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Started By
Message
Posted on 1/10/16 at 9:35 am to eelsuee
Very nice job eelsuee. I ran the numbers and got the same discount rate. It's a no brainier to take the cash.
Taking the annuity doesn't guarantee anything. Your creditors will allow you to rack up debt and then sue you to liquidate your annuity. Most likely at a significant discount. Taking he lump sum and putting it into a trust would be superior.
Taking the annuity doesn't guarantee anything. Your creditors will allow you to rack up debt and then sue you to liquidate your annuity. Most likely at a significant discount. Taking he lump sum and putting it into a trust would be superior.
Posted on 1/10/16 at 11:30 am to eelsuee
Thanks. That was what I meant
Posted on 1/10/16 at 1:19 pm to prplngldtigr
As others have said, the lump sum.
And if you are the kind of dumbass who would spend all the money on bling, then do I have a business proposition for you!
And if you are the kind of dumbass who would spend all the money on bling, then do I have a business proposition for you!
Posted on 1/11/16 at 8:11 am to eelsuee
quote:
It takes a 3.7% return to have the same amount in either case after 30 years
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.
Posted on 1/11/16 at 8:41 am to TheHiddenFlask
quote:
Taking the annuity doesn't guarantee anything. Your creditors will allow you to rack up debt and then sue you to liquidate your annuity. Most likely at a significant discount. Taking he lump sum and putting it into a trust would be superior.
well said
Posted on 1/11/16 at 9:34 am to Tigerpaw123
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.
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.
Posted on 1/11/16 at 12:40 pm to Huey Lewis
quote:I'm sure this is true, but I think that mostly counts people who won in the range of tens of millions. I'm not sure it's possible to go broke with hundreds of millions.
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.
Posted on 1/11/16 at 3:27 pm to Korkstand
Lol. I know several who have gone from over a bill to bankrupt.
Posted on 1/11/16 at 3:46 pm to Huey Lewis
quote:
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.
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.
Posted on 1/11/16 at 5:14 pm to TheHiddenFlask
quote:How many of them ended up truly "broke" though? Or even had to live a middle class lifestyle afterward?
I know several who have gone from over a bill to bankrupt.
Posted on 1/11/16 at 5:30 pm to EA6B
quote:
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.
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.
This post was edited on 1/11/16 at 5:33 pm
Posted on 1/11/16 at 5:40 pm to TheHiddenFlask
Taking the annuity doesn't guarantee anything. Your creditors will allow you to rack up debt and then sue you to liquidate your annuity. Most likely at a significant discount. Taking he lump sum and putting it into a trust would be superior.
This.
Google 'Evelyn Adams' of New Jersey who won the Lotto Jackpot twice ( 1985 & 86) for a total of $5.4 million dollars before taxes.
Gambling problem had her in debt & her remaining checks were basically owed to creditors.
Claims she was spending $25 a week on tickets before the 1st win & more afterwards.
Also loved the Atlantic City Casinos.
This.
Google 'Evelyn Adams' of New Jersey who won the Lotto Jackpot twice ( 1985 & 86) for a total of $5.4 million dollars before taxes.
Gambling problem had her in debt & her remaining checks were basically owed to creditors.
Claims she was spending $25 a week on tickets before the 1st win & more afterwards.
Also loved the Atlantic City Casinos.
Posted on 1/12/16 at 10:28 am to LSUFanHouston
quote:
f you can't manage money, the annuity might be better because it guarantees you will get payments for 30 years.
Unless you die
Posted on 1/12/16 at 10:39 am to LSUFanHouston
quote:
If you can't manage money, the annuity might be better because it guarantees you will get payments for 30 years.
It would be in their interest to take lump sum and buy their own annuity certain or treasury bills
TBills
1- Lower default risk
2- More liquidity
3- Interest rate extremely low on annuity option
Annuity
1- Annuity certain = guaranteed payments unlike powerball
2- diversify bankruptcy risk
3- More options
4- Powerball annuity interest rate extremely low
This post was edited on 1/12/16 at 10:45 am
Posted on 1/12/16 at 10:49 am to eelsuee
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!
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 post was edited on 1/12/16 at 11:12 am
Posted on 1/13/16 at 8:14 pm to southernelite
You can't move it offshore
Posted on 1/13/16 at 8:39 pm to TigerFanDan
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.
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.
Posted on 1/13/16 at 8:47 pm to buckeye_vol
quote:
At the top bracket, that would be over 7% for an extra 65+ million in taxes.
Really though, who gives a shite?
You'd wake up the next day with more money than you could have ever accumulated on your own in your lifetime.
Posted on 1/13/16 at 8:57 pm to Powerman
quote:Well you could say that for just about every discussion related to the powerball.
Really though, who gives a shite?
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