Annuity or Lump Sum?

Reply #74

redhot7 — Fri, 24 May 2013 22:05:51 GMT

It sounds to me that you are referencing a scenario in which a winner who takes the annuity option doesn't have to pay any additional taxes based on the assumption that the yearly proceeds will not be invested.

That's not what I was referring at all. I am just referring to SS and medicare taxes, not income taxes that applies to both choices.

I already clarified this in the message you replied to:

Please note that I am talking about exemption from SS and Medicare taxes, not general... [ More ]

Reply #73

Jill34786 — Fri, 24 May 2013 17:12:37 GMT

First off, I respect your opinion in your support of annuities. I would just like to clarify a few things.

The lottery invest your annuity by getting long term Government bonds that pay about 1.5% annually. If a persons chooses an annuity instead of the lump sum and decides to invest it, then they too are responsible for the same taxes that a lump sum recipient.

It sounds to me that you are referencing a scenario in which a winner who takes the annuity option doesn't have to pay any additi... [ More ]

Reply #72

gogidolim — Fri, 24 May 2013 16:06:57 GMT

Depends on what kind of businees and investment you make. You will still find some ways to get tax deduction if you have a good financial team.

Reply #71

gogidolim — Fri, 24 May 2013 16:05:03 GMT

I know that it's basically free money, but it still sucks to pay 40% of the cash value...I would still get lump sum though.

BTW, is it possible to ask the lottery commision to just withold the entire actual tax amount that I have to pay? I know that it sounds weird but for the sake of management this should be easier to manage.

Reply #70

Think — Fri, 24 May 2013 04:18:43 GMT

That is now $14,000 per person per year exemption before it is applied to your life time exemption.

As an illustration Couple A B can give couple C D $56,000 per year.

A gives C 14k and A gives D 14k B gives C 14k and B gives D 14k = 56k per year from A B to C D and if Couple C D has kids then A B can obviously give 14k+14k or 28k to each kid.

Any more than that and it starts going into the life time exemption.

If you win and you want to figure out anything different than... [ More ]

Reply #69

Think — Fri, 24 May 2013 04:03:14 GMT

That would depend on how big the Lump Sum is and what the Taxes are at the time of the Win and how old you are and what your plans are. It isn't as simple as either or.

Last year the taxes where better and it would have been easier. This year your taxes get screwed up pretty fast between $150,000 and $400,000.

Next year they are considering fining people for giving money to charity if they are over the 28% fed tax bracket. So you have to consider that if you are pushed over the 28% b... [ More ]

Reply #68

redhot7 — Tue, 21 May 2013 22:41:58 GMT

Please note that I am talking about exemption from SS and Medicare taxes, not general income taxes where you have to pay either way

If you take annuity, the lottery invested the money for you without having to pay medicare and SS taxes. You just need to wait x number of years to receive them all.

If you choose the lump sum and you want to grow it so that it would match the money you would have received from annuity by investing on your own, you would have to pay SS and Medicare taxes... [ More ]

Reply #67

Jill34786 — Tue, 21 May 2013 18:02:08 GMT

Lump sump payout recipients are not the only ones responsible for taxes from future investments or earnings. Those who choose the annuity and invest will be obligated as well.

Reply #66

JoshUK — Tue, 21 May 2013 16:59:59 GMT

We can only take a lump sum in the UK, but I would pick that anyway. There is no difference to it anyway as we don't pay tax in the UK on them. Those companies who buy your future payments for a lump sum should be banned.

Reply #65

redhot7 — Mon, 20 May 2013 04:09:51 GMT

I forgot to mention that you don't pay social security and medicare taxes from the lottery but if you take the lump sum and then invest it, you would need to pay such taxes from your investment.

Reply #64

Teddi — Sat, 18 May 2013 05:05:26 GMT

They've upped it from $12k to $14k, and you can give away up to $5M (I think) before the gift tax kick in.

Reply #63

helpmewin — Sat, 18 May 2013 04:34:00 GMT

who cares

money go up, money go down, the world will still go around and around

Reply #62

redhot7 — Sat, 18 May 2013 04:17:18 GMT

You still need to pay taxes if you invest your lump sum.

