About 100 cheese factory workers in the Wisconsin town of St. Cloud have been celebrating — because they say they're $208 million richer now.
Wisconsin state lottery officials say no one has officially stepped forward to claim Saturday's Powerball jackpot.
But a large contingent of employees from Sargento Cheese tells WITI-TV in Milwaukee they have the winning ticket locked in a safe somewhere.
It's not clear when the group will try to redeem the ticket. Lottery spokeswoman Jessica Iverson says it can take several days or weeks for a winner to come forward.
For now, the group claiming to have won seems to be soaking in the moment.
Eric Heimermann is one member of the celebrating group. He says he's still going to work today, but he's not sure what'll happen after that.
The winning ticket was sold at Ma and Pa's Grocery Express in Fond du Lac along the so-called "Miracle Mile." South Main Street earned that nickname because several stores there sold multimillion-dollar tickets in the 1990s.
The winning numbers drawn Saturday night were 2, 3, 9, 48 and 50 and the Powerball was 23.
The jackpot is the largest in Wisconsin history, according to lottery spokeswoman Jessica Iverson. Before this drawing, the largest jackpot in the state had been a Powerball jackpot worth $195 million, won by a couple from Illinois in May 1998.
Three other tickets sold in Wisconsin matched four of the five numbers plus the Powerball on Saturday, lottery officials said. Those tickets, worth $10,000 each, were sold in Appleton, Lake Geneva and Mellen.
Powerball is played in 29 states, the District of Columbia and the U.S. Virgin Islands.
Iverson said it can take several days or weeks for a winner to come forward. She encouraged the winner or winners to sign the ticket, put it in a safe place and contact lottery officials.
Ma and Pa's — which itself will receive $100,000 — has quite a rich history of selling winning tickets. The store sold a winning Megabucks ticket worth $6.5 million in 1994 and has sold winning tickets for $500,000, $250,000 and $100,000 too.
"We sell a lot of tickets of course. But statistically we shouldn't be selling this many winners," said Phil Moses, who owns the store with his mother Pat.
Can you imagine what the owners of that company are thinking? They better start putting out the help wanted signs right now. On the other hand, what a great thing for the economy -- they will instantly have 100 job openings.
They each would be getting less than a million BEFORE withholdings (assuming they make the right choice.) I don't think too many of them would be retiring.
I don't think anyone will be changing jobs. With that many people sharing this jackpot, it dosen't lend itself to retirement. It might buy a few toys, but you better be back at work on monday, this small sum by comparison won't last long with no income.
If those people can quit their jobs after winning only about $90,000 each....(they still have to take out taxes also) well then all the best to them. But I doubt a prize split nearly 100 times would be actually worth retiring one.
Are there 100 cheese factory workers in the group or everyone who work in the cheese factory? Until someone ask that question and start writing the checks, they'll all be one big happy family.
Of course these folks can retire. If they take the GUARANTEED ANNUITY, they will get a guaranteed income stream that will keep up with inflation and is likely to be slightly better than they are currently making. These second shift workers reportedly have incomes of $30,000 to $40,000. The guaranteed annuity will pay slightly more than that and will likely keep up with inflation.
People are not happy with these "little" wins anymore, but think about it. You go to work every day and bring home $40,000. Now you bring home $42,000 a year and it will keep increasing by 4% every year to keep up with inflation - a guaranteed raise - up to $131,000 a year after 29 years (which is probably worth about $42,000 in today's dollars). PLUS you aren't going to work on the second shift. Maybe you now take some time to go to school? Maybe some time to take a fun job - one you don't really care about losing - think about working at a job that you don't really need - talk about stress relief. Or maybe a job that is so fun you work harder to make it succeed - but love every minute of it?
I suppose they could take the cash too - then pay taxes, then invest what is left over and hope they invest wisely. Maybe they will spend it all quickly or lose it in investments. I know that some think that cash is the only way to go.
For these winners, this prize gives them complete freedom to quit their jobs and maintain their income - probably better than they could have otherwise done - no dealing with bosses and pushing for that cost-of-living increase every year. What more could one ask?
When we dream of what we really want, is it all really about getting a new Maybach every year? Or is it about having the freedom to spend time with your family, work on that Great American Novel, and still earn the same income you were working with before?
Note to CASH ONLY: Actually, with the federal maximum tax rate at historic lows (35%) now is about the only time in modern lottery history to even think about taking the cash - if you are a financial wizard and willing to spend your life watching your investments. And some do love to do that - I'm more of a beach-and-umbrella-drink guy myself. With around $500,000 left to invest from a cash win (after federal and state taxes), I suppose that a good stock market investment (accepting a reasonable amount of risk) might bring in $50,000 a year - but it will stay at that rate each year (while inflation goes up) unless you are not careful to invest back some of the income. Of course, there are those bad years where you will be eating a lot of beans and living with your parents again, or maybe with a friend in the group who took the annuity.
Thanks for adding a dose of reality to the discussion. It can be very monotonous to see Cash Only's lop-sided mantra about "only taking a cash option", and I completely agree with you that there are also good qualities to taking the annuity. I'll wager that the people who take annuity (with the annually-increasing amount) will love the fact that they get an increase every year.
By the way, will Wisconsin allow the winners to decide independently if they want cash or annuity, or will they all have to choose the same thing?
Sure they could quit their jobs. If it is $900,000 they get, they can put it in Bonds and get $45,000 a year for as long as they have it invested and never touch the principle. That's what I plan to do if and when I win. I'm going to get the HELL out of a 40 hour week job! AMEN!
I just wish it would hurry up and happen. I mostly play to win Powerplay, I think I have a better chance at that than the Jackpot. I wish luck to all for future plays.
I'm guessing Wisconsin will make the winners all go one way or the other. I don't think the group wants to take over the record for the largest prize paid as an annuity (which was set by a Wisconsin couple 13 years ago).
congrats to the winners, and I hope there is not a 101st employee out there tring to find a lawyer to get himself a portion of that share. Hope they had a lock tight method of playing a pool
The Wisconsin Lottery has to deal with an odd law - there can only be one winner of a jackpot prize. Without a court order, they cannot write multiple checks, but the order has not been too difficult to get.
I don't think the lottery has ever considered whether a prize can be split cash and annuity (by winner, the IRS won't allow splitting for one winner). The Multi-State Lottery Assoc. can do that pretty easily and can provide the differrent amounts to the lottery. With 100 winners, there is likely to be some number that will go for the annuity.
Congrats to the group! Hope they enjoy my 20 dollar contribution and spend it on some crackers : dats allotta cheese!
Personally I am ALL for lottery pools, but I must be realistic and say that having 99 others divy out doesnt leave much left to the small american dream . May they do what is right for their lifestyle :)
I'm from Wisconsin and unfortunatley not one of the winners LOL. Because it's one ticket they all have to decide cash or annuity. I use to drive up to Fond du Lac and buy tickets at that store, but with gas prices the way they are and that place being over 40 miles from home I haven't bought from there in a while. They will get a little over $600,000. after taxes etc. If your like 59 I'd say you could take a chance and retire, but most look pretty young 30's maybe some 20's . I don't think I'd try to retire on that amount unless you were going to supplement your income with some job you'd take because thats what you like to do ( sports store sales person, motorcyle sales,) or whatever they enjoy and up there it's hunting fishing etc. then they would maybe able to pull it off with some smart investing and being able to enjoy life to the max.
After all the dividing and taxing, they should still have plenty enough to buy one of those Wisconsin state quarters with the "extra" leaf on the corn.
One thing the story didn't mention is Phil Moses, the owner of Ma & Pa's, himself has won a jackpot from his own store. It was last year or the year before he bought a Badger 5 ticket from his own terminal. He won a jackpot I want to say was around $140,000. Not sure exactly but is was somewhere around there. It defies logic but this store sells a lot of winning tickets. Oh yeah, forgot to mention. Moses also got an additional $2500 for selling that ticket.
I *was* going to go to Fond Du Lac, but an appointment was an hour late and I was too busy to go. I WOLD havegone to that store like I have done it about 15 times before.....
And then tonight my Illinois Little lotto ticket was 1 number off tonight, so instead of getting $490,000 I get $100.... So close yet so far... :-(
I'd love to have $600,000 net. However, I agree that if the winners are young and have families, they will still want to keep working. So what's wrong with that? I'm not saying I could do it, but if I were 25 or 30 and smart enough not to go wild with the money, it would be better to invest it safely and let it double every 10 years and retire early. It all depends on whether or not a person needs instant gratification or can look beyond today. Even if someone continues to work for just 10 or 12 years, isn't living off the interest of $1.2M a lot better than $600M? That said, a young family might want to buy a new home. Real estate is usually a good investment. No matter what, these people are much better off than they were before they won. They're also very fortunate the jackpot was so high and rolled over so many times with 100 people splitting it.
By the way, did I miss something or did the article say how many tickets were purchased?
Can you imagine what the owners of that company are thinking? They better start putting out the help wanted signs right now. On the other hand, what a great thing for the economy -- they will instantly have 100 job openings.
He(They) would be thinking: I(We) should have joined that pool! LOL
Quote: Originally posted by Raven62 on Aug 8, 2006
He(They) would be thinking: I(We) should have joined that pool! LOL
With that many "in the pool" I guarantee that there will be at least one or two that will say they have been in it all along and were absent that day, out of town, etc...
Interesting thread....in this or the other one about this jackpot someone mentioned some of these people might take the cash option, and some an annuity, is that possible?
I thought lottery payoffs were one or the other.
Wouldn't they have to be one or the other, as the cash option reduces the jackpot amount?
Quote: Originally posted by Coin Toss on Aug 8, 2006
Interesting thread....in this or the other one about this jackpot someone mentioned some of these people might take the cash option, and some an annuity, is that possible?
I thought lottery payoffs were one or the other.
Wouldn't they have to be one or the other, as the cash option reduces the jackpot amount?
$208,000,000/100 Winners=$2,080,000 each
Those that want Annuity get: $2,000,000 Annuity
Those that want Cash get: $1,000,000 Cash (before Taxes)
If you want the exact $ Values you need to apply the PB Algorithm!
If I remember correctly wasn't there a large Powerball jackpot winner their in Wisconsin in the late 90's? I'm trying to search for the story but I can't remember the guys name. He was from chicago. I think it was one of the largest jackpot's at the time. The ticket was purchased for him by a bartender (mabey) I don't recall and he was suppossed to split it but I remember stories of him giving only $1million each and keeping the rest. Anyone know the guy I'm talking about?
Quote: Originally posted by Coin Toss on Aug 8, 2006
Interesting thread....in this or the other one about this jackpot someone mentioned some of these people might take the cash option, and some an annuity, is that possible?
I thought lottery payoffs were one or the other.
Wouldn't they have to be one or the other, as the cash option reduces the jackpot amount?
The WI Lottery will offer each winner the choice to take cash or annuity. Basically, you first split up the cash for each winner ($958,211.70 if there are 100 winners) and then, for those that want the annuity, Powerball will go to competitive bids for the securities to fund those who want the guaranteed, graduated annuity (perhaps $2.086 million). Powerball will use the full cash amount, BEFORE any taxes are taken out to buy securities to fund the annuities. The annuity winner then pays taxes only on the amounts actually received each year - and, of course, the tax rates on the smaller amount are lower.
