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What would the experts do with a lottery jackpot?

Topic closed. 65 replies. Last post 11 years ago by sirbrad.

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Posted: March 10, 2006, 1:36 pm - IP Logged

Uncle Jim - There's nothing hard hearted about your assessment of deductions and charitable donations.  Deductions are great if they're for money you either needed or wanted to spend anyway, but giving away $1 and saving 35 to 45 cents on your taxes leaves you with 55 to 65 cents less than you started with. That's just simple math and math has no feelings. In figuring how much I would actually get from a substantial win I just assume that as a practical matter I'd pay the maximum rate on all of it. Since I'm in NY, my total tax bill would be about 43%.  The lower rates on part of it would mean that I'd really pay about 40k less, but that's relatively meaningless in figuring out my net on a large sum. I'd rather pay less in taxes, but not as a result of having substantial deductions. That doesn't mean I wouldn't like to take advantage of deductions, though. The reasons I would much rather pocket 100 million than 10 million are less about overindulging my own desire than being able to share generously with recipients of my choosing. There are half a dozen people whose company I'd like on my next trip to the South Pacific, and others I'd take on different trips. I can easily think of donating millions just in charitable areas that would benefit my own selfish interests, let alone other worthy causes.  The reality is that even if I did pocket 100 million,I still couldn't do everything I might like to do beyond my own indulgences.

As far as inflation goes, it's been fairly low for quite a while, but in planning for security I'd plan for an increase and I'd plan for inflation over a long period of time.  <best whiny voice> What if I live to 100? </best whiny voice> People can laugh all they want at this, but if you win the lottery you're going to be living on a fixed income. Rates of return will fluctuate, but nobody will be giving you a raise, My plan is for my life style to improve or at least remain the same with each new year.  Even with modest inflation the 300k that would let me indulge most of my reasonable desires may be mere subsistence before I die. With an income of a million bucks a year I'd still put some aside so that my future income would increase.

 

mangeydog - Try reading it again. The point is that the people who lost money in those companies didn't lose it because they chose  to invest in high risk areas. The current Enron trial is about deliberately making the company apparently stable when it wasn't. One other poster said they'd put 100% in the stock market. Depending on their age and what kind of companies they choose that's not necessarily a really bad idea, but any investment in the market means accepting higher risk in the hopes of higher rewards. What's apparent just down the road could turn out to be quite different from what's apparent today. Putting all of a major windfall into even a broad range of stocks would have turned out very poorly if done in the summer of '29 or summer of '87.  When the winner recent MM winner comes forward Microsoft  will be just one really good operating system away from losing most of their value if it's somebody else who develops it, but today they're apparently a pretty good investment.


dvdiva - The advisor talking about not buying a new house is talking about his own plan for himself, and he's a 47 yo financial advisor. He probably already has a decent house and a dependable car. I'm sure he doesn't have clients who rent their home and drive cars that break down every month, but if he's like other advisors most of his clients are middle class. Some people who are middle class buy boats or other expensive toys, and some invest the money for a comfortable retirement.

If a lottery winner is living someplace that's dangerous they should move as soon as their credit allows, but that still doesn't mean they should run out and buy a house right away. The advisor didn't say they shouldn't buy a car, he said he would skip the new "cars", and it's worth noting that it looks like the statement was related to having had a client who won the lottery and lost it all. A lot of people who get a big windfall do run out and buy far more house than they need and several fancy cars. If the annual income from your investments lets you do that it's one thing, but spending big chunks of the principal without careful consideration is another. The lost income from buying a $1 million house means the house will cost perhaps $35,000 per year before you even start paying the bills. He may have said it dfferently than you, but his point is also that a Ferrari and waterfront home may not be a wise decision.

    sirbrad's avatar - Lottery-062.jpg
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    Posted: March 10, 2006, 1:52 pm - IP Logged

    So I have to hire someone to watch someone, and someone to watch that someone, and someone else to watch that someone? Sounds like a big never ending circle of watching, could also make you go broke very quickly. What is to stop all of them from teaming up and planning your bankruptcy?

    I am already quite familiar with accounting, and financial planning, so my needs would not go beyond a lawyer. It also all depends on how much money you need, and whether or not you want to invest it. There is a lot of "depends" involved. If I were to win a small jackpot like the match 6, or lucky for life, no way would I be hiring all of those people.