You still need to pay property taxes if you buy luxury items.

You still need to pay gift taxes if you give a substantial amount ( 12K) to your family and friends.

Unless you don't want your lump sum to grow and you just spend and spend for yourself, there is no way to avoid taxes.

Reply #61

weshar75 — Sat, 18 May 2013 04:08:41 GMT

I am taking the cash because I am afraid that the powers that be in washington are going to want more tax dollars over the life of the annuity. So forget paying higher taxes every year and pay only once with the lump sum. Now winning is the hard part.-weshar75

Reply #60

Teddi — Sat, 18 May 2013 02:22:10 GMT

I used to believe the ones bad with money who take the annuity do better if for no other reason they couldn't spend it all at once. But that isn't the case. They still manage to lose it all. They overextend themselves, end up having to take out loans against future payments, or worse still, they fall prey to those companies who buy future annuity payments for a lump sum cash payout which is bubkis and they spend it all.

If a person is bad with money, they're always bad with money, regardless... [ More ]

Reply #59

Jill34786 — Sat, 18 May 2013 01:32:25 GMT

The PB annuity is heavily back loaded over the 30 yearly payments. The current $600 million jackpot pays out in year 1 a pre-tax amount which is a bit over $10 Million. A $15 million payment doesn't even come until year 10. Payment 28-30 are each over $30 million pre-tax and there is no telling what the tax rate will be at that time.

Reply #58

sookie — Fri, 17 May 2013 23:40:57 GMT

An annuity guarantees an income for someone bad at saving. Lump sum can be good if you invest and save, your taxes are paid up front. Annuity are subject to tax increases each year but you still have guaranteed income.

Just myopinion.

Reply #57

helpmewin — Fri, 17 May 2013 22:42:07 GMT

Reply #56

helpmewin — Fri, 17 May 2013 22:38:52 GMT

very bad with budgets and saving

why would you assume someone would be bad with the money reason to taking annuity?

i never hear that story.

i hear more stories of people that have took Lump sum already Broke

Reply #55

sookie — Fri, 17 May 2013 22:24:02 GMT

Honestly I'd take the lump sum unless the person is very, very bad with budgets and saving.

Me personally I'd always take the lumpsum and invest it myself.

Reply #54

EZMoney — Fri, 17 May 2013 22:17:17 GMT

I can't imagine taxes going up significantly more in the next couple decades. Everyone I know is taxed out. Even if you hit a jackpot and become a one-percenter there are plenty of tax loopholes to take advantage of.

I do agree though that the lump sum should always be the chosen option. Invest it yourself. Never trust others.

Reply #53

Win$500Quick — Fri, 17 May 2013 22:14:12 GMT

I am pro lump sum, but in this case of $600 million. I would really consider taking the annunity if I was the sole winner which would be $15 million dollars a year. That is more than I need and most state lottery jackpots.

Reply #52

Teddi — Fri, 17 May 2013 22:00:36 GMT

WTF!!! He took the education money? And no one stopped him?

In any case, you have proven my point. I believe anything is possible and 30 years is a lot of time for anything to happen. Fact is, when something happens to lottery winners no one cares. If things go bad and for whatever reason they are unable to pay out the funds, it'll be a very steep uphill battle to get it back. Lawsuit or no lawsuit.

Governor can apparently redirect funds, safe pensions can disappear overnight, I'm not tak... [ More ]

Reply #51

dk1421 — Fri, 17 May 2013 19:21:39 GMT

I'm completely disagreeing here. In North Carolina, the governor TOOK the money raised by the lottery, which was supposed to go directly to the schools (*cough* that's why it's called the 'education lottery' *cough*) and used it to pay bills, three years ago.

If they can completely disregard and CHANGE the laws for their benefit, who is not to say they can't do that to your winnings?