The prize is either an annuity based on the advertised jackpot, in this case, $208,600,000 or cash option of 42.6% of the advertsied jackpot. (I think I've read that here, 42.6%).
So wouldn't cash option be based on $88,608,000, not the $208 million?
That would give us $88,608,000 / 100 winners = $ 886,080 each, not $2,080,000 each.
I guess we'll see how it all comes out when they get paid for real, but I just can't see Powerball (MUSL) basing some payoffs on an advertised jackpot whjich implies annuity and paying some others a cash option based on the advertised jackpot.
Quote: Originally posted by Coin Toss on Aug 8, 2006
OK guys, wait:
$208,000,000/100 Winners=$2,080,000 each
Those that want Annuity get: $2,000,000 Annuity
The winninng ticket is a (one) ticket.
The prize is either an annuity based on the advertised jackpot, in this case, $208,600,000 or cash option of 42.6% of the advertsied jackpot. (I think I've read that here, 42.6%).
So wouldn't cash option be based on $88,608,000, not the $208 million?
That would give us $88,608,000 / 100 winners = $ 886,080 each, not $2,080,000 each.
I guess we'll see how it all comes out when they get paid for real, but I just can't see Powerball (MUSL) basing some payoffs on an advertised jackpot whjich implies annuity and paying some others a cash option based on the advertised jackpot.
From the PowerBall FAQ:
CAN INDIVIDUALS IN A GROUP CHOOSE CASH AND ANNUITY? CAN INDIVIDUALS IN A GROUP DIVIDE THEIR SHARE UNEQUALLY?
An individual lottery may have rules about how they will pay a winner (how many checks; how many winners to process, etc.) but PowerBall can handle any request to divide the prize payments. We can divide the prize however the individuals in a group wish, including requests for cash or annuity. But again, an individual lottery's rules will apply and most lotteries have not had to consider this question.
From Wisconsin's Claim Form:
Multiple-Owned Tickets. To share a Lottery prize ALL of the following must be completed: • The Lottery will recognize more than one claimant claiming a prize from a single ticket only when item 6 on the front of this form is answered “yes” and each claimant in the group completes a claim form. • A court order is required for any prize for which there is more than one claimant. The court order must be accompanied by a separate winner claim form for each prize claimant. • Multiple-owned tickets must be processed at the Madison office. This process may take up to two weeks after the court order is received. • A person claiming a prize or part of a prize is subject to withholding, pursuant to Wis. Stats. 565.30(5t), the amount to be withheld shall be deducted from the prize claimant’s proportionate share of the total prize. • For tax reporting purposes, the Lottery will recognize only those individuals who have filed a claim form for a particular prize. Once a prize has been paid, the Lottery will not accept requests to add persons to the list of individuals who will share a prize.
We are making this Waaaay too complicated. Lotteries have cash. If the winners want the annuity, then the lottery invests the cash, pre-tax, and puts the cash and the interest earnings together to come up with the annuity amount (the amount paid over time).
The annuity is estimated based on current quotes but can't be known until bids to buy the securitites (which doesn't happen unless a winner wants the annuity).
OK, I guess it is complicated.
If the annuity is $208.6 million and if there are 100 winners, then each share of the annuity would by $2.086 million. The cash amount was $95.82 million so a cash winner's share would be $958,211.70 (to be exact since the cash amount, based on sales, is known). And if there are exactly 100 winners.
The lottery starts by dividing up the cash among all winners and then asks, "anyone want that as annuity?" If yes for some, then Powerball will buy go out to bid for some annuity streams.
Here's another little truth. When the press says "after taxes", they really mean "after tax withholding" (though even they don't know that. There are more taxes than tax withholding. For example, the IRS tax withholding is 25%, but the maximum IRS tax rate is now at 35%.
Or, it may be easier to just follow the general advice - "get plenty of tax and legal advice".
Hawking? Which at least implies pushing a "bad" choice in a marketing envirnment? With all of the "cash only" propoganda out there, sometimes a little truth is needed.
The best option, as always, is probably somewhere in between. Lotteries can only offer two options under the tax rules and so they offer the two extremes - cash and a long-term graduated annuity. The best case for all winners would be to allow them to set up their own annuity stream (X% as cash; X% as annuity over X years). Current tax rules would not allow that - with that much choice for the player, the IRS would simply tax the prize as 100% cash. That said, the annuity is clearly the best option for most winners. Maybe I should change my post name to "Annuity Only". Hmmm. Well, more choice is always good.
On the HL front. A new state will join in November. That little game is going to be hot.
If the annuity is $208.6 million and if there are 100 winners, then each share of the annuity would by $2.086 million. The cash amount was $95.82 million so a cash winner's share would be $958,211.70 (to be exact since the cash amount, based on sales, is known). And if there are exactly 100 winners.
The lottery starts by dividing up the cash among all winners and then asks, "anyone want that as annuity?" If yes for some, then Powerball will buy go out to bid for some annuity streams.
So my question is still:
The lottery starts by dividing up the cash among all winners and then asks, "anyone want that as annuity?"
Anyone want what as an annuity? The annuity or cash option has to be declared before shares start getting divvied up, no?
Granted the lotteries have the cash for the payoffs, but is this was all as simple as that, there would be no difference between the advertised prize and the cash option, it would simply be how do you want to get paid.
"Everybody in the pool except Frank wanted an annuity.
Quote: Originally posted by CASH Only on Aug 9, 2006
MA Megabucks is _still_ annuity only.
chuck32, you should stop hawking annuities, and concentrate on getting more MUSL members to join Hot Lotto.
Cash Only, Chuck32 is the one making making the most sense here, and it's obvious to anyone reading this that he knows a heck of a lot more about this topic than you do. If everyone followed your advice there would be a lot more stories about bankrupt lottery winners in the News section.
Chuck32, that's good news on a new HL state, although I wish the announcement was going to be that MUSL has decided to switch HL back to real drawings.
Not sure I understand the question. "Anyone want what as the annuity?" The question is "Anyone want the payments as an annuity?" The exact amount of the annuity cannot be known until competitive bids to purchase the best securities, but the lottery can come close enough for a winner to make a decision.
I think the confusion comes from the fact that everyone starts with the annuity amount (which, to be fair, is the focus amount for most lotteries and the press) and then tries to work backwards. Actually, the lottery starts with the cash amount, and then looks at what it can earn by investing the cash into an annuity stream.
The annuity option does NOT have to be declared before shares start getting divvied up. Start by putting everyone's cash into separate bags and then, for those that want the annuity, take the bag back and go out and buy an annuity for those folks (pre-tax, of course, or you could just as easily buy your own annuity stream).
A 99-year-old is a classic case for taking the cash. Same if you just want to have a big party and spend it all in a short time. Always the winner's choice.
Oh, differences of opinion are good. Sometimes, even I can learn something <G>.
I hear ya on the real draw thing. I love the RNG's - but more from a techno geek viewpoint. The HL RNG is based on unpredictable radioactive decay. How cool is that? The machines are packed with Americium 241.
I'm glad that HL is continuing to grow. I hope there will be a matrix change to create bigger jackpots, which in turn would entice more states-maybe even KY would dump Lose for Life.
Smoke detectors have Am 241 or something like that in them.
Quote: Originally posted by chuck32 on Aug 9, 2006
Oh, differences of opinion are good. Sometimes, even I can learn something <G>.
I hear ya on the real draw thing. I love the RNG's - but more from a techno geek viewpoint. The HL RNG is based on unpredictable radioactive decay. How cool is that? The machines are packed with Americium 241.
That is actually pretty cool (from that geek standpoint ). I wish your server had an API so I could tap the LP quick picks generator into it.
For that matter, I wish the state lottery ticket machines would use a better QP generator, although I'm not sure if they could use something of that sophistication from either a financial or HAZMAT standpoint. I think the decaying radioactive material might be a problem on the store checkout counter.
Not sure I understand the question. "Anyone want what as the annuity?"
When I say what as the annuity, I mean the $208 million (in this case) as oppossed to the cash option, which we all agree ain't going to be near $208 million.
Please follow along - I'm not doubting anything you've said here, and you obviously know your stuff, and it's agreed the lottery operates with the 'green energy' (cash) from the get go....
All that consiered, my question is now if it's possible for a jackpot payed to a group to be split up some annuitites and some cash option pay-me-now, why have we never heard it before? with all the Powerball and Mega Million jackpots that have been hit, and all the media hype, I can't ever recall hearing a report something like this:
Twenty people hit the _ _ _ _ _ jackpot for $88 million. Ten of the twenty opted for the cash payout, dividing up $44 million before taxes, and the other ten took an annuity.
Nope, can't recall ever once hearing anything like that. Can anyone here?
Quote: Originally posted by Coin Toss on Aug 9, 2006
chuck32, all
okay, let me try to rephrase this:
Not sure I understand the question. "Anyone want what as the annuity?"
When I say what as the annuity, I mean the $208 million (in this case) as oppossed to the cash option, which we all agree ain't going to be near $208 million.
Please follow along - I'm not doubting anything you've said here, and you obviously know your stuff, and it's agreed the lottery operates with the 'green energy' (cash) from the get go....
All that consiered, my question is now if it's possible for a jackpot payed to a group to be split up some annuitites and some cash option pay-me-now, why have we never heard it before? with all the Powerball and Mega Million jackpots that have been hit, and all the media hype, I can't ever recall hearing a report something like this:
Twenty people hit the _ _ _ _ _ jackpot for $88 million. Ten of the twenty opted for the cash payout, dividing up $44 million before taxes, and the other ten took an annuity.
Nope, can't recall ever once hearing anything like that. Can anyone here?
I guess I would answer it this way: "what" could be "your payment" as in "Anyone want your payment as the annuity?" You can also just say, "Do you want the annuity option or cash option? There are two options offered. The Powerball website gives a cash number and an annuity number. The player picks one or the other. One is called CASH and the other is called ANNUITY. If there are multiple winners, the share of either one is divided by the number of winning tickets.
Part of the problem may be where you are starting from. Like the educated man who went to learn from the Zen Master. The Zen Master filled his cup with tea as the man told him of his wonderous education. Then the Zen Master poured more into his cup until it overflowed. "Stop," the educated man said, "you are overfilling my cup, it is too full already." The Zen Master said, "Yes, now you see."
So forget everything and start over. For every dollar sale, 30 cents goes to the cash jackpot. So you sell a dollar and the cash jackpot is then 30 cents. You sell another dollar and the cash jackpot goes to 60 cents. You know that if you invest the 60 cents before taxes, you can pay out $1.30. So then you announce that the cash jackpot is 60 cents and the annuity jackpot is $1.30. Of course, then the lottery announces a jackpot, they are guessing what sales will be - and what the interest rates will be.
If there are two winners and one wants cash, the CASH jackpot is split. The cash person gets 30 cents, he gives about 15 cents to the federal and state goverment and then has 15 cents left over to invest. The annuity person gets his 30 cents invested by the lottery and will get a total of 65 cents over time.
How's that?
How come you haven't heard about this before? Powerball has had groups of winners where some pick annuity and others pick cash. Perhaps the newspaper you read just doesn't cover it very well. Reporters understand less than you do about the lottery. It is also somewhat rare. Most people take the cash. They get expert advice to take the cash and then to turn it over to the expert to invest. I've had discussions with a couple of finance professors and some big time financial writers and they do get it. Taxes do real damage to what you have left to invest.
