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Eastern Time (GMT-5:00) | Home -> Forums -> Lottery News -> Experts advise to take cash option Experts advise to take cash option Insider Buzz: Experts advise to take cash optionFinance 101 for lottery winners: Take the cash, advisers say. Annuities could be a bad bet. Say you win $110 million in the Pennsylvania Powerball drawing, as Steve and Kristine White did on May 8. Is it best to take the money in a lump sum or in an annuity over time? Some experts think the answer is clear: Go for the big bucks. Now. That could explain why the Whites are electing to take a check instead of a guaranteed annual payment of about $7 million, and why the state's three previous Powerball winners have all taken one-shot infusions over predictable payouts. "For most people, not just the Whites, the lump sum would probably be a better decision," said Andrew R. Wolf, a lawyer in New Brunswick, N.J., who is part of the team advising the couple. The explanation has to do partly with interest rates, which have rebounded from historic lows and are expected by many economists to continue to rise in the next year. Lock into an annuity now and you will get the same payment for the next three decades. But waiting could be lucrative. Just a one point increase in interest rates could jack up annuity payments by 15 percent or more, said Tim Flatley, president of Sterling Investment Advisors in Berwyn, which oversees $300 million in individual and corporate investments. Flatley acknowledges that the lucky ticket holders will see their big winnings immediately depressed by taxes - the state withholds 25 percent for the feds, and millions more will probably be due. But a properly managed portfolio should generate 8 percent to 10 percent a year over time - or about double an annuity, Flatley said. One reason to take an annuity, Flatley added, is to curb the urge to spend it all at once on big-ticket items like a Caribbean island. "I'm sure they have more friends than they ever knew," Flatley said. "Their hardest decision right now will be whom to trust." Pioneer Press We'd love to see your comments here! Register for a FREE membership — it takes just a few moments — and you'll be able to post comments here and on any of our forums. If you're already a member, you can Log In to post a comment. 19 comments. Last comment 8 years ago by .
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| | Posted: May 20, 2004, 9:34 am - IP Logged | |
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United States Member #983 December 30, 2002 459 Posts Offline | | Posted: May 20, 2004, 10:36 am - IP Logged | |
I'm still not persuaded. If you take the lump sum, you start your investing minus 30% in fed/state taxes, minus whatever cash you want to spend or have on hand to live the good life, say 5%...and minus investment fees, say 1%. So you have to invest it in such a way to make 36% interest just to equal an annuity payment. Nevermind making more than the annuity, and never mind living the good life which to me does not involve incessent thinking about investments or money. Since the people giving this advice are people who make money investing lump sums, not annuities, I find their advice suspect. There are good reasons for taking the lump sum - fear of future inflation making your future checks worth less and less is a good one - but the expectation that you are going to make more than the annuity over 26 years shouldn't be one of them. >Lock into an annuity now and you will get the same payment for the next three decades. But waiting could be lucrative. Waiting? To hit the jackpot next year? Yes, I may be locked into it, but I am locked into getting the amount of the jackpot I won, so what have I lost? This seems to be advice for people thinking of starting their own annuities, not lottery winners. | | |
Columbia,Pa United States Member #3589 January 27, 2004 372 Posts Offline | | Posted: May 20, 2004, 11:05 am - IP Logged | |
Quote: Originally posted by CASH Only on May 20, 2004
Duh...
I smell a setup. CASH Only wrote this article did'nt he? LOL, Chas
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Yinzer Country, PA United States Member #4139 March 18, 2004 2729 Posts Offline | | Posted: May 20, 2004, 2:08 pm - IP Logged | |
i'm still going to take the annuity. I've redone my website. Go to www.dr-ew.com. I kept a lot of the old stuff, and I've added some new stuff. Look for more new stuff in the coming weeks. | | |
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| | Posted: May 20, 2004, 4:16 pm - IP Logged | |
Dr: EW: That explains why you didn't win the recent $213 million Powerball. | | |
United States Member #436 June 30, 2002 675 Posts Offline | | Posted: May 20, 2004, 7:49 pm - IP Logged | |
Quote: Originally posted by tg636 on May 20, 2004
I'm still not persuaded. I may be locked into it, but I am locked into getting the amount of the jackpot I won, so what have I lost?
Why not take the cash and buy your own annuity? Then YOU control it, not the state. | | |
chicago ill. United States Member #3668 February 4, 2004 337 Posts Offline | | Posted: May 20, 2004, 8:12 pm - IP Logged | |
Take the cash option. History has shown that businesses fail as well as countries too. Who is not to say that legislators change the laws on lotteries affecting whatever money is left...and or affect the way future payments are handled. | | |
Yinzer Country, PA United States Member #4139 March 18, 2004 2729 Posts Offline | | Posted: May 20, 2004, 10:19 pm - IP Logged | |
CASH Only: Alright. It was nice that you expressed your preference for the cash option, but I think you have taken it a little too far. WE KNOW YOU PLAN ON TAKING THE CASH OPTION!!! It's nice that you have formed your own opinion, but it seems as if you are trying to push it on everyone else, and that is Communist. I've redone my website. Go to www.dr-ew.com. I kept a lot of the old stuff, and I've added some new stuff. Look for more new stuff in the coming weeks. | | |
United States Member #623 August 25, 2002 205 Posts Offline | | Posted: May 20, 2004, 10:35 pm - IP Logged | |
With an amount of 5-million dollars or less, I would take a lump sum payment and keep it all in CDARS. That way I could reinvest right along with inflation. Rabbitfoot | | |
chicago ill. United States Member #3668 February 4, 2004 337 Posts Offline | | Posted: May 20, 2004, 10:58 pm - IP Logged | |
All right doctor, First of all this society is free country where we can express opinions....it is called freedom of speech...second,... I am a former member of the u.s.marine corps who volunteered for two tours in vietnam in a combat capacity whereas you witness that of soldiers who are participating in the present day age of war on terroism...I am a american....you sir, are a fool. | | |
Yinzer Country, PA United States Member #4139 March 18, 2004 2729 Posts Offline | | Posted: May 20, 2004, 11:04 pm - IP Logged | |
that's what i'm trying to say. we all can express our opinions, but when we take it too far, we take it too far. I've redone my website. Go to www.dr-ew.com. I kept a lot of the old stuff, and I've added some new stuff. Look for more new stuff in the coming weeks. | | |
Mcminnville, Oregon United States Member #3070 December 13, 2003 1516 Posts Offline | | Posted: May 21, 2004, 12:09 am - IP Logged | |
I think it is funny that the expert in this news article stands to benefit from the lottery winners money. I guess I would tell them to take the cash too if I standed to gain something from it too. When I win I will choose whatever option I feel like because that is what a winning jackpot ticket gives you. The freedom to choose whatever you want! | | |
Columbia,Pa United States Member #3589 January 27, 2004 372 Posts Offline | | Posted: May 21, 2004, 12:23 am - IP Logged | |
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Columbia,Pa United States Member #3589 January 27, 2004 372 Posts Offline | | Posted: May 21, 2004, 12:35 am - IP Logged | |
Quote: Originally posted by DoctorEw220 on May 20, 2004
that's what i'm trying to say. we all can express our opinions, but when we take it too far, we take it too far.
CASH Only does rant on the cash/annunity and hot lotto debate a bit at times. That's his right. It's also my right to rib him about it. Chas
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