Now, I'm not a conspiracy theory person, but I do not trust the government to look out for me anymore. I'm... [ More ]

Reply #50

mikeintexas — Fri, 17 May 2013 18:53:41 GMT

Who knows is right. In the U.S., tax rates have fluctuated a great deal and as most people know, the top rate recently increased from 35 to 39.6%. I won't blather on about why I think taxes WILL go up, but I do remember the U.K. having a 90% tax rate on the highest earners. (read that in an interview w/ Mick Jagger a couple of yrs. ago) I can see that happening here because as Mick said, people over there are jealous of success. I see that here in the States more and more lately, people griping... [ More ]

Reply #49

yoho — Fri, 17 May 2013 17:04:43 GMT

I don't really agree. Your contract is with the lottery, the government, not whatever security they invested in. So even if that goes bust, you'll still get

the money from the government. IF something happens to the US government then your lumpsum amount would've probably been affected as well. It'd

be like the end of the world anyway.

And I don't think taxes will go up and up non-stop. But who knows.

Reply #48

Teddi — Fri, 17 May 2013 13:10:45 GMT

Yeah, I'm with Gym on this one. I can't imagine the taxes going down. At least, not on an amount like this. Though anything is possible.

As for the issue of annuity, all I can say is that, if I'm perfectly honest, I'd choose the lump sum purely because I'm paranoid. Yes, the arguments for lump sum payouts I understand and agree with. But my real motivating factor is... what if .

If the entire system went bust, what could you do about it? Sue? Okay, sue, get the judgment in your favor and i... [ More ]

Reply #47

GYM RICE — Fri, 17 May 2013 05:11:34 GMT

I can't imagine what the taxes will be in 10 years, 20 years. But one thing is certain, they are going to be A LOT higher than they are now...Take the Lump sum when your tax burden is going to be the lowest in your lifetime.

Reply #46

ginmqi — Tue, 14 May 2013 13:50:23 GMT

Thanks for the reply. It's an interesting dicsussion! I'm starting my first full time job this July and I've been doing alot of reading up on retirement investing and the financial services industry. And it seems that it's hard to find a fiduciary (someone who is legally obligated to look out for your best interests instead of their own) who can really do well with your money.

I agree that if you know exactly what you're doing you can be doing very welll and definitely beat the annuity.... [ More ]

Reply #45

Teddi — Tue, 14 May 2013 05:39:36 GMT

I know that the annuity looks like a better bet, but it isn't. If you do what you're supposed to do and get a financial advisor, you end up making more than the full $80 the annuity guy gets.

If you're concerned about how much money your financial advisor can manage, get more than one. Give each a certain amount to invest for you. If anyone has every watched an episode of American Greed on CNBC you'll see it's never a good idea to invest everything with one person.

Last year, the federal... [ More ]

Reply #44

jackpotismine — Tue, 14 May 2013 05:32:39 GMT

Lump Sum. Remember Cyprus? I want it all now

Reply #43

Stack47 — Tue, 14 May 2013 05:24:23 GMT

I have no arguments against either choice, but for me in 10 years if I need cash now I don't want to call JG Wentworth.

Reply #42

Teddi — Tue, 14 May 2013 05:04:24 GMT

I don't know how it works in Cali. Lot of weird JP rules over there, But I do know in other states each person gets to decide how they want to take it.

Reply #41

colatrips — Tue, 14 May 2013 01:43:24 GMT

There are a lot of good arguments in this thread for both sides. The thing is that most of us will never win PB or MM to decide lump sum or

annuity anyway. Hell I can't even win pick 3 or 4 what win MM.

Reply #40

yoho — Mon, 13 May 2013 23:18:43 GMT

I'm very surprised so many people would consider annuity, considering by far the majority of winners pick lumpsum.

Let me give you 2 scenarios as well.

You've won the lottery and was offered two ways to take the prize:

1. 38.7 million USD

2. 60 million Japanese Yen.

Both options are lumpsum, no-tax. Which would you pick? In case you didn't know, approximately 80 JPY = 1 USD.

