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Kansas Powerball lottery winner claims jackpot anonymously

Topic closed. 32 replies. Last post 10 years ago by guesser.

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Posted: October 5, 2006, 9:15 pm - IP Logged

So where did the missing $7,829,828.00 go ?    

 

(Rhetorical question)

 

Rant

    guesser's avatar - Lottery-017.jpg

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    Posted: October 5, 2006, 9:18 pm - IP Logged

    Or the 'you can't take it with you' thoughts kick in.

     

    I've never seen an armored car follow a hearse to a cemetary... 

      justxploring's avatar - villiarna
      Wandering Aimlessly
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      Posted: October 5, 2006, 10:58 pm - IP Logged

      So where did the missing $7,829,828.00 go ?    

       

      (Rhetorical question)

       

      Rant

      Oh, I know you're kidding, but I do understand why they don't pay the whole $15M.  I just think they deduct too much from it to pay the lump sum. The balance is supposed to be the amount that will eventually (in 30 years) become the jackpot.  My "rant"  (actually it isn't a rant, just an observation) is that they are using the very lowest interest rate, although many might argue that government bonds are the safest.  Large investments can play with one's emotions, so what one chooses to do with money is often whatever the tummy can handle. Will you puke if you lose a fortune or will you explode if you don't make one? A lot of people don't appreciate "safe" when everyone else is making a bundle. (look at the Dow today) They only like "safe" when everyone else is losing money.

        Todd's avatar - Cylon 2.gif
        Chief Bottle Washer
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        Posted: October 5, 2006, 11:05 pm - IP Logged

        Oh, I know you're kidding, but I do understand why they don't pay the whole $15M.  I just think they deduct too much from it to pay the lump sum. The balance is supposed to be the amount that will eventually (in 30 years) become the jackpot.  My "rant"  (actually it isn't a rant, just an observation) is that they are using the very lowest interest rate, although many might argue that government bonds are the safest.  Large investments can play with one's emotions, so what one chooses to do with money is often whatever the tummy can handle. Will you puke if you lose a fortune or will you explode if you don't make one? A lot of people don't appreciate "safe" when everyone else is making a bundle. (look at the Dow today) They only like "safe" when everyone else is losing money.

        They actually work very hard to get bidders with the highest rates, because doing so will make the annuity jackpot higher, which in turn drives more sales.  It's not like MUSL executives are hoping to pay out a lower cash jackpot, and they pocket the difference or something.  They pay out whatever there is, in its entirety.

        In fact, Chuck Strutt (head of MUSL) posted several messages at Lottery Post describing exactly how they calculate the annuity, based upon how much cash they have.  (Not the other way around.)  www.usamega.com includes breakdowns of cash vs. annuity, including the 29-year (30-payment) payout chart for every state on the Jackpot Analysis page.

         

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          Posted: October 5, 2006, 11:27 pm - IP Logged

          They actually work very hard to get bidders with the highest rates, because doing so will make the annuity jackpot higher, which in turn drives more sales.  It's not like MUSL executives are hoping to pay out a lower cash jackpot, and they pocket the difference or something.  They pay out whatever there is, in its entirety.

          In fact, Chuck Strutt (head of MUSL) posted several messages at Lottery Post describing exactly how they calculate the annuity, based upon how much cash they have.  (Not the other way around.)  www.usamega.com includes breakdowns of cash vs. annuity, including the 29-year (30-payment) payout chart for every state on the Jackpot Analysis page.

          Todd...how would one find the postings by Chuck Strutt regarding how MUSL calculates the annuity?

           

          Also is it right to believe that Mega Millions would follow a similar procedure? 

            justxploring's avatar - villiarna
            Wandering Aimlessly
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            Posted: October 5, 2006, 11:29 pm - IP Logged

            "They actually work very hard to get bidders with the highest rates..."  Todd

             

            I never said they didn't.  I don't think there is some sort of conspiracy. I was only saying that usually the higher the risk, the higher the gain (and also the higher the possibility of loss)  Increase in value is often related to how safe the investment is, although not always. Anyway, I don't care - just give me $200 million anyway you want to and I'll take it.

