|Posted: May 9, 2008, 12:00 pm - IP Logged|
MM annuities are spread over 26 payments, which is one up front and one for the next 25 years. For PB it's 30 payments over 29 years. That's a 4 year difference, but there's much more to it. By spreading the remaining payments over 29 years instead of 25 there is more of the available money invested right at the start. The bigger diference is that MM payments are equal, but PB payment start smaller and get bigger as time goes by. With a total of 26 payments, MM pays just under 4% up front and invests a bit over 96%. The first PB payment is abpout 1.8%, so 98.2% gets invested. That small extra investment and the extra 4 years means that the total payout for a given amount of cash is about 25% more than what you'd see with the MM schedule.
What you get upfront is exactly the same with PB and MM, if you take cash . Taking the cash means you get 100% of what they have to invest. The cash prize isn't smaller with PB, the annuity is bigger, at least in terms of the advertised numbers. Since they're both going to get the same investment results, the only real difference is how long it takes to collect the money.
The cash value percentage changes with interest rates, but not with the amount of the jackpot.