I see what both of you are saying, but I agree with Coin Toss. Many states won't even bother paying more than one claimant. That's why in most cases it's best to create a trust and appoint a trustee.
As far as choosing annuity vs lump sum, I know it can be mathematically calculated, but I'm almost willing to be the states won't do it.
"Powerball has had groups of winners where some pick annuity and others pick cash."
Can you please post an example of this? I know that when there are multiple winners of a jackpot, the individual can decide on annual payments or lump sum. I have never heard of the same winning jackpot being paid in 2 different ways.
Reporters understand less than you do about the lottery.
You sound awfully sure of yourself. Reporters know less than you do. Other members on this board know less than you do. Do you work for MUSL?
If there are multiple winners, the share of either one is divided by the number of winning tickets.
Bingo. The number of winning tickets and a prize based on which amount, advertised jackpot or lump sum. Like I said, you know your stiff but you seem to be doing some bobbing and weaving on providing any specific example.
Let's say two people happen to have picked the winning numbers, they're goiing to share the prize. Call the prize $20 million for right now. One wants the lowered cash amount, right now. The other wants an annuity and says, "I'll be dipped in grits if I'm passing up the cash option onl'y to get dinged $10 million on the deal."
Now take the two people, call it one hundred, jack the jackpot up to the $208 million just hit and we have this Wisconsin group.
I'm going to be real curious to see how they do get paid.
There are a few states that only want to cut one check per winning ticket, but most will cut separate checks. WI has a law that it can only write one check, but they can get a court order to get the job done. Many lotteries see it as a customer service issue. MN has a policy of writing whatever number of checks it takes.
The math to set up cash and annuity options is really pretty simple. MUSL handles that part. Just divide up the cash and then use a winner's share of cash to set up an annuity if that is what they want.
If I remember right, Lincoln NE winners had some split choices. Specifically, one of the winners apparently shared his share of the prize with his son (same name) and the son took his share as the annuity. A split of a split. It does not happen often. Cash is the biggest choice by a wide margin.
I'm sure that there are members here who know all this and more. Cash, annuity, present value are standard terms for financial folks. Are you trying to "out" me?
I think that Musl should go ahead and make a game for tuesday's and friday's that I could play in Oregon. Since I moved to Eugene I am further away from Mega Millions in either direction. So another big jackpot game would be a game I would like to play in addition to powerball.-weshar75
Quote: Originally posted by Coin Toss on Aug 9, 2006
chuck32
If there are multiple winners, the share of either one is divided by the number of winning tickets.
Bingo. The number of winning tickets and a prize based on which amount, advertised jackpot or lump sum. Like I said, you know your stiff but you seem to be doing some bobbing and weaving on providing any specific example.
Let's say two people happen to have picked the winning numbers, they're goiing to share the prize. Call the prize $20 million for right now. One wants the lowered cash amount, right now. The other wants an annuity and says, "I'll be dipped in grits if I'm passing up the cash option onl'y to get dinged $10 million on the deal."
Now take the two people, call it one hundred, jack the jackpot up to the $208 million just hit and we have this Wisconsin group.
I'm going to be real curious to see how they do get paid.
Sorry I come off as confusing. I'll try again using your example.
Two people win. Two winning tickets. The prize if $20 million - I assume you mean $20 million annuity here. Let's call the cash $9 million - the amount that the lottery actually has on the day of the win.
The two winners want different options. The $9 million cash is split. The cash guy takes $4.5 million in cash. The annuity guy gets $4.5 million plus interest (for maybe $10 million annuity).
The cash guy gets $4.5 million less 25% Federal withholding and less about 6% state withholding, then has to figure his actual tax (the maximum Fed rate is 35% and states vary but might be 12% or so and then has rest leftover to invest.
The annuity guy gets an immediate first payment, then the lottery invests the rest, before taxes and starts earning interest on that amount.
Quote: Originally posted by weshar75 on Aug 10, 2006
I think that Musl should go ahead and make a game for tuesday's and friday's that I could play in Oregon. Since I moved to Eugene I am further away from Mega Millions in either direction. So another big jackpot game would be a game I would like to play in addition to powerball.-weshar75
A game that goes head-to-head with MM? Sounds intriguing. I wonder if the two biggies coordinate their efforts a bit to make sure they don't go up against each other. I'm not sure if we'd find out all the scoop on that one in a public forum!
"Sorry I come off as confusing. I'll try again using your example.
Two people win. Two winning tickets. The prize if $20 million - I assume you mean $20 million annuity here. Let's call the cash $9 million - the amount that the lottery actually has on the day of the win." chuck32
Chuck, that wasn't the subject at all. I can't speak for Coin Toss or anyone else here, but from my point of view we were all talking about the Wisconsin winners, right? There was only ONE winning ticket. It is an entirely different situation which is why I asked you to please provide a link to any case where a state paid a single claim in a variety of ways, i.e., 3 people lump sum, 4 people annuity. I'm not saying it never happens, just that I've never heard of it and now we are talking about 100 people and one jackpot. Anyway, if WI has a rule that only one winner is paid, then a Trust will have to claim the money and payout the winners. I would be very surprised if a Lottery Commission would open up that can of worm and do so much paperwork.
"Of course these folks can retire. If they take the GUARANTEED ANNUITY, they will get a guaranteed income stream that will keep up with inflation and is likely to be slightly better than they are currently making. These second shift workers reportedly have incomes of $30,000 to $40,000."
Chuck, I hope I don't sound too argumentative. I don't mean to be. It's just that the above comment sounds a bit judgmental. You are assuming that these people were happy as pigs in mud making $30K a year. Perhaps they were, but maybe they also want a better lifestyle. If they continue working, they can now get it without working double shifts or budgeting every dollar. Also, what are the married workers going to tell their spouses? "Honey, get up. I'm staying in bed from now on!" For me that kind of money would be enough to retire, but I don't have a growing family. (I'd still take the cash.)
There are other important things to consider when you have a good job. First, if someone has a family he has the responsibility of providing them with protection. What I mean is that a plant like Sargento probably offers wonderful group benefits. We really don't know the personal stories of the winners, so this is all conjecture. But out of 100 people, I will bet there's somebody with a pre-existing condition like heart disease that would keep him from getting good, private medical coverage at a reasonable rate, if at all. Do you know what a family plan costs? Plus private plans don't have to follow the group laws and can be cancelled. If you have a child with a disability, or a wife with cervical or breast cancer, those benefits are priceless.
Maybe some time to take a fun job - one you don't really care about losing"
Depends if you're talking about a carefree single guy or a family man (or woman.) I guess everyone's different, but I don't understand why a person wouldn't want to provide his/her family with a nicer home, a good college education and straight teeth!! There's nothing wrong with goofing off a little, taking a nice vacation or buying a really sharp car, and I relate 100% to what you're saying about taking a fun job. In fact, your above statement is my goal! But I think winning the money and saying "I think I'll have fun" is a bit irresponsible when you have others to think about because the future is so unpredictable and it would be important to make sure that in 30 years, when the checks stop coming, you've put away enough to retire comfortably. Just my opinion.
NOTE to Psychomo - nobody gave you an attaboy for your "Whey to go" comment. So let me do it now.
Not trying to 'out' anybody. I'm just wondering why we'd never heard of one of these 'split' payoffs before.
This is what I was getting at: in your example above:
The two winners want different options. The $9 million cash is split. The cash guy takes $4.5 million in cash. The annuity guy gets $4.5 million plus interest (for maybe $10 million annuity).
OK- so the annuity guy - the annuity is based on the casah option value, even though it is an annuity - meaning that had he convinced the other guy to also go for the annuity, the prize wopuld have been $11,000,000 more.
So I'm still a little foggy on why someone would want annuity based on the cash value prize - the lottery commission gets the best of both worlds.
So in essence, what has happened here is that they both get the cash option value dollar amount, and the annuity guy decided to take that in the form of an annuity. Why would anyone do that?
I'm sure anyone reading this thread that would be involved in setting up a charter for a trust for pool group play beofre a hit (just in case of a hit) would make sure to have everyone involved specify annuity or cash option - one or the other for everyone, and that would be that.
In other words, "if we hit do we want annuity or cash option - oneway or the other, has to be unanimous."
Psykomo - sorry I spelled your name incorrectly. Just noticed. I can't edit my post...too late! LOL
Coin Toss - I think you and I are saying the same thing, right? No group can claim a prize as both an annuity and a cash payment unless that state has an exception (some do) where more than one winner can receive a prize for one ticket. Let's forget the graduated annuity for a minute. If a group in GA bought a MM ticket and won $150M and 10 people won, each person would be entitled to receive $15M. The people choosing a lump sum would get $7.5M (assuming 50% cv) and the others would get $577,000 a year for 26 years. I've never seen this happen, but I suppose in a state where they offer to pay multiple winners of one prize, it is entirely possible! So this way the state is looking at the one ticket as 10 separate wins. I think this is the reason so many FAQs on sites say the lottery will only pay one winner. Nobody ever imagined that 100 people would win one jackpot, but if WI has that "one winner only" rule, it'll sure save the state lots of red tape. One check will be written and the burden of equitable distribution will be passed onto the winners.
It seems it's being assumed that if people all agree on a cash option (cv as you say), then some can get paid annually, thus annuity - but it sounds like this is being paid based on the amount of the cash value prize.
My poinst is, if someone is going to go for an annuity, why are they settling for cash value? This thread now has me thinking this might have actually happened to some poor slob!
I'm still pretty sure that when it comes down to which payoff a group wants from the lottery, it has to be declared advertised jackpot amount, or cash option amount, one way or the other.
Or esle, we have this:
Hey Clancy, we hear you hit the jackpot!
Yup, sure did!
How much if we can ask?
$5,000,000!
We thought the jackpot was $10,000,000.
Well yeah, it was, but I asked for the cash option.
Well that's a lot of money to get all at once.
Well, I asked for annual payments.
An annuity? Then why didn't you get the $10,000,000 and not $5,000,000?
Quote: Originally posted by justxploring on Aug 10, 2006
"Sorry I come off as confusing. I'll try again using your example.
Two people win. Two winning tickets. The prize if $20 million - I assume you mean $20 million annuity here. Let's call the cash $9 million - the amount that the lottery actually has on the day of the win." chuck32
Chuck, that wasn't the subject at all. I can't speak for Coin Toss or anyone else here, but from my point of view we were all talking about the Wisconsin winners, right? There was only ONE winning ticket. It is an entirely different situation which is why I asked you to please provide a link to any case where a state paid a single claim in a variety of ways, i.e., 3 people lump sum, 4 people annuity. I'm not saying it never happens, just that I've never heard of it and now we are talking about 100 people and one jackpot. Anyway, if WI has a rule that only one winner is paid, then a Trust will have to claim the money and payout the winners. I would be very surprised if a Lottery Commission would open up that can of worm and do so much paperwork.
"Of course these folks can retire. If they take the GUARANTEED ANNUITY, they will get a guaranteed income stream that will keep up with inflation and is likely to be slightly better than they are currently making. These second shift workers reportedly have incomes of $30,000 to $40,000."
