Welcome Guest
Log In | Register )
The time is now 11:35 pm
You last visited October 24, 2014, 11:29 pm
All times shown are
Eastern Time (GMT-5:00)

Cash Option vs Annuity

Topic closed. 25 replies. Last post 5 years ago by dk1421.

Page 1 of 2
51
PrintE-mailLink

United States
Member #78471
August 15, 2009
33 Posts
Offline
Posted: August 19, 2009, 6:54 am - IP Logged

Which is the better option, cash value or payment over 30 years? It looks like most winners take the cash option but after reading about David Edwards, maybe the cash option isnt such a great idea.

    Avatar
    New Member

    United States
    Member #78669
    August 19, 2009
    4 Posts
    Offline
    Posted: August 19, 2009, 1:24 pm - IP Logged

    I personally think that the annuity would be better. Especially at my age, as im in my early 40's. It is also wise to have disbursements so you become accustom to your sudden wealth and don't blow it all in a short amount of time.

      JordanT1021's avatar - Lottery-046.jpg
      North Carolina
      United States
      Member #53121
      June 24, 2007
      5825 Posts
      Offline
      Posted: August 19, 2009, 1:32 pm - IP Logged

      I personally think that the annuity would be better. Especially at my age, as im in my early 40's. It is also wise to have disbursements so you become accustom to your sudden wealth and don't blow it all in a short amount of time.

      annuity would be the route I would take...

      US Flag

        Grovel's avatar - f800e6a39fbfea795d1dcbb09f2244
        Little Rock, AR
        United States
        Member #68365
        December 19, 2008
        232 Posts
        Offline
        Posted: August 19, 2009, 2:42 pm - IP Logged

        I am only 25, but I would take the cash option. As long as you are wise with your money, you won't have to worry about blowing it all in just a few years.

          Coin Toss's avatar - shape barbed.jpg
          Zeta Reticuli Star System
          United States
          Member #30470
          January 17, 2006
          9112 Posts
          Offline
          Posted: August 19, 2009, 3:00 pm - IP Logged

          This has been discussed here many times, do a search.

          Someone heree has or had a signature, "You can buy a better annuity", meaning always take the cash, and with it you can buy a better annuity than the one the state lottery is going to use to pay you with.

          Those who run the lotteries love it when players look for consistency in something that's designed not to have any.

          Lep

          There is one and only one 'proven' system, and that is to book the action. No matter the game, let the players pick their own losers.

            ThatScaryChick's avatar - AbnSTiA

            United States
            Member #56506
            November 21, 2007
            4660 Posts
            Online
            Posted: August 19, 2009, 3:14 pm - IP Logged

            I agree with Grovel and Coin Toss. I would take the Cash Option and choose where and how to invest it myself. But I do understand why some people would feel more comfortable choosing Annuity. It just wouldn't be the option that I would choose.

            "No one remembers the person who almost climbed the mountain, only the person who eventually gets to the top."

              Avatar
              DFW, Texas
              United States
              Member #78628
              August 18, 2009
              134 Posts
              Offline
              Posted: August 19, 2009, 3:56 pm - IP Logged

              There are multiple considerations.  First you would look at the amount of the jackpot, and your immediate needs.  If it's a smaller amount, a few million, and you need money quickly, such as to pay debts or start a business, the annuity payments may, while helpful, still make you wait for the benefit this money can bring you.

              Also consider your age.  If you're advanced in years and you want to spend your twilight years living "high on the hog," the cash value option is better.

              If you're irresponsible, which a lot of people don't know until they have a lot of money, the annuitized option may be better because it keeps you from spending all of the money at once.  A lot of people only know how to spend money, not how to hold on to it.

              While you may be able to get better returns than the annuity, also consider that the lottery commission doesn't pay taxes on the money deposited in the annuity.  If you received the cash value, you would pay the taxes on the amount and so your investments would be starting at a lower amount, so it would grow more slowly.

              A big consideration, especially right now, and the reason I'd probably choose cash value, is income taxes.  Tax rates are low now, and if you take the cash option, you pay all the taxes next year, at the current rate.  If you take the annuitized option, tax rate increases will hurt, especially if you win a larger jackpot and a large majority of it is taxed at the top rate.  A smaller jackpot, such as 4 million paid out over 25 years ($160,000 per year) won't be affected as much, because the annual payment doesn't get to the highest tax brackets.  Considering that just about everyone expects tax rates to increase in the future, this is an important factor.

              In Texas, we must select the payment option before purchasing a ticket.  I make a guess as to which is better based on these considerations.  If you live in other states and don't make the selection first, you should seek the advice or financial professionals after winning.

                Avatar
                FL
                United States
                Member #77284
                July 19, 2009
                60 Posts
                Offline
                Posted: August 19, 2009, 5:18 pm - IP Logged

                "Abig consideration, especially right now, and the reason I'd probablychoose cash value, is income taxes.  Tax rates are low now, and if youtake the cash option, you pay all the taxes next year, at the currentrate.  If you take the annuitized option, tax rate increases will hurt,especially if you win a larger jackpot and a large majority of it istaxed at the top rate.  A smaller jackpot, such as 4 million paid outover 25 years ($160,000 per year) won't be affected as much, becausethe annual payment doesn't get to the highest tax brackets. Considering that just about everyone expects tax rates to increase inthe future, this is an important factor."

                 

                excellent point.