I think you would pick choice 1, right? So here's my point. In your examp... [ More ]

Reply #39

ginmqi — Mon, 13 May 2013 22:35:40 GMT

You can make more and I agree. I was just pointing out how exactly one can do that. Most people are only used to handling hundreds to thousands of dollars at a time....it will be tough for them to handle millions at a time.

Of course there are those who know alot more (hedge fund managers, investment bankers, active mutual fund managers, Warren Buffett/Peter Lynch of the world, etc.) but it seems to me hard to find who you can trust with all those money. After all, they are looking to ma... [ More ]

Reply #38

ginmqi — Mon, 13 May 2013 22:31:39 GMT

Thanks for the welcome. Very interesting crowd here :D

Anyway, 80 mil (well the 38 some mil in cash amounts) is definitely more enough wealth than anyone to live off of for generations to come. And it is true that if you just let it sit it'll be fine...even if you are losing 3% every year due to inflation. I guess I was asking an interesting question based off of the premise that the money will do better in your hands now than in the government's hands in 26-30 years.

But yes inv... [ More ]

Reply #37

PlayToWin47 — Mon, 13 May 2013 22:16:15 GMT

Welcome to LP, ginmqi.

If you're talking about winning 80 million ... unless you're just plain stupid and wasteful with the money, that is enough for at least two or three generations of family to live quite well without even having to worry about investing ... just stuff it in your mattress!!!

If you're talking about living off of interest, assuming that you invest decently, you and your families should be able to do quite well off of 20 or 30 million ... for several generations... [ More ]

Reply #36

joshuacloak — Mon, 13 May 2013 22:15:25 GMT

u make more form lump sum, if u win

just go to people who handle 100+ million in cash and how they invest

they tell u to take the cash vs the annuity

how is your issue, its easy to beat annuity

Reply #35

ginmqi — Mon, 13 May 2013 18:45:23 GMT

So my question is what about taxes on investments and capital gains? (Assuming the lump sum will be invested)

With millions won, people would have one or many very large taxable accounts (after all IRA is only 5500 a year max as of this year, and 401k is limited to 17.5k a year) so anything above that you would be basically managing a taxable investment account. And right now capital gains is 15% but it also possible that that may be raised signifcantly. And on top of inflation (3% yearly), m... [ More ]

Reply #34

ginmqi — Mon, 13 May 2013 18:15:45 GMT

New poster here and I'm surprised at how many people like the lump sum. But here's what I was thinking behind my view on favoring annuity:

The opinion from what I've heard from friends seems to be that you can do better to invest the money today. But do people actually know exactly how to invest and live off the interest?

Here's what I was thinking and let me know what you guys think.

Scenario 1: Adam won advertised jackpot of $80million and took the cash estimate of $51.6 million. He... [ More ]

Reply #33

PlayToWin47 — Mon, 13 May 2013 17:39:48 GMT

Since I just realized (a week ago) that they're taking away the annuity option in the Hot Lotto game change, I guess I'll get the lump sum.

I gotta admit that if I won, and got a single check for several million, it would kinda freak me out ... Too big of numbers too quick!!!

I do like the idea of getting it and dealing with the taxes one year, then be done with it. After that, just make good investments and have to deal only with the taxes on the interest. I know that in reality, that wou... [ More ]

Reply #32

DC81 — Mon, 13 May 2013 12:44:17 GMT

And paying taxes (which have a higher chance of rising than they do falling) on the annuity during the whole time along with being at the mercy of the state it was won. You can beat out the annuity with low risk investments of your own.

For the most part the annuity really is for suckers. The idea that it's safer has proven in the past that you can get into just as much or even more trouble with the annuity. Now if it was some For Life contest then taking the yearly payments might not be a... [ More ]

Reply #31

jjtheprince — Mon, 13 May 2013 04:42:30 GMT

Yeah I could imagine if you won a jackpot in 1978 that paid a $25,000 annual annuity for the next 35 years. Back when they won I'm sure they thought Wow this sure is sweet, I can live really well on this not work. Fast forward to 2013 and now they're thinking I shouldn't have retired, living off ramen noodles is no fun. Lol

Reply #30

haymaker — Sun, 12 May 2013 20:59:24 GMT

Gotta go w/ lump sum.