Chuck, I hope I don't sound too argumentative. I don't mean to be. It's just that the above comment sounds a bit judgmental. You are assuming that these people were happy as pigs in mud making $30K a year. Perhaps they were, but maybe they also want a better lifestyle. If they continue working, they can now get it without working double shifts or budgeting every dollar. Also, what are the married workers going to tell their spouses? "Honey, get up. I'm staying in bed from now on!" For me that kind of money would be enough to retire, but I don't have a growing family. (I'd still take the cash.)
There are other important things to consider when you have a good job. First, if someone has a family he has the responsibility of providing them with protection. What I mean is that a plant like Sargento probably offers wonderful group benefits. We really don't know the personal stories of the winners, so this is all conjecture. But out of 100 people, I will bet there's somebody with a pre-existing condition like heart disease that would keep him from getting good, private medical coverage at a reasonable rate, if at all. Do you know what a family plan costs? Plus private plans don't have to follow the group laws and can be cancelled. If you have a child with a disability, or a wife with cervical or breast cancer, those benefits are priceless.
Maybe some time to take a fun job - one you don't really care about losing"
Depends if you're talking about a carefree single guy or a family man (or woman.) I guess everyone's different, but I don't understand why a person wouldn't want to provide his/her family with a nicer home, a good college education and straight teeth!! There's nothing wrong with goofing off a little, taking a nice vacation or buying a really sharp car, and I relate 100% to what you're saying about taking a fun job. In fact, your above statement is my goal! But I think winning the money and saying "I think I'll have fun" is a bit irresponsible when you have others to think about because the future is so unpredictable and it would be important to make sure that in 30 years, when the checks stop coming, you've put away enough to retire comfortably. Just my opinion.
NOTE to Psychomo - nobody gave you an attaboy for your "Whey to go" comment. So let me do it now.
Whoa! You read far too much into my small comments about how a person might chose to live. I am not so judgmental as to begin preaching about how a person has a duty to provide for college educations, straight teeth, a nice house, etc. As long as they don't ask my to support them, folks can live how they please, I say.
I am not aware of any press article that talks about how the NE lottery winners split their prizes. The press just does not cover that kind of detail. You could check it out at the NE Lottery.
The WI Lottery has already announced that it will split cash and annuity by individuals in this group. It is common for groups in WI to get the court order. Just a matter of filing some forms. Here is a newspaper article on that:
Boston Globe, By Emily Fredrix, Associated Press Writer, August 7, 2006
State law requires that payment be made to a single winner unless a court order is obtained, Iverson said. Then multiple winners could choose individually whether to receive a lump sum or get the larger amount spread over 30 payments, the lottery spokeswoman said.
Quote: Originally posted by Coin Toss on Aug 10, 2006
Not trying to 'out' anybody. I'm just wondering why we'd never heard of one of these 'split' payoffs before.
This is what I was getting at: in your example above:
The two winners want different options. The $9 million cash is split. The cash guy takes $4.5 million in cash. The annuity guy gets $4.5 million plus interest (for maybe $10 million annuity).
OK- so the annuity guy - the annuity is based on the casah option value, even though it is an annuity - meaning that had he convinced the other guy to also go for the annuity, the prize wopuld have been $11,000,000 more.
So I'm still a little foggy on why someone would want annuity based on the cash value prize - the lottery commission gets the best of both worlds.
So in essence, what has happened here is that they both get the cash option value dollar amount, and the annuity guy decided to take that in the form of an annuity. Why would anyone do that?
I'm sure anyone reading this thread that would be involved in setting up a charter for a trust for pool group play beofre a hit (just in case of a hit) would make sure to have everyone involved specify annuity or cash option - one or the other for everyone, and that would be that.
In other words, "if we hit do we want annuity or cash option - oneway or the other, has to be unanimous."
I guess I'm not doing a very good job of explaining this. No, it does not have to be unanimous. One person can take the cash, one person can take the annuity. I'm guessing that you might think that the lottery already has all of the money in the annuity amount. It does not. The annuity is created with future interest earnings. The only thing that the lottery has is the cash amount.
The cash amount is first split among all of the winners (just in the lottery's head at this point, not actually handing out money). A winner can choose to receive the prize as either cash or annuity. If one of the winners wants the annuity method then the lottery will invest the money for the winner and pay out the cash, plus the interest earned over time. 100% of the cash and interest goes to the winner.
All annuities are based on a cash value. There is no other way to do it. An annuity presupposes a cash amount. Annuity mean a cash amount that is invested and paid out as cash and interest over time.
Why would anyone decide to take an annuity? OK, here goes. Let's use $100 million in cash as an example (easier on my math skills).
If the winner takes cash, he pays about 45% in state and federal taxes. The cash wininer then has about $65 million left over to invest. Where will he invest it? He can take some risk and earn a high rate or he can look for a safe investment with a lower rate. Risk means that he could lose all of the money. Most people will probably want to set up an income stream that will keep up with inflation for most or all of their life.
If the winner takes the annuity, then the lottery invests the entire $100 million. The lottery does not pay taxes and since the winner does not yet have the money, the winner does not pay taxes on the $100 million. The lottery is then earning interest on $100 million while the cash wininer is earning interest on $65 million. The lottery pays out all of the cash and interest to the winner over 29 years. The Powerball game creates an annuity stream that increases the payment each year by 4% - about the expected rate of inflaction.
So the choice is - do you want to invest $65 million yourself or do you want to invest $100 million that has a structured payout over 29 years giving a guaranteed income that increases by 4% every year.
Deciding what you want to do with the money is the winner's choice of course. There are also good reasons for spending the money right away - a winner's age is key. Or maybe the winner has a great investment for the cash. Or maybe the winner just wants to spend it all on one huge part and then get back to his normal life. I don't JUDGE people here if they don't set up a nice dental plan. <G>
You just gave me the answer I've been looking for all along:
Then multiple winners could choose individually whether to receive a lump sum or get the larger amount spread over 30 payments, the lottery spokeswoman said.
Quote: Originally posted by chuck32 on Aug 10, 2006
I guess I'm not doing a very good job of explaining this. No, it does not have to be unanimous. One person can take the cash, one person can take the annuity. I'm guessing that you might think that the lottery already has all of the money in the annuity amount. It does not. The annuity is created with future interest earnings. The only thing that the lottery has is the cash amount.
The cash amount is first split among all of the winners (just in the lottery's head at this point, not actually handing out money). A winner can choose to receive the prize as either cash or annuity. If one of the winners wants the annuity method then the lottery will invest the money for the winner and pay out the cash, plus the interest earned over time. 100% of the cash and interest goes to the winner.
All annuities are based on a cash value. There is no other way to do it. An annuity presupposes a cash amount. Annuity mean a cash amount that is invested and paid out as cash and interest over time.
Why would anyone decide to take an annuity? OK, here goes. Let's use $100 million in cash as an example (easier on my math skills).
If the winner takes cash, he pays about 45% in state and federal taxes. The cash wininer then has about $65 million left over to invest. Where will he invest it? He can take some risk and earn a high rate or he can look for a safe investment with a lower rate. Risk means that he could lose all of the money. Most people will probably want to set up an income stream that will keep up with inflation for most or all of their life.
If the winner takes the annuity, then the lottery invests the entire $100 million. The lottery does not pay taxes and since the winner does not yet have the money, the winner does not pay taxes on the $100 million. The lottery is then earning interest on $100 million while the cash wininer is earning interest on $65 million. The lottery pays out all of the cash and interest to the winner over 29 years. The Powerball game creates an annuity stream that increases the payment each year by 4% - about the expected rate of inflaction.
So the choice is - do you want to invest $65 million yourself or do you want to invest $100 million that has a structured payout over 29 years giving a guaranteed income that increases by 4% every year.
Deciding what you want to do with the money is the winner's choice of course. There are also good reasons for spending the money right away - a winner's age is key. Or maybe the winner has a great investment for the cash. Or maybe the winner just wants to spend it all on one huge part and then get back to his normal life. I don't JUDGE people here if they don't set up a nice dental plan. <G>
You've done a perfectly good job of explaining it each of the several times you've explained it. Any confusion experienced by anyone isn't a reflection on you.
As far as the choice between investing 65 million myself or having the lottery invest 100 million on my behalf, I think you're overlooking one important detail. If the lottery buys me an annuity my annual interest income may be higher, but I don't have any principal. I get those higher payments for a period of time and then they stop. If I invest the cash I've got 65 million in principal and it can potentially pay me (and my heirs) that lower annual income every year until the world ends. If you take the annuity and there's any significant chance that you'll live longer than the payment period you have to be saving some of the payments. With the cash you can spend every penny it earns (yes, your spending power will go down each year). Ignoring future changes in investment opportunities, I don't think there's really a huge difference in the annual spending power between cash and annuity. I think one of the choices offers a major advantage in terms of flexibility, though.
Quote: Originally posted by KY Floyd on Aug 11, 2006
You've done a perfectly good job of explaining it each of the several times you've explained it. Any confusion experienced by anyone isn't a reflection on you.
As far as the choice between investing 65 million myself or having the lottery invest 100 million on my behalf, I think you're overlooking one important detail. If the lottery buys me an annuity my annual interest income may be higher, but I don't have any principal. I get those higher payments for a period of time and then they stop. If I invest the cash I've got 65 million in principal and it can potentially pay me (and my heirs) that lower annual income every year until the world ends. If you take the annuity and there's any significant chance that you'll live longer than the payment period you have to be saving some of the payments. With the cash you can spend every penny it earns (yes, your spending power will go down each year). Ignoring future changes in investment opportunities, I don't think there's really a huge difference in the annual spending power between cash and annuity. I think one of the choices offers a major advantage in terms of flexibility, though.
You do indeed get the principle with the lottery payment. They payout includes the interest AND the principle.
To do an apples/apples comparison, take the after-tax cash you end up with if you take the cash option and then go shopping. Go to an insurance company or other financial and ask what kind of guaranteed, graduated annuity stream you can set up. Then compare that to the lottery's income stream. Most people forget about inflation. Getting $50,000 a year is one thing now; quite another in 10 or 15 years.
This also gives you the chance to see if you prefer to set up some other kind of annuity stream - longer payments, shorter payments, etc.
This assumes, of course, that you want an annuity stream. Cash can be a good choice for some people.
Good points are being made on all sides here, which is what tends to happen when the unhelpful "only take the cash option, no matter what" mantra is taken out of the discussion.
Chuck32 makes some very good points about the annuity stream, and I would completely agree that the lottery has the clout and resources to come up with a much better annuity stream than anyone could get on their own (unless you happen to be Bill Gates).
KY Floyd also introduced an excellent point about keeping the money in an investment, rather than getting an annuity stream, which is a completely different animal. With an annuity stream, one would need to have the discipline and diligence to set aside a portion of the payment every year, and put it into a good investment. (That is, if you wish to have a good-sized nest egg remaining at the end of the 29-year period.)
The cash option would provide more financial power for the average lottery winner, such as guaranteeing a business or construction loan. It is a difficult thing to talk about in concrete terms, because it all comes down to the ability to convince the financial institution, but my feeling is that the cash offers more buying power and leverage.
However, someone who is middle-aged or older may not be concerned with having a sizable nest egg remaining after 29 years, so the annuity may be just what they need -- a maximized, annually-increasing money stream that lasts the extent of their foreseeable lifetime.
