re: Powerball-cash vs annuity

Thanks. That was what I meant

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It takes a 3.7% return to have the same amount in either case after 30 years

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With a 9 figure worth, you should kick the crap out of yourself if you cannot find a money manager that can average more than 3.7% over a 30 year timeframe. With that volume of money, you can be "risky". You may have some bad years, but I'd expect to pull an average of 8%-9% without even putting myself out there too much.

Plus the money is yours, it's in your possession and you have already paid the taxes, etc. It's nice to have the piece of mind that your dealings with that are done.

I will have to say that at these numbers though, it's mind boggling how much even the annuity is. I think they are estimating 1.2 Billion. Unless I'm just hitting my zeros wrong, that's 3.33 million dollars a month for 30 years (before taxes) . That guarantee is hard to pass up. It also stops you from going on a binge and screwing yourself.

Thanks.

This is why your first call should be to 3 different attorneys to put them on retainer. Then you should call 3 CPAs.
Then you should call 3 major asset management shops (not some jack leg with an office in a strip mall, you want someone in a major city with hundreds of millions of AUM).

Once you have all of those set up, you should fact check everything anyone says with one of their counterparts in each of the three categories. Small errors can cost millions in this situation. Don't cheap out.

Lol. I know several who have gone from over a bill to bankrupt.

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I just read this morning about a lottery winner that took 38 million lump sum, and was not only broke in 20 months, but heavily in debt.

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You're speaking anecdotes. This broke in 5 years for most Jackpot winners is an urban myth , especially the mega Jackpot winners 10 / 15 million plus.

David Lee Edwards of Kentucky?

Louisiana Jackpot is $375,000. Most state jackpots probably start at less than $1 million dollars.

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f you can't manage money, the annuity might be better because it guarantees you will get payments for 30 years.

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Unless you die

Did you account for investing the payments coming in each year the same way you invest the lump sum plus the fact it's not 30 equal payments?

I would take the cash for all of the reasons stated, but I am curious about which method would generate the most money over time. The lump sum on a 3% return or the payments with a 3% return. Also accounting for the fact the payments aren't 30 equal payments but start low in year 1 and huge in year 30. At $900M for Saturday's drawing I think it was something in the ballpark of $10M in the first year and $40 in the last.

I took a stab at it, but I may be wrong. I used a lottery calculator ( LINK) for $1.5B paid out in LA. The calculator gives you the lump sum after taxes and a rough idea of the annual payments. They only showed the annual payment amount for the 1st, 10th, 20th and final payment. I used the 1st payment for years 1 through 5. Then I used the second payment for 6-15; third payment for 16 through 25; final payment for 26-30. The total came up to almost the exact total payout of the sum of the annual checks. Close enough I'm not gonna sweat the impact of a few million dollars.

Then I just did a side by side comparison. I took the lump sum and added 3% to it each year. For the annual payments, I took each year and added 3% to the year before plus the annual payment.

At no point does the annual payment scenario ever catch up to the lump sum. After 30 years, the lump sum total is $1.514B and the annual payments is $1.489B. The actual total gap is about $25M and that's the closest they come together. With 3% growth after that the lump sum pulls further ahead with a gap of $50M after 54 total years (24 years from the final annual payout). $100M gap comes at 78 years.

None of this takes into account how you may invest differently with having the lump sum. If you just take $10M off of the lump sum payment to piss away, then the 30 year gap is down to $1M dollars. Or if you get a higher return on hundreds of millions to start versus a much smaller amount of just the first year payout at $15M, it can shift dramatically the other way.

There's a lot of variable that makes my head hurt trying to figure it out. One thing this exercise confirmed and made clear. If someone offers you $600M in cash you take it and don't worry if you can make it a little bigger!

This got me thinking, although given the probability, it's probably a waste.

Anyways, just moved from Tennessee, where there are no state and local income taxes, back to Ohio, where there are state and local income taxes. At the top bracket, that would be over 7% for an extra 65+ million in taxes.

Now if I won and moved back to Nashville or Knoxville, would I be able to able to avoid that 7% tax on the annuity in subsequent years?

If that is possible, by my non-accountant analysis (although I assumed equal payments for simplicity), that would be upwards of 350-400 million MORE paid out, post-taxes, compared to the lump sum. It seems that would be another variable to consider.

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Really though, who gives a shite?

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Well you could say that for just about every discussion related to the powerball.