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Lump Sum or payments?

Topic closed. 67 replies. Last post 9 years ago by mylollipop.

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NY
United States
Member #23835
October 16, 2005
3474 Posts
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Posted: February 13, 2008, 2:13 am - IP Logged

Ky Floyd

 

You're still paying for the house three times.  

 

Total payments of $540,000 on a house you buy for how much?

Don't forget there was a time when interest on car payments, loans, and credit cards was deductible, and there have already been attmpts at making mortgage interest non-deductible. 

Unlikely to happen, but what if it did? 

How would I be paying for the house 3 times?

Whether you pay cash or take a mortgage, the actual cost of the house is the difference between what you have after the house is paid for and what you could have had if you hadn't bought the house.  If you have 250k in an investment account and you take it out to pay cash,  in 30 years you'll have the house, and nothing at all in that account. That makes the total cost of the house a hair over $700K. If you keep the house for another 10 years, that account with nothing in it will grow to the same nothing it is after 30 years, while the $700k would grow to $987k.  The house you paid cash for, in order to save 290k in interesthas now cost you 4 times the purchase price.

If the rules for deducting mortgage interest change you'll always have the option of paying  off the remaining balance in cash if you think it's advantageous to do so.  If mortgage rates go down you'll have the option of refinancing  at abetter rate, and if interest rates go up the money you have invested will earn more interest. Of course if you paid cash you could always take a mortgage at a later date, but you'll have to do it at the rtaes that are offered. If the rates are low you can expect a low rate if you invest the money you borrow. If investment rates are high you can be sure that mortgage rates will also be high.It makes sense to consider what the future might bring, but  your current plans should be based on current reality.

    JackpotWanna's avatar - squiz

    United States
    Member #4121
    March 23, 2004
    817 Posts
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    Posted: February 13, 2008, 9:10 am - IP Logged

    Good Luck All! 

     

     

     

    Annuity

     

     

     

     

     

    Cash

    Mega Millions Jackpot for Fri, Feb 15, 2008

    $179,000,000

    $110,000,000

     
    Gross Prize26 annual payments of $6,884,615
    Lump-sum cash: $110,000,000
    - 25% Federal Tax- $1,721,154
    - $27,500,000
    Subtotal
    $5,163,461

    $82,500,000
      ThatScaryChick's avatar - x1MqPuM
      Idaho
      United States
      Member #56506
      November 21, 2007
      6537 Posts
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      Posted: February 13, 2008, 1:35 pm - IP Logged

      To each his own...

      Personally I think parrt of the lure of hitting a jackpot is to have nothing but free time! 

      I love this answer! I will invest and save of course, but I want to have nothing but free time to do the things I love. I don't want to spend my life doing investments and working. Love

      "No one remembers the person who almost climbed the mountain, only the person who eventually gets to the top."

        ThatScaryChick's avatar - x1MqPuM
        Idaho
        United States
        Member #56506
        November 21, 2007
        6537 Posts
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        Posted: February 13, 2008, 1:38 pm - IP Logged

        Good Luck All! 

         

         

         

        Annuity

         

         

         

         

         

        Cash

        Mega Millions Jackpot for Fri, Feb 15, 2008

        $179,000,000

        $110,000,000

         
        Gross Prize26 annual payments of $6,884,615
        Lump-sum cash: $110,000,000
        - 25% Federal Tax- $1,721,154
        - $27,500,000
        Subtotal
        $5,163,461

        $82,500,000

        Well I won't be playing since I'm not in a Mega Millions state, but good luck to those who are! I would love to win that jackpot, but then I would love to win a $12 or $15 million jackpot as well. LOL

        "No one remembers the person who almost climbed the mountain, only the person who eventually gets to the top."

          BaristaExpress's avatar - BaristaExpressMX zpsfb0d8b5d.png
          Magnolia, Delaware
          United States
          Member #18795
          July 20, 2005
          789 Posts
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          Posted: February 13, 2008, 1:51 pm - IP Logged

          For me, I would take payments. 

           

          Only way I would take lump sum  is if it was less then 20 million.

           

          I'm fairly young (late 20's) and payments I think would be best for me. It would prevent me to somehow, blow all that money. I dont think I could trust myself having 100m+ thrown my way. I see it as a type of protection for myself. Receiving a yearly salary from the lottery of 5mill+ would be niceee...

           

          If I was a lot older, (40+) I would definitely take lump sum. 

           

          how would you guys take it?

          It makes no sense to take payments at any age! Take the lump sum and get the proper financial advice to maximize your return on your investments and live a comfortable life from then on. The lump sum pays less taxes over time than the annuity! Yes you pay more every year with an annuity! I'd rather pay 15% in capitol gains tax, than the whopping 25% right off the top every year and then still owe another 10% to the IRS for a grand total of 35% in taxes paid each year that I'd receive the annuity payment! Now which would you rather pay 15% capitol gains tax or 35% every year you receive your annuity check?

          I hope it would be a no brainier for most here on LP. But who knows, Anything is possible!