The bottom line is that every lottery winner should weigh all options and take the time to think through everything -- without any knee-jerk reactions.
Lotteries can get better prices from the big brokers than your average Joe, but probably not any better than any other big investment firm. The real secret is that the lotteries invest the cash amount BEFORE taxes. It's easy to be a financial genius when you start with nearly twice the cash to invest. <G>
Cash probably takes the most discipline, with a straight equal payout taking second place (since you would have to save and invest some every year to keep up with inflation). A graduated long-term annuity stream probably takes the least discipline unless, as you say, you plan to live a lot longer than 29 years and need to save for a future nest egg. But I say, let the kids take care of you then, they've been living off you all this time!
Until the IRS can change the rules, players have only the two options. There is no right answer for everyone. I just tend to "hawk" the annuity option since everyone seems to get bad advice and dismisses it without running the numbers.
Well, I think that we've finally beaten the annuity horse to death.
Quote: Originally posted by chuck32 on Aug 11, 2006
You do indeed get the principle with the lottery payment. They payout includes the interest AND the principle.
To do an apples/apples comparison, take the after-tax cash you end up with if you take the cash option and then go shopping. Go to an insurance company or other financial and ask what kind of guaranteed, graduated annuity stream you can set up. Then compare that to the lottery's income stream. Most people forget about inflation. Getting $50,000 a year is one thing now; quite another in 10 or 15 years.
This also gives you the chance to see if you prefer to set up some other kind of annuity stream - longer payments, shorter payments, etc.
This assumes, of course, that you want an annuity stream. Cash can be a good choice for some people.
I can appreciate if you see it as a matter of semantics, but if the lottery buys me an annuity all I get is an annual payment. Some investment company will have principal that they use to generate the annual payment, but I won't have a dime in principal. That's the nature ofthe annuity option. The investment company gets the principal in exchange for promising the payments. If they do well with the investment they might still have some principal left after making the final payment, and if I'm clever I'll have saved some of the payments which will then be my principal. That's one of the big drawbacks to the annuity.
You make a good point about inflation, but that's a two way street. A dollar today is worth less than a dollar next year, and the annual payments, whether they increase each year or not, will be diminished by inflation. The investment companies sell the annuity because their expertise says that what they pay out over time will be less valuable than the cash they collect today.
Your last two sentences suggest that the only two choicesare an annuity or using the cash, but that's not the case. I would expect that all but those who expect to die shortly (or throw one big party and then return to their previous life) will be interested in a dependable annual income. Immediately investing the cash in an annuity of your own choosing would probably be one of the more foolish strategies, but there are any number of options that can generate an annual income while preserving the principal. The more likely scenario is using some of the cash early on and investing the remainder, and presumably preserving some or all of the principal.
I'm not suggesting that taking the cash is the only sensible strategy for everyone, but taking less than the advertised value and paying your taxes isn't a huge penalty compared to taking the deferred payments. There are plenty of people who should take (and plenty of past winners who should have taken) the annuity. It all depends on your discipline and what you want to do with your winnings.
Quote: Originally posted by KY Floyd on Aug 11, 2006
I can appreciate if you see it as a matter of semantics, but if the lottery buys me an annuity all I get is an annual payment. Some investment company will have principal that they use to generate the annual payment, but I won't have a dime in principal. That's the nature ofthe annuity option. The investment company gets the principal in exchange for promising the payments. If they do well with the investment they might still have some principal left after making the final payment, and if I'm clever I'll have saved some of the payments which will then be my principal. That's one of the big drawbacks to the annuity.
You make a good point about inflation, but that's a two way street. A dollar today is worth less than a dollar next year, and the annual payments, whether they increase each year or not, will be diminished by inflation. The investment companies sell the annuity because their expertise says that what they pay out over time will be less valuable than the cash they collect today.
Your last two sentences suggest that the only two choicesare an annuity or using the cash, but that's not the case. I would expect that all but those who expect to die shortly (or throw one big party and then return to their previous life) will be interested in a dependable annual income. Immediately investing the cash in an annuity of your own choosing would probably be one of the more foolish strategies, but there are any number of options that can generate an annual income while preserving the principal. The more likely scenario is using some of the cash early on and investing the remainder, and presumably preserving some or all of the principal.
I'm not suggesting that taking the cash is the only sensible strategy for everyone, but taking less than the advertised value and paying your taxes isn't a huge penalty compared to taking the deferred payments. There are plenty of people who should take (and plenty of past winners who should have taken) the annuity. It all depends on your discipline and what you want to do with your winnings.
Well, all you get is a LARGER annual payment that is part principle and part interest. You are correct that there are many options. You could give some investment company cash in exchange for an annuity stream - and you can set up an annuity stream in many ways. You could, for example set up a stream of interest only and still have the full cash amount back in X years. The company would determine their real interest earnings, keep their share, and pay you the difference.
But here we are comparing a graduated annuity stream that is designed to keep up with inflation. You are correct that a dollar today is worth more than a dollar next year. But a graduated annuity stream give you more dollars next year so that your "real income" IS the same. The annual payment of a graduated annuity is NOT diminished by inflation since the dollars of a graduated payment increase to keep up with inflation.
I said that the only choices are cash or the graduated 29-year annuity FROM THE LOTTERY. A winner can certainly take cash and set up many different kinds of options.
Taking the cash and paying taxes is a huge penalty compared to taking the deffered payments. You can certainly invest the post-tax cash and spend only the interest, but the earnings will be lower than a cash + interest distribution. There may be some winners who might like to live off a small interest amount for their entire life and then leave the principle to their heirs (after estate taxes). That is an option for a private investment.
All of this only really makes sense when you actually do the math. Take $50 million (cash prize after taxes) and invest it. Take $100 million (cash before taxes) and invest it and look at the income streams.
I do agree that you really have to take a hard look at the kind of person you are and what your goals and life situation is. I really only got into this long discussion because I think that too many people make too much of a quick decision to forgo the 100% guaranteed, inflation-adjusted annuity.
Whew! I'm even tired of talking about it, and I love this stuff.
I think my ship is coming in tomorrow night and I will be taking the cash because I have to split the prize with someone else. Now if I had been the 208.6 million winner I think that I would have entertained the annuity idea but I still would have went with cash. For me it is because I want to have the money under my control so I can do what I want with the cash prize I get. Now all I have to do is get all six on the same line.-weshar75
$204 million divided by 100 people = a whole lot of slices...no pun intended...
DD
Can you imagine what the owners of that company are thinking? They better start putting out the help wanted signs right now. On the other hand, what a great thing for the economy -- they will instantly have 100 job openings.
They each would be getting less than a million BEFORE withholdings (assuming they make the right choice.) I don't think too many of them would be retiring.
I don't think anyone will be changing jobs. With that many people sharing this jackpot, it dosen't lend itself to retirement. It might buy a few toys, but you better be back at work on monday, this small sum by comparison won't last long with no income.
I just said that. But I sure wouldn't turn down a 1% share of nearly $1 million cash.
If those people can quit their jobs after winning only about $90,000 each....(they still have to take out taxes also) well then all the best to them. But I doubt a prize split nearly 100 times would be actually worth retiring one.
Brad
More like 900k each. You left out a zero somewhere.
$ 900,000 Can get you into a Packers game I've got lotto tickets from that town a few years ago ITS a vortex for winners
Are there 100 cheese factory workers in the group or everyone who work in the cheese factory? Until someone ask that question and start writing the checks, they'll all be one big happy family.
That's alot of cheddar..no matter how you slice it!!
Of course these folks can retire. If they take the GUARANTEED ANNUITY, they will get a guaranteed income stream that will keep up with inflation and is likely to be slightly better than they are currently making. These second shift workers reportedly have incomes of $30,000 to $40,000. The guaranteed annuity will pay slightly more than that and will likely keep up with inflation.
People are not happy with these "little" wins anymore, but think about it. You go to work every day and bring home $40,000. Now you bring home $42,000 a year and it will keep increasing by 4% every year to keep up with inflation - a guaranteed raise - up to $131,000 a year after 29 years (which is probably worth about $42,000 in today's dollars). PLUS you aren't going to work on the second shift. Maybe you now take some time to go to school? Maybe some time to take a fun job - one you don't really care about losing - think about working at a job that you don't really need - talk about stress relief. Or maybe a job that is so fun you work harder to make it succeed - but love every minute of it?
I suppose they could take the cash too - then pay taxes, then invest what is left over and hope they invest wisely. Maybe they will spend it all quickly or lose it in investments. I know that some think that cash is the only way to go.
For these winners, this prize gives them complete freedom to quit their jobs and maintain their income - probably better than they could have otherwise done - no dealing with bosses and pushing for that cost-of-living increase every year. What more could one ask?
When we dream of what we really want, is it all really about getting a new Maybach every year? Or is it about having the freedom to spend time with your family, work on that Great American Novel, and still earn the same income you were working with before?
Note to CASH ONLY: Actually, with the federal maximum tax rate at historic lows (35%) now is about the only time in modern lottery history to even think about taking the cash - if you are a financial wizard and willing to spend your life watching your investments. And some do love to do that - I'm more of a beach-and-umbrella-drink guy myself. With around $500,000 left to invest from a cash win (after federal and state taxes), I suppose that a good stock market investment (accepting a reasonable amount of risk) might bring in $50,000 a year - but it will stay at that rate each year (while inflation goes up) unless you are not careful to invest back some of the income. Of course, there are those bad years where you will be eating a lot of beans and living with your parents again, or maybe with a friend in the group who took the annuity.
chuck32,
Thanks for adding a dose of reality to the discussion. It can be very monotonous to see Cash Only's lop-sided mantra about "only taking a cash option", and I completely agree with you that there are also good qualities to taking the annuity. I'll wager that the people who take annuity (with the annually-increasing amount) will love the fact that they get an increase every year.
By the way, will Wisconsin allow the winners to decide independently if they want cash or annuity, or will they all have to choose the same thing?
Congratulations to the lucky gang over in St Cloud. Driven through there a couple of times ...pretty place.
I guess that good things do happen to those who ..."say yes to cheese" :)
Onward and upward to the next jackpot!! Good Luck to all.
Sure they could quit their jobs. If it is $900,000 they get, they can put it in Bonds and get $45,000 a year for as long as they have it invested and never touch the principle. That's what I plan to do if and when I win. I'm going to get the HELL out of a 40 hour week job! AMEN!
I just wish it would hurry up and happen. I mostly play to win Powerplay, I think I have a better chance at that than the Jackpot. I wish luck to all for future plays.
I'm guessing Wisconsin will make the winners all go one way or the other. I don't think the group wants to take over the record for the largest prize paid as an annuity (which was set by a Wisconsin couple 13 years ago).
Wow congrats to them. That is a lot of winners to split a jackpot. At least they ended up with more money then they started with!
congrats to the winners, and I hope there is not a 101st employee out there tring to find a lawyer to get himself a portion of that share. Hope they had a lock tight method of playing a pool
The Wisconsin Lottery has to deal with an odd law - there can only be one winner of a jackpot prize. Without a court order, they cannot write multiple checks, but the order has not been too difficult to get.
I don't think the lottery has ever considered whether a prize can be split cash and annuity (by winner, the IRS won't allow splitting for one winner). The Multi-State Lottery Assoc. can do that pretty easily and can provide the differrent amounts to the lottery. With 100 winners, there is likely to be some number that will go for the annuity.
