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$344 MILLION: Mega Millions lottery jackpot skyrockets

Topic closed. 102 replies. Last post 3 years ago by rdgrnr.

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Viking Orayk's avatar - DiscoBallGlowing
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Tennessee
United States
Member #149627
December 5, 2013
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Posted: December 8, 2013, 1:15 pm - IP Logged

I would probably consider annuity if it was $1 billion or more, just because I don't have one foot in the grave yet Jester

Otherwise cash for the following reasons:

1) Regarding taxation, lump sum penalizes about half a percent versus annuity but that is under current rates only. Taxes are more likely to go up than down in the future, so it would be better to pay up now and never have to pay again (other than on interest, investments etc) rather than risk a higher rate down the road.

2) Say you feel strongly that you could earn "at least" 5% (~3% annual yield is required to match annuity) on your money. With the cash up front you already have a headstart and can use the power of compounding. Earning 5% on the lump sum beats the annuity with 5% additional return. So if you got the annuity and earned 5% on top of the premium packed into your payment, it would be less than if you had taken the cash and invested it at 5% return.

Of course, the scaling effect can potentially diminish returns on the lump sum (hence why I would consider annuity over $1 billion), you can lose it faster, etc. while the annuity guarantees an inflation-padded, steady stream of income.

3) Obviously, nobody is guaranteed another day (government/creditors included!) so might as well enjoy life and your money while you can! Wink

well said"

I especially agree with number 3.  I Agree! 

integrity is doing what's right........ when nobody's watching"

    Teddi's avatar - Lottery-008.jpg

    United States
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    May 13, 2013
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    Posted: December 8, 2013, 2:10 pm - IP Logged

    I would take the cash option simply to make sure that if something happened to me the $$$$ would go to my children!!

    If anything happened to you, the lottery still has to pay out the annuity, and those annuity payments would go to your estate, so your children would still get the money, whether you are alive or not to give it to them. While I'm all for taking the cash option, wanting to leave your kids your lottery winnings isn't a reason to forego the annuity. Annuity payments don't stop simply because you die. They'll be covered either way.  Especially if you set up trust funds for them.

      Jill34786's avatar - Lottery-006.jpg
      Windermere, FL/Franklin, TN
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      Posted: December 8, 2013, 3:31 pm - IP Logged

      While relaxing here in Colorado, a friend of mine somehow talked me into contributing towards an MM pool with her and another friend staying with us. At first she wanted $20 from each of us and I frowned at the idea as I haven't even purchased a single ticket for this new matrix yet.

      We ended up compromising and decided to apply each of our $20 towards 5-draws which is good through December 24th...I figure this would be a good reason to head back out west in the event the lottery Gods blessed us. Smile

      ** Some people fulfill their dreams by receiving entitlements from the Government while others wake up and work hard for it! **

        Jill34786's avatar - Lottery-006.jpg
        Windermere, FL/Franklin, TN
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        Posted: December 8, 2013, 3:35 pm - IP Logged

        I'm thinking sun and fun if I win.

        Waldorf Astoria Key West

        Golfer- I think you would be right at home relaxing at this resort. Just remember my advice on always taking the lump cash option.

        Good luck to you!

        ** Some people fulfill their dreams by receiving entitlements from the Government while others wake up and work hard for it! **

          RedStang's avatar - tallman zps6gf4inoc.jpg
          NY
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          January 21, 2012
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          Posted: December 8, 2013, 4:25 pm - IP Logged

          I Agree! I am boycotting by spending $1 per draw. With these astronomical odds I rather spend my money on Florida Lottery Games such as Fantasy 5, Mega Money and Lotto which have better odds.

          Would'nt call spending a dollar Boycotting Blue Thinking.   You're actually doing what they planned for.

            Teddi's avatar - Lottery-008.jpg

            United States
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            May 13, 2013
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            Posted: December 8, 2013, 4:32 pm - IP Logged

            Golfer- I think you would be right at home relaxing at this resort. Just remember my advice on always taking the lump cash option.