    All I need is a lawyer, and the highest paying CD. $300 million maybe a financial advisor, but I as I said I do not have any complicated plans. No need to be "too busy" investing either, one or two stocks or bonds would be enough. I didn't win the lottery to create even more headaches than I had previously. I also do not plan to make about 4 or 5 other people who already made more money than I did prior to winning any richer. I won, not them.

      Uff Da!'s avatar - InCelebration 001.jpg
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      Posted: March 10, 2006, 2:52 pm - IP Logged

      The article was doing real good - until the end.  Give a lot of it away? B.S. !

      We may be the same age, Chewie, but brother, are we different!  I'd give most of it away!  Not all at once, of course.  Maybe 10% of the total the first year to charities and $12,000 per person per year to about 20 of my relatives if the jackpot were great enough.  After that, gifts and charity donations would come mostly out of annual income with only occasional dips into principal.  Reducing principal wouldn't be a problem, as I don't need all that.  And I'd leave almost my whole estate to charities upon my death.

      Even though I've been retired for 12 years, I'd still put the bulk of the money in the stock market and invest quite aggressively.  (That's what I'm doing with my rather modest amount, and my method has served me well for the past 30 years or so.  I've been living off my investments since I retired, even though I couldn't even start drawing my meager pension for eight years, nor  Social Security for ten years.)  Even if the market went down drastically,  I'd be fine.  My needs aren't great.  I already own a waterfront home that in other areas of the country would sell for over one million bucks.  (I paid a mere fraction of that years ago, and my mortgage payment wouldn't even cover a shack nowadays.)  I may drive a 12 year old vehicle, and would replace that with a new one if I won, but I don't need any luxury car to go to the grocery store or the post office.  I've already traveled the world, and have no desire to do more of that.  After winning a big jackpot, I'll bet I wouldn't spend more than $50,000 per year after taxes on myself, in addition the costs like financial advisors and body guard that were generated by the win.  So I could afford to "pull in my horns" until the market recovered.  I've done it before.  It's doable.

       

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        Hollywood
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        Posted: March 10, 2006, 4:10 pm - IP Logged

        First thing first, I put 10% to the church, 10% for supporting needy in the family(brothers, parents),20% real estates, 20% deposit to some banks, 25% investments (stocks, bonds), 10% investments(golds, diamonds, art works), 5% for starting up my own business.

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          Sparta, NJ
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          Posted: March 10, 2006, 6:37 pm - IP Logged

          We may be the same age, Chewie, but brother, are we different!  I'd give most of it away! 

          Big difference.  If people want a share of the lottery win, they can go out and win the lottery - until then, screw every single one of them.  People are poeple, they will exist, or die, whether I give them a portion of any lottery win, or give them nothing.  No doubt, I see hundred of thousands of people on the freeway, in both directions, every day, ever week.  I have no idea what a single one of them looks like, and have no knowledge of their life.  I have no inclination to learn about them!  I have never been in line for a handout, and never will.  I will take care of close family and close friends, and ensure the life-long comfort of those specific people.  But give it to any one else?  If it wouldn't be tax deductible, and doesn't fall into the hand-full of family or friends I mentioned, they can freeze in the streets - I'll be having too much fun to notice.  Cats and dogs, they are at the top of my deduction list!  I envision giving free trips to Hawaii for a thousands of animal shelter workers who have proven devotion to animals.  Normal leeches, never gonna happen.

          My end goal for winning the lottery is endless F-U-N and that entails spending tons of money.  Win $100M?  Hire a team to secure the future of those small number of friends and family.  Then take 30% of the leftovers and S-P-E-N-D it for pure uncensered pleasure.  Parties, every where in the world, week after week.  Private leased jet flights for friends and close family to every pleasure-dome that I can find.  Limo's after limo's.  Season tickets to all the major sporting events in the world.  Lease a luxury cruise ship for all the ex-Army buddies, still alive, and have it sail around the world for three months.  Money was invented for one reason, to use as barter.  I would barter it in any matter that might ensured my pleasure.  If any one didn't approve of what gave me that pleasure?  All of you already know my viewpoint on other peoples opinons - especially strangers! 