Congrats to the group! Hope they enjoy my 20 dollar contribution and spend it on some crackers : dats allotta cheese!
Personally I am ALL for lottery pools, but I must be realistic and say that having 99 others divy out doesnt leave much left to the small american dream . May they do what is right for their lifestyle :)
I'm from Wisconsin and unfortunatley not one of the winners LOL. Because it's one ticket they all have to decide cash or annuity. I use to drive up to Fond du Lac and buy tickets at that store, but with gas prices the way they are and that place being over 40 miles from home I haven't bought from there in a while. They will get a little over $600,000. after taxes etc. If your like 59 I'd say you could take a chance and retire, but most look pretty young 30's maybe some 20's . I don't think I'd try to retire on that amount unless you were going to supplement your income with some job you'd take because thats what you like to do ( sports store sales person, motorcyle sales,) or whatever they enjoy and up there it's hunting fishing etc. then they would maybe able to pull it off with some smart investing and being able to enjoy life to the max.
After all the dividing and taxing, they should still have plenty enough to buy one of those Wisconsin state quarters with the "extra" leaf on the corn.
Whey.............to gooooooooo
factory chee$$$$$e worker$$$$$!!!!
(pass the chee$e.......please.......for a PICK-5.........)
We got the "cracker$$$" down here!!
LOL...(is it really true......Yaw'aalllllll ......got the ticket now?)
PSYKOMO
One thing the story didn't mention is Phil Moses, the owner of Ma & Pa's, himself has won a jackpot from his own store. It was last year or the year before he bought a Badger 5 ticket from his own terminal. He won a jackpot I want to say was around $140,000. Not sure exactly but is was somewhere around there. It defies logic but this store sells a lot of winning tickets. Oh yeah, forgot to mention. Moses also got an additional $2500 for selling that ticket.
I *was* going to go to Fond Du Lac, but an appointment was an hour late and I was too busy to go. I WOLD havegone to that store like I have done it about 15 times before.....
And then tonight my Illinois Little lotto ticket was 1 number off tonight, so instead of getting $490,000 I get $100.... So close yet so far... :-(
MarkP
I agree, If I would make say $500K after takes, I'm INSTANTLY retired...
I would be instantly making my living day trading...
SCREW WORK!!!!!
1 number off of 1/2 million $$$$ tonight :-( Sniff sniff...
MarkP
Here is a partial list of tickets won at that store...
6.? mil megabucks
$250,000 supercash
$250,000 supercash...
a couple of Badger 5's.... $80K and some more...
208 mil PB...
plus others...
MarkP
Yeah, they have all the cheese, and all I have is the whine... :-(
Plenty of whining here... :-)
MarkP
I'd love to have $600,000 net. However, I agree that if the winners are young and have families, they will still want to keep working. So what's wrong with that? I'm not saying I could do it, but if I were 25 or 30 and smart enough not to go wild with the money, it would be better to invest it safely and let it double every 10 years and retire early. It all depends on whether or not a person needs instant gratification or can look beyond today. Even if someone continues to work for just 10 or 12 years, isn't living off the interest of $1.2M a lot better than $600M? That said, a young family might want to buy a new home. Real estate is usually a good investment. No matter what, these people are much better off than they were before they won. They're also very fortunate the jackpot was so high and rolled over so many times with 100 people splitting it.
By the way, did I miss something or did the article say how many tickets were purchased?
WOW!!!!!!!!!!! thats a lot of cheese, how about a crumb for the.....
congratulations to all the cheese, i mean all of them.......
wait until the lawsuits start. there will be i know i put my money in the pool or so and so was supposed to do it for me.
He(They) would be thinking: I(We) should have joined that pool! LOL
With that many "in the pool" I guarantee that there will be at least one or two that will say they have been in it all along and were absent that day, out of town, etc...
Interesting thread....in this or the other one about this jackpot someone mentioned some of these people might take the cash option, and some an annuity, is that possible?
I thought lottery payoffs were one or the other.
Wouldn't they have to be one or the other, as the cash option reduces the jackpot amount?
$208,000,000/100 Winners=$2,080,000 each
Those that want Annuity get: $2,000,000 Annuity
Those that want Cash get: $1,000,000 Cash (before Taxes)
If you want the exact $ Values you need to apply the PB Algorithm!
If I remember correctly wasn't there a large Powerball jackpot winner their in Wisconsin in the late 90's? I'm trying to search for the story but I can't remember the guys name. He was from chicago. I think it was one of the largest jackpot's at the time. The ticket was purchased for him by a bartender (mabey) I don't recall and he was suppossed to split it but I remember stories of him giving only $1million each and keeping the rest. Anyone know the guy I'm talking about?
The WI Lottery will offer each winner the choice to take cash or annuity. Basically, you first split up the cash for each winner ($958,211.70 if there are 100 winners) and then, for those that want the annuity, Powerball will go to competitive bids for the securities to fund those who want the guaranteed, graduated annuity (perhaps $2.086 million). Powerball will use the full cash amount, BEFORE any taxes are taken out to buy securities to fund the annuities. The annuity winner then pays taxes only on the amounts actually received each year - and, of course, the tax rates on the smaller amount are lower.
OK guys, wait:
$208,000,000/100 Winners=$2,080,000 each
Those that want Annuity get: $2,000,000 Annuity
The winninng ticket is a (one) ticket.
The prize is either an annuity based on the advertised jackpot, in this case, $208,600,000 or cash option of 42.6% of the advertsied jackpot. (I think I've read that here, 42.6%).
So wouldn't cash option be based on $88,608,000, not the $208 million?
That would give us $88,608,000 / 100 winners = $ 886,080 each, not $2,080,000 each.
I guess we'll see how it all comes out when they get paid for real, but I just can't see Powerball (MUSL) basing some payoffs on an advertised jackpot whjich implies annuity and paying some others a cash option based on the advertised jackpot.
From the PowerBall FAQ:
CAN INDIVIDUALS IN A GROUP CHOOSE CASH AND ANNUITY?
CAN INDIVIDUALS IN A GROUP DIVIDE THEIR SHARE UNEQUALLY?
An individual lottery may have rules about how they will pay a winner (how many checks; how many winners to process, etc.) but PowerBall can handle any request to divide the prize payments. We can divide the prize however the individuals in a group wish, including requests for cash or annuity. But again, an individual lottery's rules will apply and most lotteries have not had to consider this question.
From Wisconsin's Claim Form:
Multiple-Owned Tickets. To share a Lottery prize
ALL of the following must be completed:
• The Lottery will recognize more than one claimant claiming a prize from a single ticket only when item 6 on the front of this form is answered “yes” and each claimant in the group completes a claim form.
• A court order is required for any prize for which there is more than one claimant. The court order must be accompanied by a separate winner claim form for each prize claimant.
• Multiple-owned tickets must be processed at the Madison office. This process may take up to two weeks after the court order is received.
• A person claiming a prize or part of a prize is subject to withholding, pursuant to Wis. Stats. 565.30(5t), the amount to be withheld shall be deducted from the prize claimant’s proportionate share of the total prize.
• For tax reporting purposes, the Lottery will recognize only those individuals who have filed a claim form for a particular prize. Once a prize has been paid, the Lottery will not accept requests to add persons to the list of individuals who will share a prize.
Well that would be rule #1 if I ever started a pool. Everyone would have to agree that the group takes the cash or it gets too complicated.
Rule #1 in Wisconsin: Don't Start a Lottery Pool! (It's too complicated)
We are making this Waaaay too complicated. Lotteries have cash. If the winners want the annuity, then the lottery invests the cash, pre-tax, and puts the cash and the interest earnings together to come up with the annuity amount (the amount paid over time).
The annuity is estimated based on current quotes but can't be known until bids to buy the securitites (which doesn't happen unless a winner wants the annuity).
OK, I guess it is complicated.
If the annuity is $208.6 million and if there are 100 winners, then each share of the annuity would by $2.086 million. The cash amount was $95.82 million so a cash winner's share would be $958,211.70 (to be exact since the cash amount, based on sales, is known). And if there are exactly 100 winners.
The lottery starts by dividing up the cash among all winners and then asks, "anyone want that as annuity?" If yes for some, then Powerball will buy go out to bid for some annuity streams.
Here's another little truth. When the press says "after taxes", they really mean "after tax withholding" (though even they don't know that. There are more taxes than tax withholding. For example, the IRS tax withholding is 25%, but the maximum IRS tax rate is now at 35%.
Or, it may be easier to just follow the general advice - "get plenty of tax and legal advice".
MA Megabucks is _still_ annuity only.
chuck32, you should stop hawking annuities, and concentrate on getting more MUSL members to join Hot Lotto.
Hawking? Which at least implies pushing a "bad" choice in a marketing envirnment? With all of the "cash only" propoganda out there, sometimes a little truth is needed.
The best option, as always, is probably somewhere in between. Lotteries can only offer two options under the tax rules and so they offer the two extremes - cash and a long-term graduated annuity. The best case for all winners would be to allow them to set up their own annuity stream (X% as cash; X% as annuity over X years). Current tax rules would not allow that - with that much choice for the player, the IRS would simply tax the prize as 100% cash. That said, the annuity is clearly the best option for most winners. Maybe I should change my post name to "Annuity Only". Hmmm. Well, more choice is always good.
On the HL front. A new state will join in November. That little game is going to be hot.
chuck32
Here you say:
If the annuity is $208.6 million and if there are 100 winners, then each share of the annuity would by $2.086 million. The cash amount was $95.82 million so a cash winner's share would be $958,211.70 (to be exact since the cash amount, based on sales, is known). And if there are exactly 100 winners.
The lottery starts by dividing up the cash among all winners and then asks, "anyone want that as annuity?" If yes for some, then Powerball will buy go out to bid for some annuity streams.
So my question is still:
The lottery starts by dividing up the cash among all winners and then asks, "anyone want that as annuity?"
Anyone want what as an annuity? The annuity or cash option has to be declared before shares start getting divvied up, no?
Granted the lotteries have the cash for the payoffs, but is this was all as simple as that, there would be no difference between the advertised prize and the cash option, it would simply be how do you want to get paid.
"Everybody in the pool except Frank wanted an annuity.
Why not Frank?
Well, it's a twenty year annuity.
Yeah?
Well, he's 99 tears old you know..."
Cash Only, Chuck32 is the one making making the most sense here, and it's obvious to anyone reading this that he knows a heck of a lot more about this topic than you do. If everyone followed your advice there would be a lot more stories about bankrupt lottery winners in the News section.
Chuck32, that's good news on a new HL state, although I wish the announcement was going to be that MUSL has decided to switch HL back to real drawings.
Not sure I understand the question. "Anyone want what as the annuity?" The question is "Anyone want the payments as an annuity?" The exact amount of the annuity cannot be known until competitive bids to purchase the best securities, but the lottery can come close enough for a winner to make a decision.
I think the confusion comes from the fact that everyone starts with the annuity amount (which, to be fair, is the focus amount for most lotteries and the press) and then tries to work backwards. Actually, the lottery starts with the cash amount, and then looks at what it can earn by investing the cash into an annuity stream.
The annuity option does NOT have to be declared before shares start getting divvied up. Start by putting everyone's cash into separate bags and then, for those that want the annuity, take the bag back and go out and buy an annuity for those folks (pre-tax, of course, or you could just as easily buy your own annuity stream).