            Good luck to you!

            Hey Jill, I've been waiting on you to throw your hat in because I think you and I both see eye to eye on this CV vs annuity debate. However, since certain possibilities have given me pause to consider the annuity as a viable option, I wanted to get your professional take on this. 

            Let's pretend circumstances presented itself so that the JP became large enough to pay out $30 to $40 million per year and the CV was 50% or less. Would choosing the cash still be a better value than opting for the annuity in such a case?

            I might wake up early and go running.  I might also wake up and win the lottery.

            The odds are about the same.

              Jill34786's avatar - Lottery-006.jpg
              Windermere, FL/Franklin, TN
              United States
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              Posted: December 8, 2013, 6:40 pm - IP Logged

              Hey Jill, I've been waiting on you to throw your hat in because I think you and I both see eye to eye on this CV vs annuity debate. However, since certain possibilities have given me pause to consider the annuity as a viable option, I wanted to get your professional take on this. 

              Let's pretend circumstances presented itself so that the JP became large enough to pay out $30 to $40 million per year and the CV was 50% or less. Would choosing the cash still be a better value than opting for the annuity in such a case?

              Hi Teddi- With the way annuities are structured for MM, it would take a jackpot of over 3 billion in order to support initial annual payments of $30 million and this is just with the initial 25% Federal and typical 5% state withholding which.

              Using the current jackpot as a basis ($344M annuity/ $184M cash) tripling this amount to 1.032 billion/$552 million cash. The first distribution would be $15.5M gross/$10.8M after-30% taxes. It would take 7 years before the pre-tax payment would even exceed $20 million.

              Taking the lump sum and factoring a nominal 3% return would far exceed the annuity progressive return. Taxes play an important role as the future is extremely uncertain and I have no doubt the rates will rise.

              With the lump sum payout (based on 1.032 Billion annuity) of $552 million/ $386 million after 30% tax, a modest 5% return would yield over $19.3 million.

              I always recommend the cash over the annuity even if the CV was 50% or less. There are many ways to let the money work for you such as contributing a large amount toward your own charitable trust, not only will this mitigate your Federal taxes but you will have the option of hiring friends and family to monitor the trust.

              I would advise anyone who gets a large windfall to meet with several Certified Financial Planner (CFP) and CPA/Tax accountant before choosing either option.

              ** Some people fulfill their dreams by receiving entitlements from the Government while others wake up and work hard for it! **

                Jill34786's avatar - Lottery-006.jpg
                Windermere, FL/Franklin, TN
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                Posted: December 8, 2013, 9:35 pm - IP Logged

                Another point I would like to make about taking the cash option instead of the annuity is the ability to let it grow without touching the principal

                Using this current $344M jackpot which offers a CV of $184M the net payout after 39.6% Federal tax is applied would be a little over $111 million. Just for comparison the $344 annuity would amount to a $207 million take home pay if the current top tier Fed rate didn't change over the next 29 years (which is unlikely).

                Investing $100 million using a diverse approach with a qualified team of financial advisers/money manager should easily bring conservative returns of at least 6-8% annually. Under a slightly more aggressive approach, 12-15% is completely possible.

                I would suggest the milder goal of 6-8% as over the span of 30-years, you would have far exceeded the return of the lottery annuity without ever making a dent in the principal.

                ** Some people fulfill their dreams by receiving entitlements from the Government while others wake up and work hard for it! **

                  Avatar
                  Portland, OR
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                  August 20, 2013
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                  Posted: December 8, 2013, 11:09 pm - IP Logged

                  After giving it a lot of thought, I'm going with the annuity option guys. :)  I'll invest a lot of the first payment smartly in some good technology startups and have the cash value in less than 15 years. :)   How much money does a man need to live?  I don't need that lump sum payment the first time.  Afraid I lose it all somehow.  I'll write a good will leaving future payments to my daughter. I got this, rgdr...  :)

                  I almost got it once.  This time it won't escape me.  http://www.lotterypost.com/thread/265134

