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Paying a jackpot over 26 years is too long of a time frame

Topic closed. 42 replies. Last post 9 years ago by RJOh.

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San Diego, CA
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February 12, 2008
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Posted: March 4, 2008, 4:27 pm - IP Logged

I am starting to belive that the time period of 26 years for the major lotteries to pay jackpots is too long of a time frame.  I can tell a friend that I am going to give him a $1 million dollars.  Then tell him I will pay him over 1 million years.  That million dollars then becomes essentially worthless.  I know that is extreme comparing it to the time frame that the lotteries give winnings, but 26 years seems too long.

The jackpot amounts are somewhat misleading.

    RJOh's avatar - chipmunk
    mid-Ohio
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    March 24, 2001
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    Posted: March 4, 2008, 5:01 pm - IP Logged

    You're not the only one to think that way.  Most winners opt to take the cash value and invest it on their own terms.  If you ever win a similar jackpot, you'll have the same option.

     * you don't need to buy more tickets, just buy a winning ticket * 
       
                 Evil Looking       

      justxploring's avatar - villiarna
      Wandering Aimlessly
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      Posted: March 4, 2008, 5:25 pm - IP Logged

      I agree, but it's better than the graduated 30 yr payout offered by Powerball.  When the Florida Lotto had a 20 year annuity, at least the payout was 5% ($50K a year for every million) but then it changed to 30 years which means you're getting even a lower rate of interest.   Our 20 year game (MegaMoney) has a much higher cash payout, however - often as high was 70%.  The last person who won $2M got a lump sum of $1.4M so taking the annual payments would be foolish IMO. 

      I think it depends on your lifestyle, the way you spend money and how good you are in managing money.  When you take the lump sum you are immediately giving up 1/2 of the total and it's entirely possible to earn much more in personal investments. However, if I wanted to disappear into the Amazon for a year at a time and never worry about my accounts or investments, it would nice to know I am going to get a giant check every year until I die. I might want to do some space or time travel, as long as I make it back to planet Earth once a year. Even if inflation skyrockets and the dollar drops (it's already toilet paper) getting over $1 million a year in 20 years is still going to be a ton of moolah.  Let's say in 1988 someone made $30,000 and now makes $70,000. At the same pay increase, he would make $163,000.  When someone says "what about inflation?" I don't see why it matters when we are talking about getting such a huge sum of money, unless someone desires to make even more, which wouldn't matter much to me at that point.  Millionaires want to become multi-millionaires and they want to become billionaires.   

        Coin Toss's avatar - shape barbed.jpg
        Zeta Reticuli Star System
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        Posted: March 4, 2008, 5:49 pm - IP Logged

        I am starting to belive that the time period of 26 years for the major lotteries to pay jackpots is too long of a time frame.  I can tell a friend that I am going to give him a $1 million dollars.  Then tell him I will pay him over 1 million years.  That million dollars then becomes essentially worthless.  I know that is extreme comparing it to the time frame that the lotteries give winnings, but 26 years seems too long.

        The jackpot amounts are somewhat misleading.

        JWBlue

        Among the many things you can learn here at LP one of them is that when a lottery advertises a jackpot the cash option is usually around 50% of the stated prize or less, and the advertised amount does not exist.  

        Right now the Powerbal site says

        Curent estimated jackpot is $173 million

        $85.7 million cash value.

        If somone hits hit and opts fopr cash, and it's a solo hit, they'll get the $85.7 million, less tax.

        The cash option is half the stated jackpot because the $173 milion doesn't exist.

        Those who run the lotteries love it when players look for consistency in something that's designed not to have any.

        Lep

        There is one and only one 'proven' system, and that is to book the action. No matter the game, let the players pick their own losers.

          Badger's avatar - adu50016 NorthAmericanBadger.jpg
          Wisconsin
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          Posted: March 4, 2008, 6:10 pm - IP Logged

          JWBlue

          Among the many things you can learn here at LP one of them is that when a lottery advertises a jackpot the cash option is usually around 50% of the stated prize or less, and the advertised amount does not exist.  

