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Payments are not that bad.

Topic closed. 5 replies. Last post 11 years ago by ryanm.

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Riverside, Ca
United States
Member #21722
September 14, 2005
173 Posts
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Posted: February 21, 2006, 1:01 am - IP Logged

i don't get why you guy's say to always take the cash option, payments would not be that bad, i don't know about your playslips, but on the back of the Californa MM play slip it says "Jackpot paid in 26 equal annual payments" so that means if you won and you got $5 million the first year, you would get $5 million the next year and ten yours later you would get $5 million dollars. i would still take cash just because i don't want to wait till 2032 to get all my payments. But it really all depends on how well you can manage your money, if you spend money like its going to go out of style then take the payments, but if you can manage it good then take the cash.

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    Clearwater, FL
    United States
    Member #31472
    January 29, 2006
    167 Posts
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    Posted: February 21, 2006, 5:07 am - IP Logged

    Take the cash option which is the amount that would be invested in government securities for 26 years, pay your taxes now and then take one tenth off the top for the first year and invest the rest in a way that will give you a nice positive cash flow for the rest of your life.

    Ever see the movie Brewster's Millions? Money makes money if you have enough of it and invested wisely.


      United States
      Member #379
      June 5, 2002
      11296 Posts
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      Posted: February 21, 2006, 9:47 am - IP Logged

      i don't get why you guy's say to always take the cash option, payments would not be that bad, i don't know about your playslips, but on the back of the Californa MM play slip it says "Jackpot paid in 26 equal annual payments" so that means if you won and you got $5 million the first year, you would get $5 million the next year and ten yours later you would get $5 million dollars. i would still take cash just because i don't want to wait till 2032 to get all my payments. But it really all depends on how well you can manage your money, if you spend money like its going to go out of style then take the payments, but if you can manage it good then take the cash.

      I hope you're not giving advice to the $365m Powerball winner. What a tragedy it would be if the largest lottery winner in US history is not paid in lump sum.

      BTW Mega is 26 equal installments, but CA Super Lotto Plus is 26 GRADUATED (increasing) payments.

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        Morrison, IL
        United States
        Member #4657
        May 13, 2004
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        Posted: February 21, 2006, 2:57 pm - IP Logged

        Powerball's annuity payments are better than Mega Millions'. At least Powerball's are paid in increasing payments as an adjustment for inflation, like CA Super Lotto Plus' are.

          dvdiva's avatar - 8ball

          United States
          Member #2338
          September 17, 2003
          2063 Posts
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          Posted: February 21, 2006, 3:06 pm - IP Logged

          No Powerball's annuity is much worse. It's a back loaded annuity. This means that you have to wait for a real long time before seeing any money. It takes far less cash to set up a back loaded annuity so you actually get less money even in the long run. It does count inflation in that's the real reason you get far less.

          Second if you die before the annuity the IRS forces a sale of the annuity to collect income/death tax. The only way around that is if you were smart enough to take cash and get an annuity in a trust. Not planning ahead like that would be akin to not having a will.

          Third, people who spend money like it's going out of style will just borrow against any annuities and just loose the money that much quicker. Nothing can really protect people from their own greed and shortsightedness.

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            Morrison, IL
            United States
            Member #4657
            May 13, 2004
            1884 Posts
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            Posted: February 21, 2006, 10:31 pm - IP Logged

            Taken from the Powerball FAQ page:
            _____________________________________________________________________________________

            WHY HAS THE CASH JACKPOT GONE DOWN?

            Actually, it is the annuity jackpot that has gone UP. Most people assume that we start with the annuity, but we actually start with the cash jackpot. In the Powerball game, thirty cents of every dollar sold goes into the cash jackpot pool. The difference between the cash jackpot and the annuity jackpot depends on how much we can make in interest earnings. The more interest that we can make, the higher the annuity jackpot. In times of high interest rates, the annuity prize will go UP and the difference between the two jackpot amounts will increase. It is not that we have reduced the cash; but only that we have been able to increase the annuity prize. All of the interest earned is paid to the winner for the annuity.

            Interest rates are slowly rising, which does reduce the cash percentage, but a change in the payment method of the Powerball annuity prize is the big reason for the increased interest earnings to build the annuity prize. The annuity is now paid out as a graduated annuity. Each payment is 4% higher than the previous year's payment to help keep up with inflation. The annuity prize used to be paid out in equal payments. Persons who elect to take the annuity prize do so because they don't want to worry about investing the money. They want to maintain their lifestyle for the term of the annuity. In fact, our past practice of equal installments did not really meet the needs of these winners. Going from an income of say, $50,000 a year to say, $1 million per year, sounds great (and I hear that it is), but ten years later, the winner's income is still $1 million a year and the price of luxury cars and yachts has gone up. In twenty years, the fact that the winner is living on a "fixed income" really starts to sink in. If you took the same cash jackpot amount to a professional financial advisor, they would certainly recommend investing for a graduated annuity so that your "real" income would stay at the same level every year. The Powerball annuity jackpot now does that.

            _____________________________________________________________________________________



            That is kind of unfair to winners of record jackpots in which a match 5 bonus pool is created though. The MUSL should instead cap its current record cash jackpot and limit those increases to say $12 million per drawing or so.