              Todd's avatar - Cylon 2.gif
              Chief Bottle Washer
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              Posted: October 5, 2006, 11:38 pm - IP Logged

              Todd...how would one find the postings by Chuck Strutt regarding how MUSL calculates the annuity?

               

              Also is it right to believe that Mega Millions would follow a similar procedure? 

              Use the search feature for posts by Chuck32.  Mega Millions uses a different procedure.  They have equal installments, and Powerball uses annually increasing payments.  But before going on any further, you really should check out all the info at www.usamega.com, because it's all there.

               

              Check the State Lottery Report Card
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                NY
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                Posted: October 6, 2006, 12:32 am - IP Logged

                Todd...how would one find the postings by Chuck Strutt regarding how MUSL calculates the annuity?

                 

                Also is it right to believe that Mega Millions would follow a similar procedure? 


                The thread in which Chuck explained things was  in a thread about  a pool winning PB, when the usual debates about annuity vs cash  started. You can start here: http://www.lotterypost.com/news/139681.htm?p=2 

                As Todd pointed out, MM pays out on a different schedule, but other than that the procedure is similar. Seek bids, buy the annuity, send a check each year. It is, naturally, the annuity that is determined by interest rates. Ticket sales generate cash, and the cash is used to buy the annuity if the winner decides to take it.


                  guesser's avatar - Lottery-017.jpg

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                  Posted: October 6, 2006, 12:46 am - IP Logged

                  Oh, I know you're kidding, but I do understand why they don't pay the whole $15M.  I just think they deduct too much from it to pay the lump sum. The balance is supposed to be the amount that will eventually (in 30 years) become the jackpot.  My "rant"  (actually it isn't a rant, just an observation) is that they are using the very lowest interest rate, although many might argue that government bonds are the safest.  Large investments can play with one's emotions, so what one chooses to do with money is often whatever the tummy can handle. Will you puke if you lose a fortune or will you explode if you don't make one? A lot of people don't appreciate "safe" when everyone else is making a bundle. (look at the Dow today) They only like "safe" when everyone else is losing money.

                  You got that right.

                  It was about this time 4 years ago when folks would DIE for something they could make 6% on in the stock market, because most folks were losing money.  I was making 8% and thought I was the richest guy around, and to show how things have gone since then, I've been making about 18% every year, and that's BAD - or at least average by today's standards.

                  I made a small fortune speculating on oil in 1998, and I also lost a bit speculating on something else I sold too soon on in 1997, but any + is better than any - . 

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                    Raleigh, NC
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                    Posted: October 6, 2006, 5:48 am - IP Logged

                    nc6string....compared to interest rates, the length of the annuity plays a bigger role in the value of an annuity.   The longer the annuity, the lower the lump sum. 

                    No where was this more evident then a few weeks ago when  Powerball and Mega Milions each had annuity values of $15 million.  The lump sum for Mega Millions (a 26 year annuity) was around $8.9 million while Powerball (a 29 year annuity) was valued at $7.1 million.  Since they both fund with governemnt securities, the two games probably have very similar interest rates.

                    I agree, the length of the annuity is very important, but the length of the Powerball payout has not changed in some time, yet, people have noticed the lump sums on Powerball going from about 55% or so last year, to now under 50%, in which case, is all a function of rising interest rates.

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                      freeport bahamas
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                      Posted: October 6, 2006, 7:19 am - IP Logged

                      hey another lucky person, well spend it wisely,  i only wish the percentage was a little lower when they take out the taxes , so you get at least 75%  instead of  30% , but hey good luck to all us guys  who keep playing ,our time is soon,then  when  i win  i will throw a block party for everyone on lottery post in the bahamas, and we will party like its our birthday,PartyPartyBananaGuitarPartyHyper

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                        Urbandale, IA
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                        Posted: October 6, 2006, 11:44 am - IP Logged

                        I agree, the length of the annuity is very important, but the length of the Powerball payout has not changed in some time, yet, people have noticed the lump sums on Powerball going from about 55% or so last year, to now under 50%, in which case, is all a function of rising interest rates.

