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Jackpot

Topic closed. 7 replies. Last post 9 years ago by rubberbandman.

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Pfdjr1's avatar - Lottery-029.jpg
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Cambridge
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March 4, 2008
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Posted: March 4, 2008, 10:18 am - IP Logged

You win a 26 Million dollar jackpot in Massachusetts. The cash option is 16.1. How do they come up with the cash option amount, and how exactly is the amount you actually end up taking home calculated.

    rubberbandman's avatar - Spawn Classic.jpg
    mn
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    Posted: March 4, 2008, 10:46 am - IP Logged

    It's approximately half of the advertised jackpot. They do this because at the moment you claim your prize they technically do not have the money to give you. They set up a large fantisiced number in the advertised jackpot hoping that people will buy enough tickets to come somewhat close to what they say it is. What they give you if you win is their reserves which is approx. 15 mil. and some of the profit of the sold lottery tickets.

    I know that this next part isn't what you asked but i will like to state it since they are both the options.

     Annutity is approx. the whole jackpot because over time they will come up with the entire jackpot to give you, but for some reason people choose cash option intead, we will never know why; you would think that people want more money but that really isn't my problem, so ill leave it alone.

      Pfdjr1's avatar - Lottery-029.jpg
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      Posted: March 4, 2008, 11:04 am - IP Logged

      Well I think most people want the all the money in hand ASAP. Say you win this 26 MIL dollar drawing. Over twenty six years your going to get less than a million dollars per year. As opposed to a 6-7 million dollar cash option. 700-800 Thou a year is obviously alot of money, but you can do more with 6 million dollars in your bank account. Also, no matter what you win, and no matter how you choose to get paid, its all gravy. Even with a 12 Mil Jackpot, your cash option is approximately 4-5 Mil, I would definately take that.

      Hopefully someday I'll be in this predicament.

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        Posted: March 4, 2008, 11:13 am - IP Logged

        I think the question is not so much, how they come up with the cash option, but how they get the advertised jackpot amount.

        The cash part is easy, that is how much money they have collected from ticket sales minus their cut. The jackpot is the total amount you get after they put that money in treasuries etc and then give you a smaller payment every year. After 30 years they pretty much double the total payment.

        The annuity performance is something you cannot duplicate yourself if you took the cash option, simply because of the tax you would pay in the first year. Having said that you would be able to speculate using other strategies that potentially could provide higher rewards. Or as has happened with some winners, lose the lot.

        The choice between the two is not as easy as first appears. Like Pfdjr1, I’d take the cash , but a smaller group of less disciplined people might be better off with the annuity.

         
        Just my 2 cents.

          Captain Lotto's avatar - CaptLotto
          Jefferson City, MO
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          Posted: March 4, 2008, 11:15 am - IP Logged

          The advertised annuity is what they would return should the Lottery invest the money and pay it out over the time period.  The cash option is what is on hand at the time of the drawing. 

          People like to think that they can do better investing it themselves, and that's possible.  But what the Lottery does is guaranteed.  They take the cash amount and invest it in Treasury Bonds.  That's how they determine what the jackpot will be - what the return is on the purchased bonds.  You might have noticed that the cash options have been creeping up of late because interest rates are so low. 

          Captain Lotto

          "Every day is a good day!"

            rubberbandman's avatar - Spawn Classic.jpg
            mn
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            Posted: March 4, 2008, 12:46 pm - IP Logged

            The choice between the two is not as easy as first appears. Like Pfdjr1, I’d take the cash , but a smaller group of less disciplined people might be better off with the annuity.

            its not really a matter of discipine, it's a matter of common sense. Even if you won the reserve (15 mill) and chose annuity, you would get at least 300,000 and with that you could create investments that would benefit your future, yeah you can do the same with cash option but it's still illogical to take it because of it's size.

              ThatScaryChick's avatar - x1MqPuM
              Idaho
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              Posted: March 4, 2008, 1:05 pm - IP Logged

              Actually for some of us, the answer is as easy as it appears. There is no doubt that I would take the cash. None. I have always felt that way.

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

                rubberbandman's avatar - Spawn Classic.jpg
                mn
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                Posted: March 4, 2008, 1:21 pm - IP Logged

                to each their own