If the math I rounded and did in my head considering 40% tax rate and 5% return on investment and increasing annuity payment amounts, you leave about 100 million dollars on the table if you take the lump sum. The annuity payments are large enough each year that I could live an extravagant lifestyle on the yearly payments, and they get bigger each year. 100 million is a huge sum of money to leave on the table by taking the lump sum.
IMO Jackpot this big, you take the annuity
- Thread starter BvillePoker
- Start date
Aren't you assuming that there will be only 1 winner? How does your math shake out if 2 or 3 individuals have winning tickets?
Along those lines, I am curious if anyone will pay the price to buy every number combination. I bet someone does it for this drawing. Maybe more than 1 person.
jammin, you couldn't physically accomplish that goal, you would have to purchase 295,000,000 tickets and it's not like the thing is automated. Besides, the numbers sold will apparently cover at least 80% of all possible combinations, so you would be SOL if someone else had a winning ticket (which a near probability) and you had to split the jackpot, which would make you a net loser.
BTW, I've read an article or two by people who won big, took their money in a lump invested it and compared it to what they would have under the annuity. Apparently, you only need a return of about 3%/yr to offset the loss in taxes and account for the loss in present value. So, I would go with lump sum and put that money to work for me. There's plenty of long term investments which have little risk but which would pay dividends in the long run.
But the number one thing anyone should do if they come into that type of money is go to the best estate, trust and wealth law firm you can find and have them set up a trust (or multiple trusts) and let the trust(s) hold all of the wealth, investments and property. It will be well worth the money spent, and if you're the compulsive type who thinks they would blow it, you could actually set up a blind trust which would pay you, while your money continues to grow, without the fear you would blow it on coke and ho's. (Why the dirty mind?: I'm talking coca cola and ho-ho's.)
BTW, I've read an article or two by people who won big, took their money in a lump invested it and compared it to what they would have under the annuity. Apparently, you only need a return of about 3%/yr to offset the loss in taxes and account for the loss in present value. So, I would go with lump sum and put that money to work for me. There's plenty of long term investments which have little risk but which would pay dividends in the long run.
But the number one thing anyone should do if they come into that type of money is go to the best estate, trust and wealth law firm you can find and have them set up a trust (or multiple trusts) and let the trust(s) hold all of the wealth, investments and property. It will be well worth the money spent, and if you're the compulsive type who thinks they would blow it, you could actually set up a blind trust which would pay you, while your money continues to grow, without the fear you would blow it on coke and ho's. (Why the dirty mind?: I'm talking coca cola and ho-ho's.)
@hollywood
Article on buying all combinations.
http://www.businessinsider.com/buying-every-powerball-ticket-2016-1
Article on buying all combinations.
http://www.businessinsider.com/buying-every-powerball-ticket-2016-1
Assuming you have the discipline to save (and investment result being equal either way), lump sum produces a greater terminal value.
I'd be terminal after 12 months of coke and ho's anyway, so who cares?
If you take the payments and die what happens? Does your family keep getting the money? I would think the lump sum would be a lot better as long as you don't go MC Hammer with the money.
Assuming a 38% discount on the lump sum payment up front and an 8% annualized return, you would end up with 14.6% more money taking the lump sum, after 20 years, all else equal.
Sorry, would have to take the lump sum payout and move to Costa Rica or Belieze. Boom! No more freakin snow or cold weather and could by enough land to keep everyone away from me and the family. Definitely would have to include some oceanfront property as well.
You could mine the water off your beach to help with that "keep everyone away from me and the family" thing. You wouldn't want anyone bothering you while you are enjoying your private beach.
Either way, you end up suddenly very rich and, with smart decisions, set for life and able to make sure your kids are set for life.
The annuity does not end upon death, per the Powerball FAQ site. It's an asset like any other and is devisable.
The other issue with taking the annuity on a large payout is that depending on what state you live in, you may have concerns about long term solvency and the state's ability to pay their share. For instance, Illinois has been issuing IOU vouchers for lottery winnings.
Take the lump sum.
Take the lump sum.
That was Mark Cubans advice for who ever won the jackpot... but he also said "because you won't know what to do with that much money" which he's not wrong.
Only a moron takes the annuity. Then again only a sucker buys the tickets.