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a poll about annuities and lump sum

Topic closed. 58 replies. Last post 10 years ago by JackpotWanna.

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should annuities no longer be an option and lump sum an only choice?

yes lotteries should offer only lump sum [ 8 ]  [16.67%]
no the lotteries should offer annuities too [ 31 ]  [64.58%]
i'm cash only and of course annuities suck [ 3 ]  [6.25%]
not sure at this time [ 6 ]  [12.50%]
Total Valid Votes [ 48 ]  
Discarded Votes [ 2 ]  
four4me's avatar - gate1
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Posted: September 30, 2006, 11:02 am - IP Logged

justxploring wrote:

four4me, just because someone doesn't like an expression doesn't mean she doesn't understand it. Point taken sorry for the miss understanding 

If someone told me to go *F* myself, I think I'd get the hint, i'd never say that to you hon!

but it would still bother me. Actually I was only kidding you since, unfortunately, most people use all sorts of expressions like that.  Ah yes it's a guy thing.

You're obviously not a cat lover. Actually i like cats but i am deathly alergic to them.

BTW, most of the Chinese Americans I know have never eaten a cat in their entire lives and have never even thought about it.  Another guy thing many times we kid about food stuff like that and no animal is without reproach. like someone might say have you seen that dog in the alley behind the resturant. and somone would say not latley might be on the menu for tonight though. We don't men anything by it and know that domestic animals aren't in any food stuffs. We just say stuff like that for a chuckle..  

    Coin Toss's avatar - shape barbed.jpg
    Zeta Reticuli Star System
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    Posted: September 30, 2006, 7:51 pm - IP Logged

    justxploring

    Stories like the one about Ms Ryan make me wonder if we wouldn't be better off  finding a way to hit Pick 3, Pick 4, and maybe Cash 5 consistently enough to be comgfortable instead of hitting a huge jackpot. 

    I'm sure once word got out she was giving to charity that a ot of these people approaching here perceived her to be "an easy touch."

    I'd like to see someobody push for a law that winners have to remain anonymous. 

    Now there's a thought! 

      jarasan's avatar - new patrick.gif
      Harbinger
      D.C./MD.
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      Posted: October 1, 2006, 12:34 am - IP Logged

      justxploring wrote:

      four4me, just because someone doesn't like an expression doesn't mean she doesn't understand it. Point taken sorry for the miss understanding 

      If someone told me to go *F* myself, I think I'd get the hint, i'd never say that to you hon!

      but it would still bother me. Actually I was only kidding you since, unfortunately, most people use all sorts of expressions like that.  Ah yes it's a guy thing.

      You're obviously not a cat lover. Actually i like cats but i am deathly alergic to them.

      BTW, most of the Chinese Americans I know have never eaten a cat in their entire lives and have never even thought about it.  Another guy thing many times we kid about food stuff like that and no animal is without reproach. like someone might say have you seen that dog in the alley behind the resturant. and somone would say not latley might be on the menu for tonight though. We don't men anything by it and know that domestic animals aren't in any food stuffs. We just say stuff like that for a chuckle..  

      You guys are fighting like cats and dogs. I need to introduce you guys to some Korean and Vietnamese friends of mine (it's a different culture totally). Don't worry, I told them " don't even think about it " or I would put them on the menu, it's a USA culture thing, and they comply (no food shortages here).  Cats and dogs fare better in the US. than anywhere else in the world: bottomline is: it doesn't matter what, who, whatever you are, the best place on this planet, is the USA.  I've seen a lot, just watch "Animal Planet".  The USA is one of the few places on Earth where our fellow  creatures stand a chance of living free of abuse and not getting eaten. As an eg. an  interesting cultural belief, is in the middle east, I've seen this with my own eyes.  Cats run footloose and fancy free. Dogs on the other hand have it tough, since they are believed to be the earthly manifistation and embodiment of satan himself! A dogs' spit can damn your soul in eternity (its like getting licked by bezeelbubbyEvil Uhh himself). I did not see a doggy the whole time I was there.  I couldn't wait to go back home.  The reason I post this is because we need to hold on, don't let go, make absolutely sure this country is safe from losing its "heart, soul, and will" to forces that would have us think differently or act differently from the way we've been going the past 250 yrs. or so. Just think about it, if everyone in the world treated dogs, cats the way we do in this country,  the world would be a better place.   LOL jarasan US Flag

        justxploring's avatar - villiarna
        Wandering Aimlessly
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        Posted: October 1, 2006, 4:10 am - IP Logged

        Four4Me, okay...if it's a "guy" thing I probably would never understand. Wink  Regarding the subject of annuity vs cash, let's hope one of us wins enough someday so we can decide which way to take the money! Most of the time I enjoy different viewpoints, so when I "debate" an issue, it's really not an argument.