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

            Avatar
            Los Angeles CA
            United States
            Member #55727
            October 16, 2007
            195 Posts
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            Posted: February 13, 2008, 1:58 pm - IP Logged

            Take the lump sum and get your own annunity built around your life style if your that worried that you will "blow" it all.

            EXMECHANIC

            "My dollar buys hope, what does yours do?" 

              MissNYC's avatar - diva
              Westchester, New York
              United States
              Member #49345
              January 27, 2007
              168 Posts
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              Posted: February 13, 2008, 4:03 pm - IP Logged

              Good Luck All! 

               

               

               

              Annuity

               

               

               

               

               

              Cash

              Mega Millions Jackpot for Fri, Feb 15, 2008

              $179,000,000

              $110,000,000

               
              Gross Prize26 annual payments of $6,884,615
              Lump-sum cash: $110,000,000
              - 25% Federal Tax- $1,721,154
              - $27,500,000
              Subtotal
              $5,163,461

              $82,500,000

              It's about time this thing starts to grow! Anyone else notice that both the Powerball and Megamillions rarely see the large jackpots the saw about 5 years back? Why is that? It seems like they rarely break 200 million, when at one time they seemed to continuously roll to 300 mil +. Don't get me wrong, I'll be perfectly happy with a 200 mil win, it just is so much more exciting when it grows!

              "If you just keep believing, that dream that you wish will come true"

              Bed

               

                sfilippo's avatar - skull
                Oklahoma
                United States
                Member #33770
                February 24, 2006
                3146 Posts
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                Posted: February 15, 2008, 6:40 pm - IP Logged

                Powerball Jackpots can be taken by annuity and then cashed out later.

                It's a good tactic to use. It let's everyone around you know that you are on a fixed income and once they get used to that idea, you can cash out your annuity and invest it for better gains and do it descretely too.

                Smiley Steve


                  United States
                  Member #17555
                  June 22, 2005
                  5582 Posts
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                  Posted: February 15, 2008, 6:53 pm - IP Logged

                  Powerball Jackpots can be taken by annuity and then cashed out later.

                  It's a good tactic to use. It let's everyone around you know that you are on a fixed income and once they get used to that idea, you can cash out your annuity and invest it for better gains and do it descretely too.

                  That's hilarious. Are you telling me that people wouldn't come out of the woodwork asking for money because they knew that you were on a fixed income of almost 7 million a year, for 26 years?

                  Green laugh

                    LuckyLilly's avatar - savy chick.png

                    United States
                    Member #50124
                    February 26, 2007
                    601 Posts
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                    Posted: February 15, 2008, 7:02 pm - IP Logged

                    That's hilarious. Are you telling me that people wouldn't come out of the woodwork asking for money because they knew that you were on a fixed income of almost 7 million a year, for 26 years?

                    Green laugh

                    That's an excellent line tho!  I can't count the number of times I've heard people say they can't afford something because they're "on a fixed income."  Can you imagine the first time you told someone that as a lottery winner?  "You want me to buy you a car?  Oh I'm sorry, didn't you know?  I'm on a fixed income."  Bet it'd stop them in their tracks.  Well, at least for a minute.


                      United States
                      Member #17555
                      June 22, 2005
                      5582 Posts
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                      Posted: February 15, 2008, 7:13 pm - IP Logged

                      That's an excellent line tho!  I can't count the number of times I've heard people say they can't afford something because they're "on a fixed income."  Can you imagine the first time you told someone that as a lottery winner?  "You want me to buy you a car?  Oh I'm sorry, didn't you know?  I'm on a fixed income."  Bet it'd stop them in their tracks.  Well, at least for a minute.

                      Well that makes sense if you could be anonymous. They wouldn't even think of asking you for money if they didn't know you won, but everybody will know...lol

                      What? you want 10 grand for a new car? Are you kidding me? I only make 7 million a year....lol

                        bigato1010's avatar - army

                        United States
                        Member #33588
                        February 22, 2006
                        2068 Posts
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                        Posted: February 17, 2008, 7:51 pm - IP Logged

                        I would not know which way to go , will consult with my financial advisor first.

                          Avatar
                          Kentucky
                          United States
                          Member #32652
                          February 14, 2006
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                          Posted: February 17, 2008, 9:21 pm - IP Logged

                          I would not know which way to go , will consult with my financial advisor first.

                          Since the cash option would give you more money to invest with them, I'm pretty sure a financial advisor would suggest taking the lump sum.

                            bigato1010's avatar - army

                            United States
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                            February 22, 2006
                            2068 Posts
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                            Posted: February 18, 2008, 12:09 am - IP Logged

                            Since the cash option would give you more money to invest with them, I'm pretty sure a financial advisor would suggest taking the lump sum.

                            Hey stack47 i woud like to thank for taking time out to explain the questions i had on vtract numbers and how they work. Thank you for people like you .. few in a millions.

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                              San Diego, CA
                              United States
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                              February 12, 2008
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                              Posted: February 19, 2008, 6:28 pm - IP Logged

                              It seems like a no brainer to take the lump sum.  Wouldn't it be possible to get a higher rate of return by investing the lump sum than the effective rate with taking the annual payments without significnt risk ?