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would you take cash or payments on the PB

Topic closed. 62 replies. Last post 11 years ago by CASH Only.

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sirbrad's avatar - Lottery-062.jpg
PA
United States
Member #22983
October 6, 2005
2226 Posts
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Posted: October 14, 2005, 9:18 pm - IP Logged

I never did like Uncles. But you are right, I worry about all this when I win tomorrow.

    Bradly_60's avatar - disney37
    Atlantic Mine, Michigan
    United States
    Member #416
    June 23, 2002
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    Posted: October 14, 2005, 9:31 pm - IP Logged

    How do people make the assumption that if you are taking the lump sum you are losing the difference between the annuity and the lump sum???  Obviously those people have no idea what they are talking about.  The lottery doesn't give you an "extra" amount if you take the annuity.  The lump sum and the annuity start at the same amount, the cash option.  The extra is just the interest that is earned buying low yield government treasuries.  That is where the difference comes from.  And believe me no matter how stocks are doing today you will make more than the 4.0% that the government bonds are yeilding now over the next 30 years.  Always take the cash.  That is why no one takes annuity no more because we don't have to and any educated professional will tell you to take the lump sum.  It will be worth more. 

    For taxes you will owe the goverment 10% more after they take the 25% withholding from you before you even get your money.  (Maximum tax rate is 35%)  So instead of giving that money to the IRS by the following April 15, donate the 10%  to qualified charitable organizations during the same year.  Then you won't owe more taxes to them and you can help a good cause.  Remember there is a thing called a gift tax also.  Anything you give to someone over $11,000 you are legally obligated to pay a tax on that also.  The IRS is a mess of rules and regulations.

    Brad

      Bradly_60's avatar - disney37
      Atlantic Mine, Michigan
      United States
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      June 23, 2002
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      Posted: October 14, 2005, 9:33 pm - IP Logged

      One more interesting fact less than 700 people filed tax returns last year that listed their income higher than $10,000,000.  So if you win on Saturday you are going to join a very small elite club.  haha

      Brad

        Debzo's avatar - disney29

        United States
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        May 26, 2004
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        Posted: October 14, 2005, 9:36 pm - IP Logged

        I would take cash      White Bounce

        Follow your dreamsCoffee

          MADDOG10's avatar - smoke
          Beautiful Florida
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          July 18, 2004
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          Posted: October 14, 2005, 10:11 pm - IP Logged

          cash...!!!  $$$$$$$$$...!!!!!

                                                       

                                                         "  When Injustice Becomes Law, Resistance Becomes Duty "

            truecritic's avatar - PirateTreasure
            Michigan
            United States
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            September 24, 2005
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            Posted: October 14, 2005, 10:32 pm - IP Logged

            How do people make the assumption that if you are taking the lump sum you are losing the difference between the annuity and the lump sum???  Obviously those people have no idea what they are talking about.  The lottery doesn't give you an "extra" amount if you take the annuity.

            I don't think anyone here thinks what you stated.  There is no extra amount, it is the fact that they state the Jackpot is $290,000,000 and that is the amount you expect.  That is the amount that should be paid in cash.  Up front.  And tax free.  Then we are talking LOTTO!

              Avatar
              Huntsville AL
              United States
              Member #16531
              June 1, 2005
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              Posted: October 16, 2005, 8:48 am - IP Logged

              some additional considerations:

              1. The top tax rate is roughly 40% including both the federal and state income tax.  Because of Powerball's size, the jackpots and the annual annuity payments are probably both going to be taxed at the top rate.  Hence there's no significant tax advantage to choosing the annuity.  PLUS FOR LUMP SUM.

              2.  The stated interest on the annuity is roughly 4.7 percent.  The higher it goes, the more favorable it is to choose the annuity.  I think it needs to approach 6 to 6.5 percent to make the riskless rate of return of an annuity attractive. PLUS FOR LUMP SUM.

              3. You have to include the after-tax investment income for both cases.  In the case of the lump sum, you would invest it once and it would compound annually.  In the annuity case, you would essentially be averaging in your investment each year over 30 years and compounding as well.  HIRE AN ACCOUNTANT BEFORE YOU DECIDE.

              4.  Do you still want to collect an annuity well past 65, and do you have plans to save a portion each year for your retirement age?  DEPENDS ON YOUR PERSONAL SITUATION. 

               5. Do you have plans to donate a significant portion of your prize to charitable causes?  I think an annuity might make sense in this case if you can assign a portion of your prize to a charitable trust, say for awarding college scholarships, so that it's not subject to restrictions in the individual income tax code.  HIRE A LAWYER.

               

              an additional thought if you live in a state with income tax the are going to take 5% on lump sum.  If you take the annuity you could pay the 5% on the 1st annuity pay and then move to a state with no income tax such as TN TX FL NV. 

              Can any one tell me why the MM Annuity vs cash is 90/53 = little less than 60% and PB is 340/164.4 which is less than 50%.

                Avatar
                Huntsville AL
                United States
                Member #16531
                June 1, 2005
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                Posted: October 16, 2005, 8:57 am - IP Logged

                The withholding rate of 25 percent is what they're required to withhold from you when you get paid.  The top tax rate of 35 percent is what you're required to pay by April 15th when you file your annual return.  If less than 35 percent was withheld, you have to send in the difference with your return.  For the latest tax rates, check here:

                http://www.taxpolicycenter.org/TaxFacts/TFDB/TFTemplate.cfm?Docid=367 

                The state income tax in Virginia is 5.75 percent.  Most state have income tax rates above 5 percent.

                http://www.taxadmin.org/fta/rate/ind_inc.html

                Other states compensate by having much higher real estate tax rates or sales taxes.