A 99-year-old is a classic case for taking the cash. Same if you just want to have a big party and spend it all in a short time. Always the winner's choice.
Oh, differences of opinion are good. Sometimes, even I can learn something <G>.
I hear ya on the real draw thing. I love the RNG's - but more from a techno geek viewpoint. The HL RNG is based on unpredictable radioactive decay. How cool is that? The machines are packed with Americium 241.
I'm glad that HL is continuing to grow. I hope there will be a matrix change to create bigger jackpots, which in turn would entice more states-maybe even KY would dump Lose for Life.
Smoke detectors have Am 241 or something like that in them.
That is actually pretty cool (from that geek standpoint
). I wish your server had an API so I could tap the LP quick picks generator into it. 
For that matter, I wish the state lottery ticket machines would use a better QP generator, although I'm not sure if they could use something of that sophistication from either a financial or HAZMAT standpoint. I think the decaying radioactive material might be a problem on the store checkout counter.
chuck32, all
okay, let me try to rephrase this:
Not sure I understand the question. "Anyone want what as the annuity?"
When I say what as the annuity, I mean the $208 million (in this case) as oppossed to the cash option, which we all agree ain't going to be near $208 million.
Please follow along - I'm not doubting anything you've said here, and you obviously know your stuff, and it's agreed the lottery operates with the 'green energy' (cash) from the get go....
All that consiered, my question is now if it's possible for a jackpot payed to a group to be split up some annuitites and some cash option pay-me-now, why have we never heard it before? with all the Powerball and Mega Million jackpots that have been hit, and all the media hype, I can't ever recall hearing a report something like this:
Twenty people hit the _ _ _ _ _ jackpot for $88 million. Ten of the twenty opted for the cash payout, dividing up $44 million before taxes, and the other ten took an annuity.
Nope, can't recall ever once hearing anything like that. Can anyone here?
I guess I would answer it this way: "what" could be "your payment" as in "Anyone want your payment as the annuity?" You can also just say, "Do you want the annuity option or cash option? There are two options offered. The Powerball website gives a cash number and an annuity number. The player picks one or the other. One is called CASH and the other is called ANNUITY. If there are multiple winners, the share of either one is divided by the number of winning tickets.
Part of the problem may be where you are starting from. Like the educated man who went to learn from the Zen Master. The Zen Master filled his cup with tea as the man told him of his wonderous education. Then the Zen Master poured more into his cup until it overflowed. "Stop," the educated man said, "you are overfilling my cup, it is too full already." The Zen Master said, "Yes, now you see."
So forget everything and start over. For every dollar sale, 30 cents goes to the cash jackpot. So you sell a dollar and the cash jackpot is then 30 cents. You sell another dollar and the cash jackpot goes to 60 cents. You know that if you invest the 60 cents before taxes, you can pay out $1.30. So then you announce that the cash jackpot is 60 cents and the annuity jackpot is $1.30. Of course, then the lottery announces a jackpot, they are guessing what sales will be - and what the interest rates will be.
If there are two winners and one wants cash, the CASH jackpot is split. The cash person gets 30 cents, he gives about 15 cents to the federal and state goverment and then has 15 cents left over to invest. The annuity person gets his 30 cents invested by the lottery and will get a total of 65 cents over time.
How's that?
How come you haven't heard about this before? Powerball has had groups of winners where some pick annuity and others pick cash. Perhaps the newspaper you read just doesn't cover it very well. Reporters understand less than you do about the lottery. It is also somewhat rare. Most people take the cash. They get expert advice to take the cash and then to turn it over to the expert to invest. I've had discussions with a couple of finance professors and some big time financial writers and they do get it. Taxes do real damage to what you have left to invest.
I see what both of you are saying, but I agree with Coin Toss. Many states won't even bother paying more than one claimant. That's why in most cases it's best to create a trust and appoint a trustee.
As far as choosing annuity vs lump sum, I know it can be mathematically calculated, but I'm almost willing to be the states won't do it.
"Powerball has had groups of winners where some pick annuity and others pick cash."
Can you please post an example of this? I know that when there are multiple winners of a jackpot, the individual can decide on annual payments or lump sum. I have never heard of the same winning jackpot being paid in 2 different ways.
Reporters understand less than you do about the lottery.
You sound awfully sure of yourself. Reporters know less than you do. Other members on this board know less than you do. Do you work for MUSL?
chuck32
If there are multiple winners, the share of either one is divided by the number of winning tickets.
Bingo. The number of winning tickets and a prize based on which amount, advertised jackpot or lump sum. Like I said, you know your stiff but you seem to be doing some bobbing and weaving on providing any specific example.
Let's say two people happen to have picked the winning numbers, they're goiing to share the prize. Call the prize $20 million for right now. One wants the lowered cash amount, right now. The other wants an annuity and says, "I'll be dipped in grits if I'm passing up the cash option onl'y to get dinged $10 million on the deal."
Now take the two people, call it one hundred, jack the jackpot up to the $208 million just hit and we have this Wisconsin group.
I'm going to be real curious to see how they do get paid.
There are a few states that only want to cut one check per winning ticket, but most will cut separate checks. WI has a law that it can only write one check, but they can get a court order to get the job done. Many lotteries see it as a customer service issue. MN has a policy of writing whatever number of checks it takes.
The math to set up cash and annuity options is really pretty simple. MUSL handles that part. Just divide up the cash and then use a winner's share of cash to set up an annuity if that is what they want.
If I remember right, Lincoln NE winners had some split choices. Specifically, one of the winners apparently shared his share of the prize with his son (same name) and the son took his share as the annuity. A split of a split. It does not happen often. Cash is the biggest choice by a wide margin.
I'm sure that there are members here who know all this and more. Cash, annuity, present value are standard terms for financial folks. Are you trying to "out" me?
I think that Musl should go ahead and make a game for tuesday's and friday's that I could play in Oregon. Since I moved to Eugene I am further away from Mega Millions in either direction. So another big jackpot game would be a game I would like to play in addition to powerball.-weshar75
Sorry I come off as confusing. I'll try again using your example.
Two people win. Two winning tickets. The prize if $20 million - I assume you mean $20 million annuity here. Let's call the cash $9 million - the amount that the lottery actually has on the day of the win.
The two winners want different options. The $9 million cash is split. The cash guy takes $4.5 million in cash. The annuity guy gets $4.5 million plus interest (for maybe $10 million annuity).
The cash guy gets $4.5 million less 25% Federal withholding and less about 6% state withholding, then has to figure his actual tax (the maximum Fed rate is 35% and states vary but might be 12% or so and then has rest leftover to invest.
The annuity guy gets an immediate first payment, then the lottery invests the rest, before taxes and starts earning interest on that amount.
A game that goes head-to-head with MM? Sounds intriguing. I wonder if the two biggies coordinate their efforts a bit to make sure they don't go up against each other. I'm not sure if we'd find out all the scoop on that one in a public forum!
"Sorry I come off as confusing. I'll try again using your example.
Two people win. Two winning tickets. The prize if $20 million - I assume you mean $20 million annuity here. Let's call the cash $9 million - the amount that the lottery actually has on the day of the win." chuck32
Chuck, that wasn't the subject at all. I can't speak for Coin Toss or anyone else here, but from my point of view we were all talking about the Wisconsin winners, right? There was only ONE winning ticket. It is an entirely different situation which is why I asked you to please provide a link to any case where a state paid a single claim in a variety of ways, i.e., 3 people lump sum, 4 people annuity. I'm not saying it never happens, just that I've never heard of it and now we are talking about 100 people and one jackpot. Anyway, if WI has a rule that only one winner is paid, then a Trust will have to claim the money and payout the winners. I would be very surprised if a Lottery Commission would open up that can of worm and do so much paperwork.
"Of course these folks can retire. If they take the GUARANTEED ANNUITY, they will get a guaranteed income stream that will keep up with inflation and is likely to be slightly better than they are currently making. These second shift workers reportedly have incomes of $30,000 to $40,000."
Chuck, I hope I don't sound too argumentative. I don't mean to be. It's just that the above comment sounds a bit judgmental. You are assuming that these people were happy as pigs in mud making $30K a year. Perhaps they were, but maybe they also want a better lifestyle. If they continue working, they can now get it without working double shifts or budgeting every dollar. Also, what are the married workers going to tell their spouses? "Honey, get up. I'm staying in bed from now on!" For me that kind of money would be enough to retire, but I don't have a growing family. (I'd still take the cash.)
There are other important things to consider when you have a good job. First, if someone has a family he has the responsibility of providing them with protection. What I mean is that a plant like Sargento probably offers wonderful group benefits. We really don't know the personal stories of the winners, so this is all conjecture. But out of 100 people, I will bet there's somebody with a pre-existing condition like heart disease that would keep him from getting good, private medical coverage at a reasonable rate, if at all. Do you know what a family plan costs? Plus private plans don't have to follow the group laws and can be cancelled. If you have a child with a disability, or a wife with cervical or breast cancer, those benefits are priceless.
Maybe some time to take a fun job - one you don't really care about losing"
Depends if you're talking about a carefree single guy or a family man (or woman.) I guess everyone's different, but I don't understand why a person wouldn't want to provide his/her family with a nicer home, a good college education and straight teeth!! There's nothing wrong with goofing off a little, taking a nice vacation or buying a really sharp car, and I relate 100% to what you're saying about taking a fun job. In fact, your above statement is my goal! But I think winning the money and saying "I think I'll have fun" is a bit irresponsible when you have others to think about because the future is so unpredictable and it would be important to make sure that in 30 years, when the checks stop coming, you've put away enough to retire comfortably. Just my opinion.
NOTE to Psychomo - nobody gave you an attaboy for your "Whey to go" comment. So let me do it now.
Not trying to 'out' anybody. I'm just wondering why we'd never heard of one of these 'split' payoffs before.
This is what I was getting at: in your example above:
The two winners want different options. The $9 million cash is split. The cash guy takes $4.5 million in cash. The annuity guy gets $4.5 million plus interest (for maybe $10 million annuity).
OK- so the annuity guy - the annuity is based on the casah option value, even though it is an annuity - meaning that had he convinced the other guy to also go for the annuity, the prize wopuld have been $11,000,000 more.
So I'm still a little foggy on why someone would want annuity based on the cash value prize - the lottery commission gets the best of both worlds.
So in essence, what has happened here is that they both get the cash option value dollar amount, and the annuity guy decided to take that in the form of an annuity. Why would anyone do that?
I'm sure anyone reading this thread that would be involved in setting up a charter for a trust for pool group play beofre a hit (just in case of a hit) would make sure to have everyone involved specify annuity or cash option - one or the other for everyone, and that would be that.
In other words, "if we hit do we want annuity or cash option - oneway or the other, has to be unanimous."
