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Started By
Message
Powerball-cash vs annuity
Posted on 1/9/16 at 4:59 pm
Posted on 1/9/16 at 4:59 pm
Which way would you go and why?
What are some of the pros and cons of each?
What are some of the pros and cons of each?
14
Posted on 1/9/16 at 5:13 pm to prplngldtigr
At this amount, it really doesn't matter 
Posted on 1/9/16 at 5:20 pm to TigerTatorTots
Hahahahahahaha I know , most I ask have that response , but I'm genuinely curious what would be the better move financially.
I would think annuity , but what tax implications are there and what about the flexibility of having the total cash amount ?
I'm no financial genius , so I figure many would know better than me!
I would think annuity , but what tax implications are there and what about the flexibility of having the total cash amount ?
I'm no financial genius , so I figure many would know better than me!
Posted on 1/9/16 at 5:45 pm to prplngldtigr
I'm taking the cash and moving at least half offshore.
Posted on 1/9/16 at 6:07 pm to prplngldtigr
Take the lump sum.
I dont trust the lottery not to go bankrupt and certainly don't trust Democrats not to raise taxes in 30 years.
I dont trust the lottery not to go bankrupt and certainly don't trust Democrats not to raise taxes in 30 years.
Posted on 1/9/16 at 6:15 pm to prplngldtigr
Cash.....a bird in the hand is worth two in the bush.
Posted on 1/9/16 at 6:16 pm to TigerTatorTots
quote:I agree with this!
At this amount, it really doesn't matter
Posted on 1/9/16 at 6:32 pm to tigerpawl
Lump sum 100%
Posted on 1/9/16 at 6:54 pm to prplngldtigr
Cash is king.
Posted on 1/9/16 at 7:40 pm to prplngldtigr
Lump sum, no way am I depending on them to give me that much money over a long term. Plus, you can probably end up with the same amount over the long term if you invest that lump sum well. Taxes wouldn't matter much since you're in the top bracket regardless.
Posted on 1/9/16 at 8:12 pm to prplngldtigr
What % do they use to figure cash value?
Posted on 1/9/16 at 8:18 pm to yellowfin
Looks to be about .62
Lump sum all day long for me, but some people the annuity might be better
Lump sum because I then have the option of how I want to invest which includes buying the same annuity that they were going to set me up with, but the biggest reason is income tax, take it all right now and pay the tax, because the tax rate will do one of three things , stay the same, go up or go down,.... Want to bet what I think they are going to do?
Lump sum all day long for me, but some people the annuity might be better
Lump sum because I then have the option of how I want to invest which includes buying the same annuity that they were going to set me up with, but the biggest reason is income tax, take it all right now and pay the tax, because the tax rate will do one of three things , stay the same, go up or go down,.... Want to bet what I think they are going to do?
Posted on 1/9/16 at 8:40 pm to prplngldtigr
Not even doing the math. Cash...all day.
Posted on 1/9/16 at 8:43 pm to prplngldtigr
Cash. No question.
Posted on 1/9/16 at 9:29 pm to prplngldtigr
Lump Sum for following reasons:
1) I think I can invest it better than the lottery company can
2) Lottery winnings are ordinary income. If you take the annuity, you pay ordinary rates on the entire amount. If you take the cash, you can invest it in things that will have earnings taxed at qualified rates, or even tax-free munis if you choose
3) You can plan better for the money if you control all of it
If you can't manage money, the annuity might be better because it guarantees you will get payments for 30 years.
In the year I win the money and take the cash, I would divide the money into the money I would keep for me and my family, and the money that would go to charity. Set up a private foundation and go ahead and put it all in now (in my case, I'd probably invest 50 percent of the money for my family and put 50 percent into the foundation). That also cuts down on your tax bill.
1) I think I can invest it better than the lottery company can
2) Lottery winnings are ordinary income. If you take the annuity, you pay ordinary rates on the entire amount. If you take the cash, you can invest it in things that will have earnings taxed at qualified rates, or even tax-free munis if you choose
3) You can plan better for the money if you control all of it
If you can't manage money, the annuity might be better because it guarantees you will get payments for 30 years.
In the year I win the money and take the cash, I would divide the money into the money I would keep for me and my family, and the money that would go to charity. Set up a private foundation and go ahead and put it all in now (in my case, I'd probably invest 50 percent of the money for my family and put 50 percent into the foundation). That also cuts down on your tax bill.
Posted on 1/9/16 at 10:02 pm to prplngldtigr
Out of curiosity, I made a spreadsheet. All my numbers assume you invest everything (spend nothing) with either option. I also assumed the lump sum is 62% (558/900).
With a 0% return, the annuity passes the lump sum in the 19th year.
With a 3% return, the annuity passes the lump sum in the 27th year.
With a 5% return, lump sum is 115% of the annuity after 30 years.
It takes a 3.7% return to have the same amount in either case after 30 years. So from a math perspective, if you can do better than that, you should take the cash.
With a 0% return, the annuity passes the lump sum in the 19th year.
With a 3% return, the annuity passes the lump sum in the 27th year.
With a 5% return, lump sum is 115% of the annuity after 30 years.
It takes a 3.7% return to have the same amount in either case after 30 years. So from a math perspective, if you can do better than that, you should take the cash.
Posted on 1/9/16 at 10:14 pm to eelsuee
Thanks for that!
I realize it doesn't account for spending , but that would be difficult to ascertain anyway.
Appreciate the breakdown.
I realize it doesn't account for spending , but that would be difficult to ascertain anyway.
Appreciate the breakdown.
Posted on 1/9/16 at 11:04 pm to prplngldtigr
I think (though I could be wrong) that historically speaking, lottery winners that take the lump sum have been far more likely to be broke after 10 years or so than the ones that took the annuity. If I were to assume that I am at least somewhat in danger of the same issues faced by those people then the conservative approach would be to take the annuity for the forced pacing.
Posted on 1/9/16 at 11:55 pm to Huey Lewis
For anyone with financial sense, it is a clear cut decision: lump sum.
For most of America, the annuity payout is a better option. Most lottery winners do not know what to do with $100,000 much less $100,000,000.
For most of America, the annuity payout is a better option. Most lottery winners do not know what to do with $100,000 much less $100,000,000.
Posted on 1/10/16 at 6:45 am to prplngldtigr
quote:
Which way would you go and why?
Don't remember the numbers, but pretty positive taking the lump and investing it yields more than the annuity.
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