                 

                I am not too sure about how taxes would work for that. Are you saying you would have to pay 35% of your income again after the 25% is withheld? As I said in another thread that is 60%! Say you won $100 million, and after taxes you had about $75 million. Would you then have to give up 35% of that the following April? ($26 million) Is this a one time payment for the taxes, or every year 35%? If so that is  a crock of BSCan you explain in more detail how the taxes are charged, and how much? In my state there is no state, or local tax on lotteries. Seems as though these jackpots really are nothing more than overinflated lies.

                Judging from that quote I would hope you would hire a pro after winning. It's 25% withheld. Since the current Federal rate is 35% that would mean you would own 10% later (on April 15). Thus we can see that 35 - 10 is 25. That should be simple math. Since it is very unlikely you will have a lot of deductions the first year the IRS could hit you with penalties for not giving them the full 35% at a quarterly. Since most W2 wage slaves don't have to fill out quarterlies and most of the weathy do the IRS will not consider that you just didn't know any better. Hence the need for Professionals. You would also get hit with what ever state taxes there are in the state the ticket was purchased or possibly the state you live in.  The 25% is only the ATM which may be going away shortly. Income tax will not. If you get an annuity expect to pay 35% a year and have that amount go up (how much depends on which party is in power).

                This isn't Europe or Canada where you get the money tax-free and in cash. The pots are mostly just marketing since the post tax cash amount is far less than the advertised amount. The reason why the rich get rich is they have investments and a change in wealth is not taxed, just income. The two can be mutually exclusive. If you get the money in cash you are only hit once with tax, after that you can grow your wealth like the rest of the rich. Or if you are from WV just spend it on booze and strippers.

                The pentalties would probably not kick in because there are safety nets.  If you have had withheld an amount equal to your last year tax bill or in some cases 110% there is no penalty the way I understand it.  Keep your money working for you until April 15th when the imperial federal government puts a gun to your head and takes it!!!!!!! Also consult a tax lawer and accountant

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                  Huntsville AL
                  United States
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                  June 1, 2005
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                  Posted: October 16, 2005, 9:09 am - IP Logged

                  Remember the "tax-free municipal bonds" only mature in the time stated (3 or 5 years) and the interest is paid at the end of that time. So the 4-5% is per-year, but it's compounded. It all depends on the municipal bonds you buy!

                  Federal Bonds are not taxable at state and local level.  However if you buy an AL tax free and live in NY it would be subject to State and local.

                   

                  Bond mature which means they pay back the principle at maturity.  Intersest is paid monthly or quarterly.  (If not it is whats known as a zero cupon bond)  There is a technique called laddering where you buy bond with different maturities so you are not putting all your eggs in one basket

                    whitmansm2's avatar - Lottery-029.jpg
                    Right here...can't you see me?
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                    September 10, 2005
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                    Posted: October 16, 2005, 9:30 am - IP Logged

                    wow!

                    I was thinking of taking the Annuity.  I figured it would be easier to manage and I'd still be able to live the "high life".  Taking the lump sum would mean more people touching your money before you get it, like someone else stated.  I was just worried about pulling a "Jack".  lol

                    Now that you all totally confused me, lol, I KNOW before I claim the money I'm going to go and hire an advisor!  (I knew it before, but now it's the first thing!)

                    I've never been good with math, but after listening to you all, I know that I'll need help.  THANKS!

                    Just a question though, you get a smaller amount if you take cash.....and the yearly ends up only 64mil less than the whole amount (roughly).  If you choose the lump sum....will that make up for what you didn't get in annuity?  It seems to me that you are going to get butt f*cked with a 2x4 and no lube with taxes either way!

                    Any thoughts?

                    Stephanie

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                      New Member
                      Bible belt state
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                      October 16, 2005
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                      Posted: October 16, 2005, 4:58 pm - IP Logged

                      I would take cash after i got out of the loney home for going nuts. lol

                       

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                        Sparta, NJ
                        United States
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                        July 9, 2005
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                        Posted: October 16, 2005, 5:45 pm - IP Logged

                        How do you convince a team of lawyers, accountants, and financials advisers to give you advise -- before you have the money? I would think they would be looking out for the con-job. Hi, I won $350 million, come work for me. Will pay you next month; until then do all that work based on trust. By the way, can you loan me a couple of bucks so I can afford the gas to drive to the meetings?

                        Cheers

                        |||::> *'`*:-.,_,.-:*''*:--->>> Chewie  <<<---.*''*:-.,_,.-:*''* <:::|||

                        I only trust myself - and that's a questionable choice


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                          Posted: October 16, 2005, 6:34 pm - IP Logged

                          This guy took the annuity.  The annuity terminates right when he's expected to retire, when he probably starts collecting his government pension.

                          http://www.powerball.com/hotlotto/winners/2005/092105ia.shtml


                           

                           

                            Avatar
                            Sparta, NJ
                            United States
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                            Posted: October 16, 2005, 6:50 pm - IP Logged

                            One nice thing about states like Pennsylvania, you don't have to choose chas or annuity until well after you turn in the ticket. I have no idea of how other states work, but, I do know NY and NJ mandate that you to choose up front, long before you can afford legal or tax advise. To me, that makes Pennsylvania a much more citizen friendly state. Makes you wonder why the legislatures in New York and New Jersey force their citizens to make life long decisions before the fact.

                            Cheers

                            |||::> *'`*:-.,_,.-:*''*:--->>> Chewie  <<<---.*''*:-.,_,.-:*''* <:::|||

                            I only trust myself - and that's a questionable choice

                              hypersoniq's avatar - 8ball
                              Pennsylvania
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                              April 6, 2003
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                              Posted: October 16, 2005, 10:41 pm - IP Logged

                              cash, for me that's the choice (after careful consideration both ways).

                              Playing more than one ticket per game is betting against yourself.