One more annuity vs cash discussion

Reply #20

SirMetro — Fri, 19 Jan 2007 13:53:19 GMT

What you are looking for is kept here (at Todd's other site) http://www.usamega.com/powerball-jackpot.htm

Reply #19

SirMetro — Fri, 19 Jan 2007 13:47:32 GMT

Hummm...where's CashOnly when ya need him???

First, I think (and this is only my opinion as since I have not had time to do the calculations and probably will allow someone else to do that anyway) that an annuity payout is actually an incredible handicap to one's buying power .

Simple mathematics makes that clear. If you divide $100,000,000 over a period of 30 years is roughly $3.3 million annually. After taxes, you would only end up with roughly $1.6 million spendable funds. Now, if you... [ More ]

Reply #18

justxploring — Fri, 19 Jan 2007 08:07:33 GMT

I'm trying to find a breakdown of the PB annuity for the current $205M jackpot. How is it calculated? I think the annuity makes a lot of sense. However, I'd be receiving the higher payments in my 80s, so I like the MM payout which is 26 years and divided into equal payments. I thought it was a big mistake when FL changed from 6/49 to 6/53 and also increased the payout from 20 to 30 years.

Reply #17

Coin Toss — Tue, 16 Jan 2007 22:18:17 GMT

KY Floyd

Of course it's also likely that a lot of the true believers will discover that their belief isn't quite as strong as they once thought.

Excellent point Floyd

Reply #16

KY Floyd — Tue, 16 Jan 2007 20:37:10 GMT

One thing that's certain is that there's only one person who would have taken lump sum in the 50's. Everybody else would have taken the annuity because the top tax rate ifrom 1951 through 1963 was 91% on taxable income over $400,000. Still, even with high tax rates $333,000 annually would have been an enormous amount of money, but if it only last for 15 years, how much they invested and how well they invested would have had a major influence on how their standard of living changed when the pay... [ More ]

Reply #15

KY Floyd — Tue, 16 Jan 2007 20:21:47 GMT

If you've netted $25 million from the lump sum and lived off of the interest for two years and I've only got about $4 million (a rough approximation of the after-tax net from the first two years of an annuity) you could write a check about 6 times as big as I could. Of course I can always go to the bank and borrow against my future payments to write a bigger check. As a very rough figure, with current rates of about 6% I could potentially borrow about $32 million if I could make annual payment... [ More ]

Reply #14

psykomo — Tue, 16 Jan 2007 05:18:44 GMT

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Reply #13

tiggs95 — Tue, 16 Jan 2007 03:42:30 GMT

If you don't trust anyone put your money in the bank in a savings account..You have to pay taxes no matter what.The goverment can rip you off for just so much..If I hit big time I have a brother-in-law who lives in San Diego and he is worth 8mil.I will call him and let him advise me.I'm sure he knows how to handle big money..Now all I have to do is HIT

Reply #12

Coin Toss — Mon, 15 Jan 2007 19:51:35 GMT

No hi-jack, just a giggle:

A very wealthy Wall Street exec decided to call it quits with his mistress. Thanks to him, she had a penthouse on the 23rd floor over looking Central Park.

He went up to see her, holding a letter in his hand, and said, Sorry honey, but I tanked. I took a beating on shorting a couple of securities and another one went down to nothing. Sorry, but it's all gone, the penthouse, you're Jag XJ6, Maserati, the weekends in Paris, the minks, the jewellery, everything.... [ More ]

Reply #11

justxploring — Mon, 15 Jan 2007 16:50:06 GMT

If I had only taped the first time I sat down with the financial planner at Paine Weber 6 years ago I would have been able to sue him. People give so-called advice based on what is good for them and for their firm. There are some brokers who will pay a lot of attention to individual clients however and their personal needs, but they're hard to find. Maybe if someone won the lottery, it would be different, but even honest people can make bad decisions. Trust me, I know.

Reply #10

Coin Toss — Mon, 15 Jan 2007 16:30:38 GMT

Trump? When he's peaking or re-organizing?

Professional advisors are in it more for themselves than their clients, if the client makes money, fine, but they get heat, too, and they exist to see activity in accounts (it's called churning), not stagnation.

There are honest and really conscientious ones, sure but often they move on to other things.

