but for me personally, winning the lottery would be miserable. I'd either have to give it away to endlessly needy relatives or be the bad guy in the family. Much better to be in the closet comfortable, than nakedly stinkin' rich.
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Old 01-06-2014, 01:37 PM   #24
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Schaudenfreude sells better but here is an article on seven successful lottery winners. Successful lottery winners
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Old 01-07-2014, 10:17 AM   #25
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Call me a stick in the mud, but for me personally, winning the lottery would be miserable. I'd either have to give it away to endlessly needy relatives or be the bad guy in the family. Much better to be in the closet comfortable, than nakedly stinkin' rich.
I could easily be the "bad guy" in my family for failure to give handouts. If it meant having tens of millions but a pissed off family...give me the money. I have no problems saying "no" to people, even blood relatives. I've done it before, I can do it again.
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Old 01-07-2014, 12:00 PM   #26
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I could easily be the "bad guy" in my family for failure to give handouts. If it meant having tens of millions but a pissed off family...give me the money. I have no problems saying "no" to people, even blood relatives. I've done it before, I can do it again.
Try it with a spouse. Of course with the half of the lottery money you'd have after the divorce, I guess spouses are more easily replaceable.
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Old 01-07-2014, 01:43 PM   #27
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Try it with a spouse. Of course with the half of the lottery money you'd have after the divorce, I guess spouses are more easily replaceable.
Very true! Good thing I don't have one
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Old 01-07-2014, 05:18 PM   #28
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but you also hear of people who wind up selling off their future payments to pay debts, probably at an even worse rate.
Its YOUR money! Use it when YOU want to use it... call JG Wentworth... 877-cash-now... 877-cash-now...



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