                        The Powerball Annuity payout was changed last year to a graduated annuity payout - with each year's payment going up by 4%.  If you had a lump of cash and wanted to set up your future, any financial advisor worth their salt would recommended a graduated annuity.  Tough to live on even $1 million a year if it never keeps up with inflation.  Lottery payouts that are equal really are not meeting the needs of a winner that wants to sit on the beach and not think about the money.  The graduated annuity means that a little more money is invested longer and so the earnings grow more for the winner.  Of course, the cash does not go "down" at all.  The earnings go up and the difference between the two grows wider.  People do an odd thing whey they focus on the "cash percentage" number.  They should be looking at the reciprocal - the annuity percentage number.  If you want a bigger cash percentage number, that is easy to do.  Just refuse some of the annuity.  If you earn 0% percent interest, you can even make the cash percentage 100%.

                        Taxes take a bigger bite than most people realize - more than is typically reported by the press as "after tax" - as CA Lottery Guy correctly pointed out.  Most winners come closer to taking home 45% to 50% of the CASH prize.  As someone said, we all pay taxes, so we should be used to that (we just are not all used to being in this tax bracket).  No one takes a job and when told the salary asks, "Yeah, but what is that after taxes?"

                        To the one who says they can earn more than the annuity and that the lottery is running a scam - run the numbers.  Take an example of a $100 million annuity jackpot where the winners ends up with maybe $25 million CASH after tax and start investing that.  Remember that it is paid out as a stream of income every year - you don't get to hold the cash and compound the earnings.  It is hard to take $25 million and beat a lottery that is investing twice the amount (pre-tax).  Oh, and then guarantee the income stream.

                        Most folks do take the cash (only 2 out of 14 winners took annuity in 2005).  Their financial advisors always tell them to take cash.  Let's see, I am a financial advisor and some guy just fell into $80 million in cash – he has no financial experience - I earn my living based on investing money - what to do - what to do?  Not that I would ever suggest that someone would act in their own interest.  Likely, they just have a lot of confidence in their investment ability - and indeed, a smart or lucky person willing to take some risk can do better.  But every independent finance professor and syndicated financial columnist I've talked to who has done the math and asks "Why do they always take the cash?"  You have to decide whether a 100% guaranteed return of 8% is a good deal or not (this is the true comparision to the lottery annuity).

                        Actually (with a tip to CASH ONLY), this year is really a pretty good time to consider taking the cash.  Even though it means working hard to protect your money and accepting some risk (goody-bye beach dreams), the maximum federal income tax rate (35%) is at an all-time low.  If you are going to take the hit at some point in your life, this might be the year to do it.  With tax rates so low, you really only have to approach earning 8% in the current environment to equal the lottery's annuity stream.  Of course working hard to safely earn the exact same interest stream is not the point, you want to beat it, so you'll want to earn more than 8%.  Can it be done?  Of course.  Not without risk, but it can be done.  There are investors that earn more than that all the time - and there are investors that lose it all.  The trick is to buy low, sell high SmileyThe best reason to take cash is really to be able to set up your own future – everyone’s needs are different.  The lottery offers both choices - the extremes of each case (cash vs. long-term graduated annuity).  The best deal would be if the IRS would allow the lottery give the winner more control - take X% in cash; put X% in a pre-tax graduated annuity over X years.  But, at the moment, that is just too much manipulation of your tax liability for the IRS to bear.