I recall reading some time ago about some folks that won back in the 70s when you had to take annuity,

they were getting ready to recieve their last payment an talking about how inflation had taken the fun and

anticipation out of waiting for the check.

Reply #29

C0w Pi3 — Sun, 12 May 2013 06:57:28 GMT

Depends on which game I won. If I won the powerball lump sum no doubt but if I won the Mega Millions it be a little bit harder to choose but i'd most likely still take the lump sum.

Reply #28

colatrips — Sun, 12 May 2013 05:18:09 GMT

I not sure what the taxes on annuity payments would be or if the taxes are taken from the lump sum and then the annuity payments come from that but personally I would take the lump sum pay the tax and find a top notch wealth manager to invest the money and just draw payments from the interest earned.

Reply #27

mikeintexas — Sun, 12 May 2013 04:26:54 GMT

Amen to that, Ridge.

I did some quick figuring: if you had won this same JP a year ago, your lump sum check would have been 114.27 million after Fed. taxes. This year it would/will be $106.1832 million, a difference of 8.08 million. I suppose taxes *might* go down in the future, but I sure wouldn't bet on it.

I'm gettin' on up there in age - no children - and while an annuity would make for comfortable twilight years of my life, I'd still prefer the lump sum. A relatively safe invest... [ More ]

Reply #26

rdgrnr — Sun, 12 May 2013 03:39:51 GMT

The government doesn't have a very good track record at handling other people's money.

I'll take the cash.

Like now.

Reply #25

helpmewin — Sun, 12 May 2013 00:04:57 GMT

Reply #24

helpmewin — Sun, 12 May 2013 00:04:27 GMT

lump sum if its powerball

Reply #23

helpmewin — Sun, 12 May 2013 00:02:36 GMT

Reply #22

hearsetrax — Wed, 24 Apr 2013 19:45:13 GMT

and remember folks you heard it right from the

Reply #21

Ronnie316 — Wed, 24 Apr 2013 18:57:13 GMT

Annuity is 4 dumb dumb.

Reply #20

jjtheprince — Wed, 24 Apr 2013 18:53:38 GMT

Annuity if its mega millions, lump sum if its powerball

Reply #19

BreakingBad94 — Wed, 24 Apr 2013 16:18:38 GMT

Lump Sum, like Steve Miller said, Take the Money and Run.

Reply #18

helpmewin — Tue, 23 Apr 2013 13:00:30 GMT

where did you get your information? let me guess off the internet

Reply #17

BuyLow — Tue, 23 Apr 2013 10:08:23 GMT

Reply #16

onlymoney — Tue, 23 Apr 2013 03:04:11 GMT

Lump sum.

When they want us to purchase tickets, they don't allow us to make installments, they want that dough right then and there handed to the clerk before the buyer gets their hands on the tickets.

This question was posed many times on LP. My theme in all of this focuses more on when you win , then worry about it.

Read my signature, not opinion, but fact. It is nice to dream though. I do it with the P-3 twice a day

Reply #15

ttech10 — Tue, 23 Apr 2013 02:49:07 GMT

Lump sum. I used to think about getting the annuity, but since then I've figured that I'd most likely want to just get the money and not have to be connected to the lottery for X amount of years.

It would be nice though if I could choose after I've won, instead of having to choose at the time of purchase. Who knows, I might end up with a different choice depending on the amount that is ultimately won. Also since I plan on splitting with some family, it would allow me to collect via lump... [ More ]

Reply #14

PlayToWin47 — Tue, 23 Apr 2013 02:35:12 GMT

I'm pretty sure that I would do the annuity. I like the idea of guaranteed yearly income for 25 years.

Reply #13

gogidolim — Mon, 22 Apr 2013 00:14:22 GMT

I will take the lump sum and find a way to legally get tax breaks. The gov doesn't run on a song and it sucks.