        Jarasan,  Korea and Vietnam are different from China.  I know that in many parts of Asia people eat dogs and they are served in restaurants. Cats are more of a delicacy.  I was talking about American restaurants and modern Chinese people. However, when I was in Hawaii ..well, never mind. I get nightmares (if I ever sleep that is) when I think too much, so I try to stay away from this subject, although I've watched Animal Planet. Some of those shows get very graphic.  I'll stick to rescuing dogs I see abused or scold people who leave their dogs in their cars when it's 95 degrees. Anytime I hear the statement "fighting like cats & dogs" I think of the people I know with both pets that get along well and are pals. One friend's cat sleeps with her dog.

        Floridian, thanks for your compliment. I also enjoy reading your posts. By the way, I remember Jack Webb, so I must be very old too!  (just the facts, just the facts)  I hope I don't sound jealous or bitter about the wealthy.  I think people Paul Newman & Joanna Woodward, Danny Thomas and countless other celebrities have done wonderful things to help the world. Audrey Hepburn spent the last years of her life helping children. Danny Thomas was so committed to Saint Jude's that people say he worked himself to death. Danny Kaye was one of my favorite actors and was a goodwill Ambassador for UNICEF for over 30 years. I grew up listening to a 78 with the songs from Hans Christian Andersen. "Inchworm, inchworm, measuring the marigolds..."  I think "ordinary" people have a much harder time with new money, but agree that leaving the country or moving to a place where they're not well known would definitely help. Living alone, Ms Ryan probably felt threatened being approached by strangers. I know I certainly would.

        Coin Toss, I agree that saying about money in the Bible is often misquoted. I have 3 Bibles with the New Testament and they are all a little different, but basically in Timothy say that "For the love of money is the root of all evil." I've had a similar discussion about "Thou Shalt Not Kill" too. Some people say the translation is "Thou Shalt Not Commit Murder" which sort of takes us humans off the hook so to speak.  I would never want to get into a Bible discussion on this board, however!  Maybe there have been a few on the mystical forum?

          Coin Toss's avatar - shape barbed.jpg
          Zeta Reticuli Star System
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          Posted: October 1, 2006, 1:28 pm - IP Logged

           Just an FYI

          In the Korean language, dog is "kae" and meat is "gogi" or "Kogi"

          (k and g are the same letter), and there is a word, kaegogi,(kay -go-ghee, hard g) which means....well, do the math.

          But it's a ceremonial thing kind of, and one breed of dogs that is raised for that purpose, they eat kaegogi on Buddhist holidays.  

          In some rural areas of Italy, they eat cats. Ptoooey.

          I know we're talking about U.S. here in the thread, but every ethnic group brings its culture with it.

          If you've eaten a buffet in a U.S. Chinese restaurany, you've eaten rabbit.

          Of course, if you've been in the military, you've eaten horse, so..... 

            justxploring's avatar - villiarna
            Wandering Aimlessly
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            Posted: October 1, 2006, 6:10 pm - IP Logged

            Of course, if you've been in the military, you've eaten horse, so..... 

            to continue:  If you've ever been wrong about something after a bet, you've probably eaten crow.

            if you've ever had to give into a disagreement with your spouse, you've eaten humble pie

            if you've ever been depressed about losing money or breaking up with someone, you've probably eaten your heart out.

            if you're stubborn and think you're always right, you've probably eaten your hat a few times

            if you've ever been in a heated argument, he probably told you to eat dirt.

             

            Getting dark, time to go until Tues.  Happy New Year to all!  Tomorrow will be the year 5767.  Don't forget to stop writing 5766 on your checks!    LOL

            Shalom

              Preppy's avatar - scene sunoverlake.jpg
              Los Angeles County, CA
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              Posted: October 1, 2006, 7:46 pm - IP Logged

              4-4-me,

              This is absolutely the most intelligent thing I've read on LP considering this subject.

