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Started By
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re: Annuity or Lump? Updated for 1.6 Billion
Posted on 10/19/18 at 9:59 am to Thib-a-doe Tiger
Posted on 10/19/18 at 9:59 am to Thib-a-doe Tiger
That's not really my point.
A couple years of negative returns only brings the overall value of your assets of the lump sum scenario and the annuity scenario closer to even.
A prudent person and wise investor will certainly make the lump sum payment the wiser choice, but more people think that describes them than is actually true. And anyone saying they are who may be now has never and will never deal with that kind of money.
A couple years of negative returns only brings the overall value of your assets of the lump sum scenario and the annuity scenario closer to even.
A prudent person and wise investor will certainly make the lump sum payment the wiser choice, but more people think that describes them than is actually true. And anyone saying they are who may be now has never and will never deal with that kind of money.
0
Posted on 10/19/18 at 10:00 am to Thib-a-doe Tiger
quote:
Whether you earned it or not, people want their money to grow
Right. And if you have some experience and a solid track record of investing go for it.
But the vast majority of people would be much better off turning this over to a professional financial planner.
I don't think you'd be doing yourself any favors day trading with your robinhood account
Posted on 10/19/18 at 10:00 am to LSU6262
Absolutely lump in case the system becomes insolvent.
Take all the money you can upfront and run. Run away to a Swiss bank to keep it there then run away to an island to live.
Take all the money you can upfront and run. Run away to a Swiss bank to keep it there then run away to an island to live.
Posted on 10/19/18 at 10:01 am to GRTiger
quote:
Nobody ever thinks about the other side of "gains" or it never occurs to them that they could lose their arse in investments. Any investment losses from the money in the annuity scenario is offset by the guaranteed return of those annuities, plus the limited amount invested.
The annuity is attractive as a behavioral finance tool. For the 20 years ending 12/31/2015, retail investors trailed the S&P 500 by 4.6% annualized over the period.
That's incredible.
Posted on 10/19/18 at 10:04 am to slackster
quote:
The annuity is attractive as a behavioral finance tool. For the 20 years ending 12/31/2015, retail investors trailed the S&P 500 by 4.6% annualized over the period.
That's incredible.
To be fair the S&P has had pretty solid returns though over that time period. Isn't it close to 11% annualized over the long haul?
Posted on 10/19/18 at 10:04 am to LSU6262
$389.5MM earning 2% interest over 30 years would give you $705MM. You're much better off taking the lump sum. Even if you take out $30MM right at the beginning to "live on" for those 30yrs you'd end up with $651MM.
Posted on 10/19/18 at 10:07 am to Powerman
quote:
But the vast majority of people would be much better off turning this over to a professional financial planner.
I got blasted in the other thread for saying the first thing you do if you win this kind of money is A) Hire an attorney and B) find a private banker who specializes in managing and growing that kind of money.
Posted on 10/19/18 at 10:08 am to TheCaterpillar
quote:
Absolutely lump in case the system becomes insolvent.
I can't seem to find any information on who presumably insures the annuity, but that would be a prudent thing to know.
Posted on 10/19/18 at 10:08 am to HeyHeyHogsAllTheWay
quote:
I got blasted in the other thread for saying the first thing you do if you win this kind of money is A) Hire an attorney and B) find a private banker who specializes in managing and growing that kind of money.
I'd hire a tax attorney and a financial planner right off the bat
Posted on 10/19/18 at 10:10 am to Powerman
quote:
be fair the S&P has had pretty solid returns though over that time period. Isn't it close to 11% annualized over the long haul?
9.85% market
5.19% retail investors
Posted on 10/19/18 at 10:11 am to MLCLyons
quote:So. Much. Wrong.
$389.5MM earning 2% interest over 30 years would give you $705MM. You're much better off taking the lump sum.
quote:Even. More. Wrong.
Even if you take out $30MM right at the beginning to "live on" for those 30yrs you'd end up with $651MM.
Posted on 10/19/18 at 10:14 am to Powerman
quote:Stokes and Hubbell in New Orleans is who I'm calling first.
I'd hire a tax attorney and a financial planner right off the bat
This post was edited on 10/19/18 at 10:15 am
Posted on 10/19/18 at 10:14 am to MLCLyons
quote:
$389.5MM earning 2% interest over 30 years would give you $705MM. You're much better off taking the lump sum. Even if you take out $30MM right at the beginning to "live on" for those 30yrs you'd end up with $651MM.
The correct answer is that there is no correct answer for every situation.
Posted on 10/19/18 at 10:15 am to slackster
Just ran the numbers for both scenarios using a 6% return and I was surprised by how big a gap there is between both at the end of the 30 years.
Using the numbers in the OP, which are wrong but close enough, there's 400 mil difference at the end of the 30 years if ALL the money received in both cases on invested.
Using the numbers in the OP, which are wrong but close enough, there's 400 mil difference at the end of the 30 years if ALL the money received in both cases on invested.
Posted on 10/19/18 at 10:16 am to castorinho
quote:Did you also invest the money you received from the annuity?
there's 400 mil difference at the end of the 30 years if ALL the money received in both cases on invested.
And which number did you start with?
Should be 325 for the lump and 10.5 for the annuity.
This post was edited on 10/19/18 at 10:18 am
Posted on 10/19/18 at 10:17 am to ell_13
quote:
there's 400 mil difference at the end of the 30 years if ALL the money received in both cases on invested.
Posted on 10/19/18 at 10:21 am to ell_13
quote:
Stokes and Hubbell in New Orleans is who I'm calling first.
With all due respect, I'm probably looking for a place that manages more than $1.2B,but I guess it wouldn't hurt.
Posted on 10/19/18 at 10:21 am to ell_13
22.9 per year and 389 for lump sum.
Also interest was annualized, let me do monthly instead, that should close the gap
Also interest was annualized, let me do monthly instead, that should close the gap
Posted on 10/19/18 at 10:22 am to slackster
quote:It was a shameless plug of a college friend.
I'm probably looking for a place that manages more than $1.2B
Posted on 10/19/18 at 10:30 am to castorinho
quote:I made a spreadsheet...
22.9 per year and 389 for lump sum.
Take 325 and randomize a yearly return between 0 and 10% for 30 years...
Then take the annuity schedule that you would net based on today's taxes starting with 10.365 and randomize that between 0 and 10%...
Randomized 1000 times, the lump sum ranges from 900MM to 1,800MM but averaging 1,450MM. The annuity is much more stable from 1,050MM and 1,600MM averaging 1,320MM.
FWIW.
ETA: About 20% of the time, the annuity is more.
This post was edited on 10/19/18 at 10:34 am
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