Psykomo - sorry I spelled your name incorrectly. Just noticed. I can't edit my post...too late! LOL
Coin Toss - I think you and I are saying the same thing, right? No group can claim a prize as both an annuity and a cash payment unless that state has an exception (some do) where more than one winner can receive a prize for one ticket. Let's forget the graduated annuity for a minute. If a group in GA bought a MM ticket and won $150M and 10 people won, each person would be entitled to receive $15M. The people choosing a lump sum would get $7.5M (assuming 50% cv) and the others would get $577,000 a year for 26 years. I've never seen this happen, but I suppose in a state where they offer to pay multiple winners of one prize, it is entirely possible! So this way the state is looking at the one ticket as 10 separate wins. I think this is the reason so many FAQs on sites say the lottery will only pay one winner. Nobody ever imagined that 100 people would win one jackpot, but if WI has that "one winner only" rule, it'll sure save the state lots of red tape. One check will be written and the burden of equitable distribution will be passed onto the winners.
justxploring
It seems it's being assumed that if people all agree on a cash option (cv as you say), then some can get paid annually, thus annuity - but it sounds like this is being paid based on the amount of the cash value prize.
My poinst is, if someone is going to go for an annuity, why are they settling for cash value? This thread now has me thinking this might have actually happened to some poor slob!
I'm still pretty sure that when it comes down to which payoff a group wants from the lottery, it has to be declared advertised jackpot amount, or cash option amount, one way or the other.
Or esle, we have this:
Hey Clancy, we hear you hit the jackpot!
Yup, sure did!
How much if we can ask?
$5,000,000!
We thought the jackpot was $10,000,000.
Well yeah, it was, but I asked for the cash option.
Well that's a lot of money to get all at once.
Well, I asked for annual payments.
An annuity? Then why didn't you get the $10,000,000 and not $5,000,000?
Clancy: Oh no! DUH!
In Texas, it's called "cash value option", or CVO. There the wrong choice is AP.
Whoa! You read far too much into my small comments about how a person might chose to live. I am not so judgmental as to begin preaching about how a person has a duty to provide for college educations, straight teeth, a nice house, etc. As long as they don't ask my to support them, folks can live how they please, I say.
I am not aware of any press article that talks about how the NE lottery winners split their prizes. The press just does not cover that kind of detail. You could check it out at the NE Lottery.
The WI Lottery has already announced that it will split cash and annuity by individuals in this group. It is common for groups in WI to get the court order. Just a matter of filing some forms. Here is a newspaper article on that:
Boston Globe, By Emily Fredrix, Associated Press Writer, August 7, 2006
State law requires that payment be made to a single winner unless a court order is obtained, Iverson said. Then multiple winners could choose individually whether to receive a lump sum or get the larger amount spread over 30 payments, the lottery spokeswoman said.
I guess I'm not doing a very good job of explaining this. No, it does not have to be unanimous. One person can take the cash, one person can take the annuity. I'm guessing that you might think that the lottery already has all of the money in the annuity amount. It does not. The annuity is created with future interest earnings. The only thing that the lottery has is the cash amount.
The cash amount is first split among all of the winners (just in the lottery's head at this point, not actually handing out money). A winner can choose to receive the prize as either cash or annuity. If one of the winners wants the annuity method then the lottery will invest the money for the winner and pay out the cash, plus the interest earned over time. 100% of the cash and interest goes to the winner.
All annuities are based on a cash value. There is no other way to do it. An annuity presupposes a cash amount. Annuity mean a cash amount that is invested and paid out as cash and interest over time.
Why would anyone decide to take an annuity? OK, here goes. Let's use $100 million in cash as an example (easier on my math skills).
If the winner takes cash, he pays about 45% in state and federal taxes. The cash wininer then has about $65 million left over to invest. Where will he invest it? He can take some risk and earn a high rate or he can look for a safe investment with a lower rate. Risk means that he could lose all of the money. Most people will probably want to set up an income stream that will keep up with inflation for most or all of their life.
If the winner takes the annuity, then the lottery invests the entire $100 million. The lottery does not pay taxes and since the winner does not yet have the money, the winner does not pay taxes on the $100 million. The lottery is then earning interest on $100 million while the cash wininer is earning interest on $65 million. The lottery pays out all of the cash and interest to the winner over 29 years. The Powerball game creates an annuity stream that increases the payment each year by 4% - about the expected rate of inflaction.
So the choice is - do you want to invest $65 million yourself or do you want to invest $100 million that has a structured payout over 29 years giving a guaranteed income that increases by 4% every year.
Deciding what you want to do with the money is the winner's choice of course. There are also good reasons for spending the money right away - a winner's age is key. Or maybe the winner has a great investment for the cash. Or maybe the winner just wants to spend it all on one huge part and then get back to his normal life. I don't JUDGE people here if they don't set up a nice dental plan. <G>
chuck32
You just gave me the answer I've been looking for all along:
Then multiple winners could choose individually whether to receive a lump sum or get the larger amount spread over 30 payments, the lottery spokeswoman said.
That's what I was getting at.
Thanks.
You've done a perfectly good job of explaining it each of the several times you've explained it. Any confusion experienced by anyone isn't a reflection on you.
As far as the choice between investing 65 million myself or having the lottery invest 100 million on my behalf, I think you're overlooking one important detail. If the lottery buys me an annuity my annual interest income may be higher, but I don't have any principal. I get those higher payments for a period of time and then they stop. If I invest the cash I've got 65 million in principal and it can potentially pay me (and my heirs) that lower annual income every year until the world ends. If you take the annuity and there's any significant chance that you'll live longer than the payment period you have to be saving some of the payments. With the cash you can spend every penny it earns (yes, your spending power will go down each year). Ignoring future changes in investment opportunities, I don't think there's really a huge difference in the annual spending power between cash and annuity. I think one of the choices offers a major advantage in terms of flexibility, though.
You do indeed get the principle with the lottery payment. They payout includes the interest AND the principle.
To do an apples/apples comparison, take the after-tax cash you end up with if you take the cash option and then go shopping. Go to an insurance company or other financial and ask what kind of guaranteed, graduated annuity stream you can set up. Then compare that to the lottery's income stream. Most people forget about inflation. Getting $50,000 a year is one thing now; quite another in 10 or 15 years.
This also gives you the chance to see if you prefer to set up some other kind of annuity stream - longer payments, shorter payments, etc.
This assumes, of course, that you want an annuity stream. Cash can be a good choice for some people.
Good points are being made on all sides here, which is what tends to happen when the unhelpful "only take the cash option, no matter what" mantra is taken out of the discussion.
Chuck32 makes some very good points about the annuity stream, and I would completely agree that the lottery has the clout and resources to come up with a much better annuity stream than anyone could get on their own (unless you happen to be Bill Gates).
KY Floyd also introduced an excellent point about keeping the money in an investment, rather than getting an annuity stream, which is a completely different animal. With an annuity stream, one would need to have the discipline and diligence to set aside a portion of the payment every year, and put it into a good investment. (That is, if you wish to have a good-sized nest egg remaining at the end of the 29-year period.)
The cash option would provide more financial power for the average lottery winner, such as guaranteeing a business or construction loan. It is a difficult thing to talk about in concrete terms, because it all comes down to the ability to convince the financial institution, but my feeling is that the cash offers more buying power and leverage.
However, someone who is middle-aged or older may not be concerned with having a sizable nest egg remaining after 29 years, so the annuity may be just what they need -- a maximized, annually-increasing money stream that lasts the extent of their foreseeable lifetime.
The bottom line is that every lottery winner should weigh all options and take the time to think through everything -- without any knee-jerk reactions.
Lotteries can get better prices from the big brokers than your average Joe, but probably not any better than any other big investment firm. The real secret is that the lotteries invest the cash amount BEFORE taxes. It's easy to be a financial genius when you start with nearly twice the cash to invest. <G>
Cash probably takes the most discipline, with a straight equal payout taking second place (since you would have to save and invest some every year to keep up with inflation). A graduated long-term annuity stream probably takes the least discipline unless, as you say, you plan to live a lot longer than 29 years and need to save for a future nest egg. But I say, let the kids take care of you then, they've been living off you all this time!
Until the IRS can change the rules, players have only the two options. There is no right answer for everyone. I just tend to "hawk" the annuity option since everyone seems to get bad advice and dismisses it without running the numbers.
Well, I think that we've finally beaten the annuity horse to death.
I can appreciate if you see it as a matter of semantics, but if the lottery buys me an annuity all I get is an annual payment. Some investment company will have principal that they use to generate the annual payment, but I won't have a dime in principal. That's the nature ofthe annuity option. The investment company gets the principal in exchange for promising the payments. If they do well with the investment they might still have some principal left after making the final payment, and if I'm clever I'll have saved some of the payments which will then be my principal. That's one of the big drawbacks to the annuity.
You make a good point about inflation, but that's a two way street. A dollar today is worth less than a dollar next year, and the annual payments, whether they increase each year or not, will be diminished by inflation. The investment companies sell the annuity because their expertise says that what they pay out over time will be less valuable than the cash they collect today.
Your last two sentences suggest that the only two choicesare an annuity or using the cash, but that's not the case. I would expect that all but those who expect to die shortly (or throw one big party and then return to their previous life) will be interested in a dependable annual income. Immediately investing the cash in an annuity of your own choosing would probably be one of the more foolish strategies, but there are any number of options that can generate an annual income while preserving the principal. The more likely scenario is using some of the cash early on and investing the remainder, and presumably preserving some or all of the principal.
I'm not suggesting that taking the cash is the only sensible strategy for everyone, but taking less than the advertised value and paying your taxes isn't a huge penalty compared to taking the deferred payments. There are plenty of people who should take (and plenty of past winners who should have taken) the annuity. It all depends on your discipline and what you want to do with your winnings.
what? that doesn't sound right.
well, it's still more money than they started out with =) so good luck to them, and congratulations.
Well, all you get is a LARGER annual payment that is part principle and part interest. You are correct that there are many options. You could give some investment company cash in exchange for an annuity stream - and you can set up an annuity stream in many ways. You could, for example set up a stream of interest only and still have the full cash amount back in X years. The company would determine their real interest earnings, keep their share, and pay you the difference.
But here we are comparing a graduated annuity stream that is designed to keep up with inflation. You are correct that a dollar today is worth more than a dollar next year. But a graduated annuity stream give you more dollars next year so that your "real income" IS the same. The annual payment of a graduated annuity is NOT diminished by inflation since the dollars of a graduated payment increase to keep up with inflation.
I said that the only choices are cash or the graduated 29-year annuity FROM THE LOTTERY. A winner can certainly take cash and set up many different kinds of options.
Taking the cash and paying taxes is a huge penalty compared to taking the deffered payments. You can certainly invest the post-tax cash and spend only the interest, but the earnings will be lower than a cash + interest distribution. There may be some winners who might like to live off a small interest amount for their entire life and then leave the principle to their heirs (after estate taxes). That is an option for a private investment.
All of this only really makes sense when you actually do the math. Take $50 million (cash prize after taxes) and invest it. Take $100 million (cash before taxes) and invest it and look at the income streams.
I do agree that you really have to take a hard look at the kind of person you are and what your goals and life situation is. I really only got into this long discussion because I think that too many people make too much of a quick decision to forgo the 100% guaranteed, inflation-adjusted annuity.
Whew! I'm even tired of talking about it, and I love this stuff.
I think my ship is coming in tomorrow night and I will be taking the cash because I have to split the prize with someone else. Now if I had been the 208.6 million winner I think that I would have entertained the annuity idea but I still would have went with cash. For me it is because I want to have the money under my control so I can do what I want with the cash prize I get. Now all I have to do is get all six on the same line.-weshar75
If they win it, congratulations to them. I hope they choose cash.