              Lottery winners should do exactly as you suggest.  Protect the principle, be guaranteed the total amount of the jackpot, and gamble (invest) from their annuity payments.

              Very good post. 

              Cash Only, I love ya' but you cannot argue with this reasoning.

              I am a total lump sum fan.

              The annuity prize is a marketing gimmick to inflate the jackpot. The annuity prize is also an easy way to shirk responsibility and discipline. A good to excellent financial advisor could easily beat the low returns of "zero's/strips" government bonds and establish a financial plan.

              I agree with four4me that the only reason a person should take the annuity is if that person has poor money habits.  However, if a person has poor money habits taking the annuity will most likely only delay the eventual bankruptcy. A person with poor money habits will still most likely throw discipline to the wind, overspend, underestimate taxes, borrow against the winnings, and then finally call up one of those horrible companies on TV that are always advertising  -- "Call X today to exchange your annuities for a lump sum payment." To add insult to injury they finally file for bankruptcy.

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                Roslindale, MA
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                Posted: October 1, 2006, 8:10 pm - IP Logged

                I am a total lump sum fan.

                The annuity prize is a marketing gimmick to inflate the jackpot. The annuity prize is also an easy way to shirk responsibility and discipline. A good to excellent financial advisor could easily beat the low returns of "zero's/strips" government bonds and establish a financial plan.

                I agree with four4me that the only reason a person should take the annuity is if that person has poor money habits.  However, if a person has poor money habits taking the annuity will most likely only delay the eventual bankruptcy. A person with poor money habits will still most likely throw discipline to the wind, overspend, underestimate taxes, borrow against the winnings, and then finally call up one of those horrible companies on TV that are always advertising  -- "Call X today to exchange your annuities for a lump sum payment." To add insult to injury they finally file for bankruptcy.

                I Agree!

                  Coin Toss's avatar - shape barbed.jpg
                  Zeta Reticuli Star System
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                  Posted: October 1, 2006, 8:25 pm - IP Logged


                  Happy Rosh Hashanah and Yom Kippur justxploring,

                  Shalom.

                  All;

                  On the Learning Channel lotteyr program, (a lot more positive spin than the E! network Curse one), one of the people on there said something kind of od, he said, "Never take lump sum, you lose your benefits". All I can think of is he meant the benefit of getting an annual check - for those who couldn't handle a lump sum. 

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                    California
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                    Posted: October 1, 2006, 8:55 pm - IP Logged

                    I am a total lump sum fan.

                    The annuity prize is a marketing gimmick to inflate the jackpot. The annuity prize is also an easy way to shirk responsibility and discipline. A good to excellent financial advisor could easily beat the low returns of "zero's/strips" government bonds and establish a financial plan.

                    I agree with four4me that the only reason a person should take the annuity is if that person has poor money habits.  However, if a person has poor money habits taking the annuity will most likely only delay the eventual bankruptcy. A person with poor money habits will still most likely throw discipline to the wind, overspend, underestimate taxes, borrow against the winnings, and then finally call up one of those horrible companies on TV that are always advertising  -- "Call X today to exchange your annuities for a lump sum payment." To add insult to injury they finally file for bankruptcy.

                    Preppy, how about the effect of Income Taxes?  Let us take a specific example, a Mega Millions Jackpot with an annuity value of $26 million and a cash value of $14,820,000 in the state of California. 

                     

                    The annuity comes out to 26 annual payments of $1,000,000.  The withholding tax situation is federal income tax of 25% ($250,000) is taken (no state tax on lottery winnings in California) so your check from the lottery every year is $750,000.  Keep in mind you will probably owe an additional $100,000 in federal income taxes as you most likely will be in the 35% tax bracket.  This gives you a net amount of $650,000 per year. 

                     

                    Now let us take the cash value of $14,820,000.  Your check from the lottery would have 25% federal income tax withheld giving you $11,115,000.  You would also owe $1,482,200 in additional federal income tax at tax time.  This gives you a net total of $9,633,000.