          Right now the Powerbal site says

          Curent estimated jackpot is $173 million

          $85.7 million cash value.

          If somone hits hit and opts fopr cash, and it's a solo hit, they'll get the $85.7 million, less tax.

          The cash option is half the stated jackpot because the $173 milion doesn't exist.

          Coin Toss, you always seem to be knowledgable about this sort of thing.  So here's a question....

          I usually don't think about it, because I have a real obstacle in getting my mind around an actual  figure like $85.7 M in cash.  I gues its because I can't imagine that much real money in one place with my name on it.

          But say you win, and you take that cash option.  They give you a check for it.  Now, what do you do with it until you can figure out how to  invest it?  You can't put it in the bank. The banks (FDIC) only insure deposits up to 100K dollars for you.  The rest is at risk sitting there. You'd have to deposit it in 850 plus banks to be assured that the FDIC would cover it if the banks crashed (which historically has happened, and the way the world is going who knows) Weirder things have happened.

          What would you do with it until you could invest it. And where would you invest it?

          ============

          How can you tell if a politician is lying?

          Answer: His lips are moving.

            justxploring's avatar - villiarna
            Wandering Aimlessly
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            Posted: March 4, 2008, 6:12 pm - IP Logged

            Coin Toss, this is one case where I (sort of) disagree with you. Why not? It's an internet board. LOL Anyway, it's true that the advertised dollar amount is very misleading if someone is unaware that the numbers mean "over a period of XX years"  Remember the poor guy who won a 20 year payout on a scratch-off and had cancer?  But the reason he wasn't able to collect is because he was never misled into believing he'd be receiving a million dollars.  The games always state the rules.  Just because many people don't bother to read them when they play doesn't mean the $173 million doesn't exist.  They always say the total is (whatever it is) over a 20, 26 or 30 year period.  Not too long ago there wasn't even a cash option in many states and everyone knew that $1,000,000 meant $50,000 a year for 20 years. 

            Edit:  I just saw Badger's comment.  That $100,000 limit is only for 1 individual account.  Joint accounts are up to $200,000 and for every sibling (brother, sister) and every child (included adopted children) you can have an account in trust for up to $100,000.  It's only to meet FDIC regulations, but it's called a revocable trust, paid on death  (meaning it's still 100% your money until you die)  You can also invest in lots of other things, like short-term bonds, but since you asked Coin Toss, I'll let him answer you.  As time*treat writes all the time, you can buy gold & silver.  Just since Aug you would have made over 40%.  (with some risk)  However, if I won $200 million, I wouldn't listen to my advice or anyone else here.  I'd talk to an attorney.

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              San Diego, CA
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              Posted: March 4, 2008, 6:29 pm - IP Logged

              My point is that it is significantly less than advertised.  Getting only close to half as much up front is toeing the line of false advertising.

               

              I remember a few years ago, someone won about $25 million in a lottery.  When he found out the cash value up front was about half as much, he sued the lottery commission for false advertising, asking for the full amount up front.  The judge ruled in favor of the lottery commision and told the player that he could have the money he paid for th ticket back.  I am guessing he settled for the cash value up front.

                justxploring's avatar - villiarna
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                Posted: March 4, 2008, 6:39 pm - IP Logged

                Well, I won't dwell on it, since last time it got me into some kind of weird debate with someone who went besserk, but it's only misleading if people don't read the rules which are printed on the cards and lottery web site which states a cash option. 

                I agree that the advertising makes the jackpot seem very inflated, but it's like the ad in the newspaper that says "chairs from $99."  The store might have only 1 chair that is $99 and every other chair is $599.  As long as they have the $99 chair, it's not false advertising.  If you look at a model home it is very upgraded so that you like the house and say "wow" when you walk in.  But if you pay $200,000 for that model, you won't get the ceramic tile floor, the granite countertops and the fancy window treatments or the swimming pool. That's all stated in the contract before you purchase. It's called marketing.  I'm really not arguing here, since I totally agree that they are trying to excite people with higher jackpot amounts.  However, that is what most profit making businesses do to attract customers.