                    Avatar
                    California
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                    October 7, 2009
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                    Posted: December 9, 2013, 12:00 am - IP Logged

                    After giving it a lot of thought, I'm going with the annuity option guys. :)  I'll invest a lot of the first payment smartly in some good technology startups and have the cash value in less than 15 years. :)   How much money does a man need to live?  I don't need that lump sum payment the first time.  Afraid I lose it all somehow.  I'll write a good will leaving future payments to my daughter. I got this, rgdr...  :)

                    I almost got it once.  This time it won't escape me.  http://www.lotterypost.com/thread/265134

                    Unfortunately, the MegaMillions managers have changed their game:

                    MegaMillions Has Changed:  "The odds of winning a jackpot changed from 1 in 176 million, to 1 in 259 million."

                    It's now almost impossible to win.  They increased the odds by 50% so it would be harder to win and the jackpots would increase.

                    I don't know about you guys, but I'm going to ignore this game until it goes to $700 Million.  That's what the managers wanted anyway.  Bed  Then I'll play 10 bucks.

                      golfer1960's avatar - Lottery-003.jpg
                      Eatontown, NJ
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                      Posted: December 9, 2013, 1:19 am - IP Logged

                      Golfer- I think you would be right at home relaxing at this resort. Just remember my advice on always taking the lump cash option.

                      Good luck to you!

                      Thanks Jill! I hope you're enjoying your vacation in CO. I've never been there but it looks like a beautiful state with snow capped mountains. I hope you're skiing out there?

                      Good luck to you and your friends too!! :)

                      Aspen, CO ski resort Colorado ski trip Colorado Colorado

                        Jill34786's avatar - Lottery-006.jpg
                        Windermere, FL/Franklin, TN
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                        Posted: December 9, 2013, 7:11 am - IP Logged

                        Thanks Jill! I hope you're enjoying your vacation in CO. I've never been there but it looks like a beautiful state with snow capped mountains. I hope you're skiing out there?

                        Good luck to you and your friends too!! :)

                        Aspen, CO ski resort Colorado ski trip Colorado Colorado

                        Hi golfer-we are really enjoying ourselves here in Aspen which btw happens to coincide with some of the pics you posted:)
                        My children as well as the adults have been participating in both skiing and snowboarding.
                        We pooled our money for 5 draws starting the 10th...peer pressure.
                        Good luck to you as well!

                        ** Some people fulfill their dreams by receiving entitlements from the Government while others wake up and work hard for it! **

                          surimaribo24's avatar - photo11 zpsfffd70be.jpg
                          NEW YORK. RIVERHEAD
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                          Posted: December 9, 2013, 11:23 am - IP Logged

                          wow . someone's live will change tom  . night . 

                          goodluck everyone .

                          PETS#=105-215

                            Jon D's avatar - calotterylogo
                            Los Angeles, California
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                            Posted: December 9, 2013, 11:34 am - IP Logged

                            I agree with most that say always take the cash.

                            The annuity is mainly a gimmick to inflate the Jackpot for sales and marketing purposes...and it works!

                            It may have made more sense in the old days, with state lottos and when jackpots were smaller. With a smaller jackpot under $10M, there is some tax advantage with smaller annual payments falling under the top tax bracket. But now with huge jackpots of a few hundred million, that disappears.

                            I agree that it can seem scary when the jackpot is so large like now. You'd be so busy worrying about moving the money around and diversifying in the early stages, so some might consider the annuty for less stress and to have security.

                            Why can't they do half and half? Let you claim part of the JP as cash, and part as annuity? I don't know if this can be done, but sheesh, if they can do it for pizza, why not the lottery? Some winners do with by splitting payment options between husband and wife, or siblings, but how about for one person? I'd vote for that.

                              ressuccess's avatar - Lottery-043.jpg

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                              Posted: December 9, 2013, 4:36 pm - IP Logged

                              I hope the Mega Millions Jackpot continues to roll.