                     

                    So the question is could you find an investment with this amount of money that could return after taxes more then $650,000 per year for the next 26 years.  Let’s say a good to excellent financial advisor could average 10% per year, a healthy return mind you.  That would equal $963,300 per year.  Income taxes would be 35% at the federal level and 9.3% (ouch!) at the state level.  This means you would net out $536,558 per year.

                     

                    This is where the professionals come in, as one would need to compute present value, future value, rate of return, income tax (both state and federal) on earned income, tax payment schedule, residual value, etc.  The question of annuity or lump sum is very complicated and requires the input of a seasoned financial planner and a qualified accountant.  I am neither a financial planner nor an accountant and welcome more dialogue on this topic, particularly if I have overlooked any pertinent issues.  I am somewhat inclined to choose an annuity.  It is my sincere wish that I am faced with this dilemma at some point in the (near) future!

                      Coin Toss's avatar - shape barbed.jpg
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                      Posted: October 1, 2006, 11:57 pm - IP Logged

                      CA Lottery Guy

                      Someone here on the board has a sig that says, "You can always buy a better annuity" 

                      So I gues the point is that even if you want an annuity, take the cash lump sum from the state and find a better annuity than they'd offer.

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                        Posted: October 2, 2006, 1:52 am - IP Logged

                        CA Lottery Guy

                        Someone here on the board has a sig that says, "You can always buy a better annuity" 

                        So I gues the point is that even if you want an annuity, take the cash lump sum from the state and find a better annuity than they'd offer.

                        Well the issue is that we are not talking about level playing fields.  The lottery gets to buy their annuity (most likely zero coupon bonds) before income taxes, while a lottery winner is subject to purchasing an annuity with post income tax funds.  This is a HUGE difference; 35% in California, more in other states. 

                        As far as  "You can always buy a better annuity" is concerned, there is a lot of truth to that statement.  Most likely you can purchase an annuity that is better, i.e. pays a better interest rate.  However, the most important issue is how much the annuity will produce after taxes compared to the lump sum after taxes.

                        One could say that they would rather take the lump sum, get the lottery out of their financial affairs, and be in complete control of their own finances.  That is certainly their decision.  My point is that the comparison should always be brought down to an after tax level.  After all, that is what one gets to keep. 

                          BaristaExpress's avatar - BaristaExpressMX zpsfb0d8b5d.png
                          Magnolia, Delaware
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                          Posted: October 2, 2006, 2:12 am - IP Logged

                          The other thing is the present day value of our currency. Heck I'd rather have a dollar while it's worth 65 cents today, than a dollar when it's value next year could be as low as 55 cents or even lower when that annuity check arrives. I want my money at it's current value today rather than at a undetermined lower value in the future like it could be by taking an annuity! Everyone knows our money does the worst in the world when trading against other currencies! Yes, our currency is the most sought after currency in the world by other counties, but it's also the most counterfeited in the world too. Think about it people, annuities have more cons than pros! The same goes for all of the hundreds of thousands of people out there that get more than a two or three hundred dollar tax refund checks from Uncle Sam every year! They for some reason think it's wise to get those thousand, two thousand dollar and above refunds, when actually it's the worst thing to do! 1) You just gave Uncle Sam an interest free loan. 2) The value of the dollar is most likely lower now than it was when it was being withheld from your pay-check throughout the year! Remember people the cost of living is always going up, rarely does it go down! Basically what I'm saying is: The dollar of tomorrow will be worth much less than it is today.

                          Keep dreaming the impossible dream, it just may come true! Thumbs Up

                            Preppy's avatar - scene sunoverlake.jpg
                            Los Angeles County, CA
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                            Posted: October 2, 2006, 11:54 am - IP Logged

                            Preppy, how about the effect of Income Taxes?  Let us take a specific example, a Mega Millions Jackpot with an annuity value of $26 million and a cash value of $14,820,000 in the state of California. 

                             

                            The annuity comes out to 26 annual payments of $1,000,000.  The withholding tax situation is federal income tax of 25% ($250,000) is taken (no state tax on lottery winnings in California) so your check from the lottery every year is $750,000.  Keep in mind you will probably owe an additional $100,000 in federal income taxes as you most likely will be in the 35% tax bracket.  This gives you a net amount of $650,000 per year. 