          Cheers

          |||::> *'`*:-.,_,.-:*''*:--->>> Chewie  <<<---.*''*:-.,_,.-:*''* <:::|||

          I only trust myself - and that's a questionable choice

            TheGameGrl's avatar - character catafly.jpg
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            Posted: March 10, 2006, 6:54 pm - IP Logged

            I'd question anyone deterring the investment in real estate. It rarely drops and if given the right location one can fair well in the real estate market. Its equity not a liability.  Buying acrage is the first step. Why? Because at some point a city will expand and when it does, its the local builders who will salivate and bid ridiculous amounts to get the rights to that property. My co-worker is already in this market.Bought farmland (25 acres) at 42k because it was so far out in a rural area. Today he's selling it to developers for 95k per quarter acre! I never knew dirt could cost so much!

            Only 10% of my (wishfull thinking) winnings would go to township bonds. A portion would go to some medical groups for finding cures and aiding families who need financial help.

            My family would get houses (good equity investment!) and be set up with trust funds.

            Unless you lived and had money in the stocks back in the 1990's you have no idea what its like to see your hard working money just vanish! And it happened in a manner that didnt allow a person to bounce back! It was gone. Poof! Never again will I trust an advisor to tell me how to handle my money. I'd trust a few folks here with decent suggestions but the end result is simiple. Its no ones business but your own in what you do with your winnings. (barring any taxes or illegal activities of course).

             

            ~~Is it true, Is it kind,Is it necessary. ~~~

             Thanks be to the giving numbers: 1621,912,119 02014

              Coin Toss's avatar - shape barbed.jpg
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              Posted: March 10, 2006, 6:56 pm - IP Logged

               

              What the financial adviser said in the OP sounds grat for the most part, but I've got to wonder if the financial adviser him or herslef made a score like a lottery jackpot how much of their own advice they'd follow?

               "What happened to that financial adviser that was telling lottery winners what to do?"

              "Oh, they hit some lottery, quit, and went to Vegas". 

                Uff Da!'s avatar - InCelebration 001.jpg
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                Posted: March 10, 2006, 7:31 pm - IP Logged

                TheGameGrl said:

                Unless you lived and had money in the stocks back in the 1990's you have no idea what its like to see your hard working money just vanish! And it happened in a manner that didnt allow a person to bounce back! It was gone. Poof! Never again will I trust an advisor to tell me how to handle my money.

                Ah, maybe that is why I made out so well.  I didn't have a financial advisor.  LOL!  I made all my own decisions without one.  I don't know that I'd dare to try that with more than a couple of million, though, and even that might be stretching it. 

                  sirbrad's avatar - Lottery-062.jpg
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                  Posted: March 10, 2006, 7:36 pm - IP Logged
                  What I still cannot figure out tax wise about the lottery is, what if one chooses to only live off the principal and had no interest bearing accounts, would they still have to pay a tax on their winnings every year? I heard that you only had to pay once (35%) and never have to deal with the IRS after that?
                  That should be the case, because after once it is no longer income coming in. I could easily live off the principal and still never use it all for a jackpot of about 3 million or more. Say I wanted to live a luxurious lifestyle, where I am from $5,000 a month would buy that, even much less. I consider $5,000 a month the maximum I would ever spend, but more realistically it would never be more than $2,000-$3,000 probably.
                  Even at $5,000 a month that would be $60,000 a year. $3,000,000 for 50 years. So if you won like $20 million, or even a ridiculous $300 million, why would you even need to bother with interest if you had no family to pass it on to? Would you still be taxed yearly? I would rather live off the principal if it meant never having deal with the IRS again. They get too much money as it is.

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                    Sparta, NJ
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                    Posted: March 10, 2006, 8:06 pm - IP Logged

                    Say I wanted to live a luxurious lifestyle, where I am from $5,000 a month would buy that, even much less.

                    Luxury is $5K a month - $60K a year?  I'd pay my chauffer more then that, and provide his car!  Man, Pennsylvania gasline tax would eat a large portion of that!