                 

                taxes are going to be higher in couple years, so might as well take the cash option to pay a lower rate of tax

                  ca-dreamin*'s avatar - Lottery-065.jpg
                  Chicago
                  United States
                  Member #70678
                  February 8, 2009
                  889 Posts
                  Offline
                  Posted: August 19, 2009, 6:42 pm - IP Logged

                  I would take the cash and head for CA LOL!

                    Coin Toss's avatar - shape barbed.jpg
                    Zeta Reticuli Star System
                    United States
                    Member #30470
                    January 17, 2006
                    9112 Posts
                    Offline
                    Posted: August 19, 2009, 6:48 pm - IP Logged

                    A couple of things....

                    Many winners who took an annuity wind up selling it to one of those companies that buy them from people who've deciddd they want cash right now after all. Sadly, these compnaies offer comparitive chump change, so those people would have been much better off with the cash option from the lottery from the get go. That's really something to thik about.

                    The other thing?

                    Dec 21, 2012!

                    Scared

                    Those who run the lotteries love it when players look for consistency in something that's designed not to have any.

                    Lep

                    There is one and only one 'proven' system, and that is to book the action. No matter the game, let the players pick their own losers.

                      Avatar
                      Monkey Butt, USA
                      United States
                      Member #54569
                      August 23, 2007
                      1124 Posts
                      Offline
                      Posted: August 19, 2009, 7:43 pm - IP Logged

                      I would most certainly go the route of the annuity. I would go to school and learn to manage my money wisely. Dupe Alert

                      Until then I would deposit my once a year check and continue mastering self control and self discipline. If I lose it all I would rather it be on me than pay someone to escort me back to hard times. Can I do it? Yes. Will it be easy? Of course not. More than likely it will be a constant uphill battle? But it will make for some interesting table talk. Besides, how can I teach my children & grandchildren to manage their money if I hand my money over to be managed by someone else.

                      Anyway, getting that annual check will give me something to look forward to and a reason to go to the mailbox at least once a year.  LOL

                        GamerMom's avatar - tails

                        United States
                        Member #60535
                        April 21, 2008
                        460 Posts
                        Offline
                        Posted: August 19, 2009, 8:05 pm - IP Logged

                        I would most certainly go the route of the annuity. I would go to school and learn to manage my money wisely. Dupe Alert

                        Until then I would deposit my once a year check and continue mastering self control and self discipline. If I lose it all I would rather it be on me than pay someone to escort me back to hard times. Can I do it? Yes. Will it be easy? Of course not. More than likely it will be a constant uphill battle? But it will make for some interesting table talk. Besides, how can I teach my children & grandchildren to manage their money if I hand my money over to be managed by someone else.

                        Anyway, getting that annual check will give me something to look forward to and a reason to go to the mailbox at least once a year.  LOL

                        Personally i would want direct deposit but that's just me...

                          Avatar

                          United States
                          Member #59720
                          March 25, 2008
                          52 Posts
                          Offline
                          Posted: August 19, 2009, 8:52 pm - IP Logged

                          I'd take the cash option the majority of the time. $89 mil sounds pretty nice right about now!

                            Coin Toss's avatar - shape barbed.jpg
                            Zeta Reticuli Star System
                            United States
                            Member #30470
                            January 17, 2006
                            9112 Posts
                            Offline
                            Posted: August 20, 2009, 1:24 am - IP Logged

                            Some things to think about....since some states have tried to sell their lotteries to private firms, does that tell us that the ststes themselves, in the long run, want the cah option? Hmm? Lets' see, if they're willing to sell the lottery they must want the cash right now! There's a lesson in that.

                            Also, since states are finding themselves more and more strapped, would it be any great surprise if the tax on annuitiy payments got steeper and steeper?

                            And what about Federal? Would it shock anyone of the current regime in the White House decided that jackpot winners should pay a much steeper tax than they are now?

                            Just things to think about.

                            Those who run the lotteries love it when players look for consistency in something that's designed not to have any.

                            Lep

                            There is one and only one 'proven' system, and that is to book the action. No matter the game, let the players pick their own losers.

                              BaristaExpress's avatar - BaristaExpressMX zpsfb0d8b5d.png
                              Magnolia, Delaware
                              United States
                              Member #18795
                              July 20, 2005
                              789 Posts
                              Offline
                              Posted: August 20, 2009, 9:53 am - IP Logged

                              Some things to think about....since some states have tried to sell their lotteries to private firms, does that tell us that the ststes themselves, in the long run, want the cah option? Hmm? Lets' see, if they're willing to sell the lottery they must want the cash right now! There's a lesson in that.

                              Also, since states are finding themselves more and more strapped, would it be any great surprise if the tax on annuitiy payments got steeper and steeper?

                              And what about Federal? Would it shock anyone of the current regime in the White House decided that jackpot winners should pay a much steeper tax than they are now?

                              Just things to think about.

                              I Agree! and besides, everyone knows taxes always go up and very rarely do they down! Annuities are not good tax wise! Not for anyone at anytime!

                              Just about any financial adviser that's worth his fees will tell you from a practical stand point (financially), it's always better to lessen your (all a round) tax liability to best maximize the growth of your portfolio. That's why they advise most to take the cash option! That's why you are told to get professional help with handling your new found wealth, so you are able to keep more of it for you and your family for many, many years to come! And of course to keep Uncle Sam out of your pocket as much as possible, legally that is!

                              Keep dreaming the impossible dream, it just may come true! Thumbs Up