I remember one who said he did it for seven years and 99% of his clients didn't really need his advice as much as they needed simply more mone... [ More ]

Reply #9

LottoHackJack — Mon, 15 Jan 2007 16:08:27 GMT

If you are business-minded and know how to or are experienced at taking healthy risks for gain, or have access to good professional advisors, take the lump sum. Ask Gates or Trump...

If you are consumer-oriented, take the annuity so that you can learn to live comfortably within your means and maybe stay out of trouble on an annual basis, and know that you can do so for years to come. Ask Jack Whittaker...

LottoHackJack

Reply #8

Coin Toss — Mon, 15 Jan 2007 15:35:37 GMT

Call you and raise you by two

Reply #7

justxploring — Mon, 15 Jan 2007 15:30:49 GMT

But if you a tad bit old like 50 or over 60 cash option to me would be best..More to spend at a old age...

I just noticed this. Thanks at lot from all of us aging 55 year olds!

Coin Toss wrote: They'd pretty much think they were set, but as they years went on that once vast annual income wouldn't even buy a house in some places.

Yes, this is true. However, if they purchased a couple of homes in the 50s, they'd have plenty of money just from selling them! I know pe... [ More ]

Reply #6

Coin Toss — Mon, 15 Jan 2007 15:21:23 GMT

I've thought a lot about this kind of stuff.

OK, let's just say for conversation there was lottery in the 1950's, and the jackpot was $5 million, which would have been a lot more money then than it is now. Let's also say someone hit, and took an annuity, and after taxes that came out to $330,000 a year. They'd pretty much think they were set, but as they years went on that once vast annual income wouldn't even buy a house in some places. What sounded like a fortune the first year turns out... [ More ]

Reply #5

justxploring — Mon, 15 Jan 2007 09:29:22 GMT

A large factor comes down to the age of the person. Taking an annuity at 80 makes no sense. Take the cash, spend it fast, and heck with the grandkids inheritance. rdc127

I once wrote something similar to your first sentence, that age is a factor. However, I would never just spend my money wildly without helping my family. I don't have children. But if I were 80 and had a son, I hope I would trust him enough to claim the prize and promise me he would choose the annuity, or at least set u... [ More ]

Reply #4

rdc137 — Mon, 15 Jan 2007 07:52:44 GMT

A large factor comes down to the age of the person. Taking an annuity at 80 makes no sense. Take the cash, spend it fast, and heck with the grandkids inheritance.

A younger person in their 20s, 30s, or even 40s would be better served in most cases by taking the annuity and doing their best to try to live a normal life. Even if the person simply rolled the cash not needed into bank accounts paying 4-5% per year (no risk) your money will grow by hundreds of thousands and eventually millions by

Reply #3

tiggs95 — Sun, 14 Jan 2007 01:06:11 GMT

If you are young I think it's best to take payments over 30 years..But if you a tad bit old like 50 or over 60 cash option to me would be best..More to spend at a old age...

Reply #2

Guru101 — Sat, 13 Jan 2007 23:08:37 GMT

The annuity option does have its advantages. For example, the annuity option of the PowerBall is 30 years. Well, if the person takes the annuity option, in about 10 years they will have the same, if not more money than if they had taken the cash option. After that, the person can look forward to 20 more years of big ol' checks.

Reply #1

Todd — Sat, 13 Jan 2007 22:59:28 GMT

Those are all excellent points. They get raised here and there, so it's nice to see the arguments laid out all together.

I agree with you, and I'll bet that Jackie Boy would not be in near the trouble he's in today -- singing the blues about all the crooks -- if he took the annuity!

There are absolutely plusses and minuses to each option, and those who look at it with a black white perspective are possibly overlooking several important factors.

One more annuity vs cash discussion

Coin Toss — Sat, 13 Jan 2007 22:54:15 GMT

One thing I haven't seen mentioned in these discussions, (or I missed), is any mention of someone taking a cash option not having the same buying power , let's say, of what the annuity offered.

In other words, let's say the deal is a $100,000,000 annuity spread over 20 or 26 years as compared to a cash option that is about 40% of that, pre-tax.

I've learned here on LP that the advertised jackpot amount (annuity) doesn't really exist in cash (and that's what the prize wouldl be, theorhet... [ More ]