$868 million...that's it....no 1.4 bilion exists , yet....IF you take the annuity, they'll gladly pay you in payments while the interest and taxes fluctuate for 30 years...LOL How do they get away with this lie of 1.4 billion? LOL! $500 million of that number DOESN'T exist!
JAMORA is right in spirit. Anyone thinking about taking the annuity is falling for something we call the money illusion.
The 1.4 billion annuity is misleading as it doesn't exist beyond the cash amount they can pay you right now folks.
You need to stop thinking about “1.4 billion” and start thinking about true earnings power if you invested it by yourself.
All, the lottery does is take nearly the full cash jackpot and invest it into a government bond on your behalf. So the question becomes can they earn more than you in the free market?
The core issue is the federal interest rates are deceptively low. They can't earn jack crap for you at the moment compared to the free market. IF federal interest rates were normal and not low then we would have a true debate on our hands.
However, there is no debate when one option is far above the others. The cash option is kind of like how Donald Trump's polling numbers are so far above everyone else's numbers LOL.
You could earn far more by taking the cash jackpot. Paying the full tax bill of 39.6% on the cash jackpot and investing it all yourself in the free market. To prove my point. I walk you through it. Let us say I am the only winner.
868,000,000 Cash won.
If I was to take the annuity they would give me $21,072,009 of the cash right away to use now and invest the rest of it or "846,927,991" in case they would invest in a government bond to be paid out over the next 29 years of my life.
So am going to take that 846,927,991 part of the cash they would have invested in a government bond for me and do it myself.
First off: 846,927,991 Max fed rate of -39.6% = 511,544,506 (half a billion to invest is just absurd.)
Alright, so am going to invest this amount in the free market. Only the most profitable and safest stock market investments will do. (No high-risk bets allowed here folks.)
So am limiting my investments to say the likes of Coca-Cola - Nestle - Hershey, McDonald's - Exxon Mobil - etc.
Now say I will earn 4% the first year easy in dividends alone. ( 4% is very conservative) That is 20,461,780 million.
Now some of you will see the 2nd annuity payment amount is 22,125,610 and go: Hahahaha the annuity is earning me FAR more than you Mr. cash option guy. I would laugh right back at you annuity people. First off, my tax rate is now different to the annuity option person.
You're sure paying 39.6% for all the payments for next 29 payments (or whatever the rate changes too in that time period) I changed all my future rates over to the current lower rate of 23.8% max on all investment income. Yes, really your dividend income is taxed at a lower rate. Am playing the really long game here.
Annuity 22,125,610 -39.6% = 13,363,868
Cash 20,461,780 -23.8% = 15,591,876
Mr. Cash has over 2 million more to invest the next year.
Now for the really amazing part. For you see while I only got around 15m back from the corporations that year. 15m is not all true earnings from my new ownership.
They didn't send out all the "earnings" per share. The dividend they send out is only a part of the story.
They earned much more money than they sent out to you as a general rule. So they reinvested the profits back into the business on your behalf.
If you never sell and just hold on to really great companies. You will watch your dividend go sky high along with watching the company's total earnings go over the top in the coming decades.
Take a great company like Hershey: (If you love chocolate you love owning this company!)
Let's look back on recent history and see how the dividend paid out to owners grown over the years.
Let's use time jumps of 5 years...
What a single share paid out in total dividends that year:
In 1997: 0.32
In 2002: 0.6302
In 2007: 1.135
In 2012: 1.56
You see my point, right?
Your dividend income will go up a lot if you own best corporations and just hold on to them forever. You can't lose when owning the highest quality companies in the world.
Plus sense you would have never sold your "shares" in the companies. The cash keeps coming forever. There is no end date to the ownership unless you sell your ownership! The cash dividends are forever people! Hell, you could leave the stock to your grandchildren even.
Speaking of which, the numbers get beyond shocking when you own great companies for like 50 year plus range. (Generation wealth.)
Just thinking what I could turn half a billion investment into in 50 years is mind blowing.
It has been fun just doing the math on this jackpot size. I play the lottery for the entertainment value and this billion dollar jackpot is worth price tag of 2 bucks to dream this big.
P.S. When investing your money always remember "Murphy's Law" If there are two or more ways to do something, and one of those ways can result in a catastrophe, then someone will do it.
So don't be that complete and total moron you read about on lottery post news reports who lost everything. Avoid risk at all cost. If you can earn more than 4% the first year, but the road is with "risky" companies DON'T DO IT. The Coca-Cola Company will sure around in 30 years. Hell, Nestle has been at it for over 150 years!