Reply #12

helpmewin — Sun, 21 Apr 2013 23:12:28 GMT

$9.5 Million Good Luck i got me 5 tickets today

Reply #11

Guru101 — Sun, 21 Apr 2013 23:09:11 GMT

Well I primarily play Hoosier Lotto, which is an in-state jackpot game. I rarely play PB or MM anymore. If I won the Hoosier Lotto, I would take the annuity. Unlike PB and MM, which have cash options usually between 65% and 72% of the annuity, Hoosier Lotto's jackpot is usually around 33%, which isn't that much. Then you take taxes out. Why play Hoosier Lotto then? Well, because my personal goal isn't to be mega rich necessarily, just to be able to retire and live a comfortable lifestyle the res... [ More ]

Reply #10

Hallfamily8 — Sun, 21 Apr 2013 20:20:53 GMT

I just realized that was my first post, I've been lurking for a while lol

And for the married folk out there would you consider that option of one spouse picking lump and you pick the other option or vise versa? To have something RIGHT now and also having the annuity pmts coming in

Reply #9

redhot7 — Sun, 21 Apr 2013 20:16:03 GMT

I thought if you split the ticket, like an office pool, all parties are required to take the same method. Either all annuity or all lump sum. At least that's how it works in CA.

Reply #8

Hallfamily8 — Sun, 21 Apr 2013 20:13:14 GMT

Honestly I'd prob just go for the lump sum.

Hey I seen a married couple on lottery changed my life, they split the ticket one got the annuity option the other lump sum. Didnt they pay more in taxes by doing it that way

Reply #7

dognabit — Sun, 21 Apr 2013 20:04:49 GMT

Depends on the amount that I won.

Let's take Wisconsin's mega bucks as an example. The jackpot was just recently won, so it starts over at $1 million.

If I were to hit it right now, my choices would be take the cash option at $400k before taxes(I'm guessing around $270k after taxes), or take $40k a year for 25 yrs. At that the amount, I'd probably take the annuity. Invest about a third of it every year, invest a little more into my work 401k and just be a little more comfortable in l... [ More ]

Reply #6

redhot7 — Sun, 21 Apr 2013 20:02:19 GMT

Anything below 50K per year, I would take the lump sum. Above that, it's a tough call.

If I win $10 CA Set for Life, 260K per year for 25 years or 3,750,000 lump sum, I would most likely choose the annuity. But if I win $2 CA SFL, 52K per year for 25 years or 750K lump sum, that's right at the border and I don't know which one to choose.

Reply #5

maringoman — Sun, 21 Apr 2013 13:26:44 GMT

Lump Sum!

With the US national debt standing at a whopping $16,789,582,986,524.07 its almost impossible getting it paid off. It was telling when the BRICS met and deliberated on starting a new currency to rival the US Dollar at the world stage.

Reply #4

hearsetrax — Sun, 21 Apr 2013 11:57:13 GMT

curiouser and curiouser and thanks 4 the tip, wb

Reply #3

whiteballz — Sun, 21 Apr 2013 04:25:10 GMT

I would pick the lump sum. Then I'd live in the American territory of Puerto Rico 183 days of the year so I could legally pay zero percent capital gains tax on my investments.

http://dealbook.nytimes.com/2013/03/25/puerto-rico-creates-tax-shelters-in-appeal-to-the-rich/

I'd still keep my US passport, so I'd be able to travel to the US anytime I want. Just as long I live 183 days in Puerto Rico, I get the favorable capital gains tax rate.

Reply #2

helpmewin — Sun, 21 Apr 2013 04:20:43 GMT

i would take Annuity but most people who are either over a certain age have the mind set that they want all their money right now thinking they might die within 20 years take the cash/Lump Sum which they lose half to get it that way, then suprized when they are still alive and Broke

Reply #1

Original Bey — Sun, 21 Apr 2013 04:15:29 GMT

Take the lump sum. Hire a team of results oriented financial advisers who have a well established track record for growing wealth. Decide on a fixed amount to upgrade your current lifestyle and let them put you on an allowance.

Annuity or Lump Sum?

New York — Sun, 21 Apr 2013 04:10:12 GMT

Which one? I need to know. It's important... I need feedback.