                        One writer says that the annuity is advertising hype.  That may be a little strong.  Lotteries are in a business and a business will always focus on the positive, but the lotteries announce both the cash and annuity amounts.  I’m not sure what the lottery could do to be more open and honest about it.  The cash amount is the true “present value” of the prize; the annuity is total dollars that the lottery can pay out after investing the cash pre-tax for you.  You can’t confuse what a reporter writes as coming from the lottery. 

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                          California
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                          Posted: October 6, 2006, 12:22 pm - IP Logged

                          I agree, the length of the annuity is very important, but the length of the Powerball payout has not changed in some time, yet, people have noticed the lump sums on Powerball going from about 55% or so last year, to now under 50%, in which case, is all a function of rising interest rates.

                          nc6string...while the length of the Powerball annuity has not changed, the annuity payment schedule has changed.  In the summer of 2005 Powerball went from an equal payout schedule to a graduated (4% increase per year) schedule.  This change means the amount of cash set aside for the jackpot can purchase a larger annuity.  This means a bigger advertised jackpot which in turn lessens the percentage of the cash payout of the jackpot. 

                          Interest rates do have an effect.  Earlier this year the payout percentage was 44.2%.  The most recent was 48.4%  That is a direct result of changing interest rates.

                          These two factors are why people are noticing the lump sum % of the jackpots for Powerball going down from earlier levels.

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                            Raleigh, NC
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                            Posted: October 8, 2006, 11:25 am - IP Logged

                            nc6string...while the length of the Powerball annuity has not changed, the annuity payment schedule has changed.  In the summer of 2005 Powerball went from an equal payout schedule to a graduated (4% increase per year) schedule.  This change means the amount of cash set aside for the jackpot can purchase a larger annuity.  This means a bigger advertised jackpot which in turn lessens the percentage of the cash payout of the jackpot. 

                            Interest rates do have an effect.  Earlier this year the payout percentage was 44.2%.  The most recent was 48.4%  That is a direct result of changing interest rates.

                            These two factors are why people are noticing the lump sum % of the jackpots for Powerball going down from earlier levels.

                            I remember when that happened, and the only thing I remember thinking was that I hope NC chooses Mega Millions instead of Powerball - didn't happen of course.  The only thing the change did, I think, is lessen the chance (to about zero) that anyone would ever take the annuity option.  The amount you get per year, in the first few years, seems so out of proportion with the total amount won, I can't see anyone taking it.  It's like having a father, doling out an allowance again, "Son, when you get a little older, I'll raise your allowance..."  No thanks!

                            The guy who said it would be tough to live on 1 million a year for 25 to 30 years - I trust you were kidding.  

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                              Urbandale, IA
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                              Posted: October 8, 2006, 12:47 pm - IP Logged

                              I remember when that happened, and the only thing I remember thinking was that I hope NC chooses Mega Millions instead of Powerball - didn't happen of course.  The only thing the change did, I think, is lessen the chance (to about zero) that anyone would ever take the annuity option.  The amount you get per year, in the first few years, seems so out of proportion with the total amount won, I can't see anyone taking it.  It's like having a father, doling out an allowance again, "Son, when you get a little older, I'll raise your allowance..."  No thanks!

                              The guy who said it would be tough to live on 1 million a year for 25 to 30 years - I trust you were kidding.  

                              Just hardly half-kididng about being tough to live on 1 million a year for 29 years.  Most people quickly get used to their income.  Having $1 million a year is great for the year or three, but then you start noticing that the docking fees on your yacht keep going up.  The cost of a new Rolls-Royce has continued to rise.  Your service staff keeps wanting raises.  Those monthly trips to Europe keep rising with higher first class costs and luxury suite costs.  Without an inflationary increase in your income, your "true" income - your lifestyle begins to decline.  If you do a little math, you will find that a $1 million needs to be $1.4 million in 10 years; $1.8 million in 15 years; and goes over $2 million in 20 years - just to stay the same.  Any investment advisor setting up an annuity stream for someone will certainly set up a graduated stream.  To do otherwise would be irresponsible.