                    Cheers

                    |||::> *'`*:-.,_,.-:*''*:--->>> Chewie  <<<---.*''*:-.,_,.-:*''* <:::|||

                    I only trust myself - and that's a questionable choice

                      TheGameGrl's avatar - character catafly.jpg
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                      Posted: March 10, 2006, 8:11 pm - IP Logged

                      Sirbrad- Your correct that the first year of collecting (if you chose cash option) the tax is at 38% for the government plus any state or local (if they have it in the state of play). After that the money is yours to do as you so please. The catch is, anytime that money makes a profit - such as from interest or trades, you get nailed for making money! Go figure that riddle out! The govt taxes you for gains, interest and selling items. The way around it is simple, hide your money in a nuns habit. Or in this case a whole abbey full of nuns! Its against the law for the govt to search and seize a religious place :) (just kidding!). 

                      Most folks dont carry your level of living the simple life. Unfortunately greed is a powerful force. I truly think that if you ever did win a huge jackpot you really would live as you stated in your post. You'd live well enough to get by and stay humble enough to not be bothered with the hype or wants of such material status quo items of the wealthy. (re-yachts,summer home,vacations abroad,collector cars).

                      ~~Is it true, Is it kind,Is it necessary. ~~~

                       Thanks be to the giving numbers: 1621,912,119 02014

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                        Hollywood
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                        Posted: March 10, 2006, 8:54 pm - IP Logged

                        There is a purpose for someone who won the jackpot. God doesnt give that away without a purpose. The way I look at it, if you win it, you need to give it back at least 10% (TITHE). HE has already given then you give it back at least 10%. It's alway that way. REMEMBER 10% for God ... you can use the 90% wisely.

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                          Posted: March 10, 2006, 9:45 pm - IP Logged

                          There is a purpose for someone who won the jackpot. God doesnt give that away without a purpose. The way I look at it, if you win it, you need to give it back at least 10% (TITHE). HE has already given then you give it back at least 10%. It's alway that way. REMEMBER 10% for God ... you can use the 90% wisely.

                          God isn't going to have a damn thing to do with it, thus he doesn't get a percentage; why should any human be obligated to provide funds to a superior being?  If he wants a share, let him go out and sprinkle his magic sperm dust on his own ticket.  If his magic sperm dust can get a virgin pregnant, and he can write a best selling comic book about it, then he can create his own lottery winnings.  He can also take care of all the needy that he created during his famous temper tantrums. No wonder no one wants computerized drawings, God needs balls to function!

                          Cheers

                          |||::> *'`*:-.,_,.-:*''*:--->>> Chewie  <<<---.*''*:-.,_,.-:*''* <:::|||

                          I only trust myself - and that's a questionable choice

                            TheGameGrl's avatar - character catafly.jpg
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                            Posted: March 10, 2006, 10:43 pm - IP Logged

                            Leave it to you Chewie to set the record straight. You're forthright. One never has to guess with where  you stand on matters. Its true that TITHING is a Church ploy and not a GOD issue.  Churchs are a business that are" not for profit"  so in keeping with that idea, no need for them to profit off of a hard earned paycheck or a well earned jackpot.  Be a person a beleiver of a faith or not, it has no bearing on who wins the jackpot. 

                            ~~Is it true, Is it kind,Is it necessary. ~~~

                             Thanks be to the giving numbers: 1621,912,119 02014

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                              Posted: March 10, 2006, 11:34 pm - IP Logged

                              There is a purpose for someone who won the jackpot. God doesnt give that away without a purpose. The way I look at it, if you win it, you need to give it back at least 10% (TITHE). HE has already given then you give it back at least 10%. It's alway that way. REMEMBER 10% for God ... you can use the 90% wisely.

                              If there's a god and she cares one whit about who wins, how come Jack Whittaker got about $113 million (after taxes) and Mother Teresa didn't win anything? If there's a god and he wants to give me a lottery jackpot  there's no reason to even buy a ticket. When the winning ticket, with my signature already on the back, blows in the window of my car while I'm cruising down the Thruway at 75 I'll figure god deserves a share. Since I can't trust a church to tell me which god deserves it I'll have to wait for the right god to speak to me directly. I'm sure I'll be told all sorts of important things, including the number of the account I should transfer the funds to. I'm certainly not going to give it to some middle man like Pat Robertson or Jim Bakker so they can hire an assassin to kill Hugo Chávez or a secretary to have sex with.