                             

                            Now let us take the cash value of $14,820,000.  Your check from the lottery would have 25% federal income tax withheld giving you $11,115,000.  You would also owe $1,482,200 in additional federal income tax at tax time.  This gives you a net total of $9,633,000.

                             

                            So the question is could you find an investment with this amount of money that could return after taxes more then $650,000 per year for the next 26 years.  Let’s say a good to excellent financial advisor could average 10% per year, a healthy return mind you.  That would equal $963,300 per year.  Income taxes would be 35% at the federal level and 9.3% (ouch!) at the state level.  This means you would net out $536,558 per year.

                             

                            This is where the professionals come in, as one would need to compute present value, future value, rate of return, income tax (both state and federal) on earned income, tax payment schedule, residual value, etc.  The question of annuity or lump sum is very complicated and requires the input of a seasoned financial planner and a qualified accountant.  I am neither a financial planner nor an accountant and welcome more dialogue on this topic, particularly if I have overlooked any pertinent issues.  I am somewhat inclined to choose an annuity.  It is my sincere wish that I am faced with this dilemma at some point in the (near) future!

                            CA LotteryGuy, welcome to lottery post fellow Californian!  Thanks for not arguing the tax rate is only 27% or some other low ball rate. Lottery winnings are taxed just like any other income so what would be the big problem. Do you work fewer hours to earn less money so your tax bill will be lower? You just have to make up the tax loss with smart investing, legal moves, deductions, or as Coin Toss said "You can always buy a better annuity"

                            First, if I hit the big jackpot I would follow my own advice and hire an excellent lawyer, an excellent financial advisor, and an excellent CPA.

                            Second, present value, future value, annuities, and rate of return are the same as any other algebraic formula. However, I am glad I majored in Business.

                            Third, most of the good to excellent law firms, wealth management firms, and investment firms usually have liquid (cash, stock or bonds) account minimums of $1 million, $5 million, $10 million, $15 million, or $25 million.  Accordingly, I very rarely buy a lottery ticket that does not have a post tax lump sum value of $22 million or higher.

                            Fourth, I already accounted for the 35% tax rate in my lottery purchasing habits. I would be honored to pay several million dollars (35%) to Uncle Sam and have millions left over. It is a simple sign you are making money. Don't get me wrong, I would expect my financial team and especially the lawyer and CPA to minimize my tax obligation. I would be more excited that I had the ability to pay than not to pay or never had the opportunity to pay. The 9.3% is pretty nasty, but last time I looked Montana won the prize for top state tax rates at 11%. Again, I would expect my financial team and especially the lawyer and CPA to minimize my tax obligation. I honestly can't say I would stay in California for the next 30 plus years if I won the lottery. Taking the federal tax hit at one time, not worrying about double taxation of annuity winnings, having the ability to move freely (no need to send change of address forms and bank numbers to lottery officials), selecting my investment and types of returns given the economic environment or future economic environment, and not being locked into the lowest returning investment vehicle for 26+ years are more important to me. You can always have your financial team re-invest in annuities if that is your investment vehicle of choice.

                            Fifth, the tax rates in the US and in California will most likely not stay at these low rates for 26 plus years. Can you point to any point in American history when tax rates remained stable for 26 to 30 years. Someone in the US has to pay for the war on terror.  Someone in California has to pay for the financial crisis in California that was fixed by the state issuing more bonds and engaging in additional borrowing. 

                            Sixth, with the right financial team the whole planet is your investment play background.

                            The implied pre tax return of government bonds should be approximately 4.9% and the post tax return of government bonds should be about 3.2%. A financial advisor should be able to surpass those return rates. China is growing at +9%. Many non US stock markets easily give returns above 10%. While the US real estate market is cooling, you could easily make 25%, 50%,100%, or 200% gain on your investment last year by flipping real estate.

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                              Knoxville
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                              Posted: October 2, 2006, 2:11 pm - IP Logged

                              Annuities are great if you win while still realitively young.  But anyone over 55 may prefer the lump sum.  I am 34 and would want to get the most out of the money and my understanding is that the deferred tax savings on the annuity is like taking the lump sum at a guaranteed return of 8% interest, not to mention you can reinvest as the money comes in.  I also agree that it will help keep your money safe from moochers, because it is a built in excuse "i don't have access to most of the money".