                  Guru101's avatar - rw6jhh
                  Indiana
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                  Posted: March 4, 2008, 9:06 pm - IP Logged

                  I don't think it's misleading. It's a jackpot game, therefore it should be assumed the advertised amount will be paid in annuity. Plus, at the end of the day, it's in the rules of the game, which the person can read.

                  Gonna win.Big Smile

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                    San Diego, CA
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                    Posted: March 4, 2008, 10:31 pm - IP Logged

                    I don't think it's misleading. It's a jackpot game, therefore it should be assumed the advertised amount will be paid in annuity. Plus, at the end of the day, it's in the rules of the game, which the person can read.

                    When it comes to the law, nothing should be assumed.  It can be still be false advertising even if it is in the rules of the game.

                    As I mentioned above, someone sued when he found out his jackpot winnings were annual payments.  He had a case.

                      tiggs95's avatar - Lottery-036.jpg

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                      Posted: March 4, 2008, 10:47 pm - IP Logged

                      If I was like in my 20's or 30's I'd take payments over 26 years and lock it in so I could not get the rest in a buy out..At my age I'd take a lump sum payment..When your young you can be more foolish then when your older IMO..

                        Coin Toss's avatar - shape barbed.jpg
                        Zeta Reticuli Star System
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                        Posted: March 4, 2008, 11:35 pm - IP Logged

                        When it comes to the law, nothing should be assumed.  It can be still be false advertising even if it is in the rules of the game.

                        As I mentioned above, someone sued when he found out his jackpot winnings were annual payments.  He had a case.

                        Since the lottries adveretise a specific cash value, or "Cash value approximatley 50%", it isn't false advertising.

                        Badger

                        Good question, but I don't think people with multi-millions deal only with banks (and banks have a ceiling on much cash they keep on hand, too much and all the regulations change, and the bank examiners set up cots!). Like Justxploring said, you'd go to an attorney (hopefully one that wouldn't take off to Switzerland with your winnings!) and the attorney would probably steer you to an investment firm.

                        Those who run the lotteries love it when players look for consistency in something that's designed not to have any.

                        Lep

                        There is one and only one 'proven' system, and that is to book the action. No matter the game, let the players pick their own losers.

                          time*treat's avatar - radar

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                          Posted: March 5, 2008, 12:15 am - IP Logged

                          Coin Toss, you always seem to be knowledgable about this sort of thing.  So here's a question....

                          I usually don't think about it, because I have a real obstacle in getting my mind around an actual  figure like $85.7 M in cash.  I gues its because I can't imagine that much real money in one place with my name on it.

                          But say you win, and you take that cash option.  They give you a check for it.  Now, what do you do with it until you can figure out how to  invest it?  You can't put it in the bank. The banks (FDIC) only insure deposits up to 100K dollars for you.  The rest is at risk sitting there. You'd have to deposit it in 850 plus banks to be assured that the FDIC would cover it if the banks crashed (which historically has happened, and the way the world is going who knows) Weirder things have happened.

                          What would you do with it until you could invest it. And where would you invest it?

                          What you do with that kind of money, before you get to the investment stage, is park it in a special program the banks have called CDARS (pronounced "cedars"). What they do is in effect spread your money out into $100K blocks across many banks, but to you it looks and acts like one account. You aren't, in that case, required to physically go to every bank and open those accounts. more info.

                          The largest (in terms of the amounts you can put in) option is U.S. treasury notes & bonds. Treasury paper can be sold before maturity, so your money isn't really tied up for the 2 to 10 year lifetime of the note unless you want it to be.

                          In neo-conned Amerika, bank robs you.
                          Alcohol, Tobacco, and Firearms should be the name of a convenience store, not a govnoment agency.

                            Guru101's avatar - rw6jhh
                            Indiana
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                            Posted: March 5, 2008, 12:19 am - IP Logged

                            When it comes to the law, nothing should be assumed.  It can be still be false advertising even if it is in the rules of the game.

                            As I mentioned above, someone sued when he found out his jackpot winnings were annual payments.  He had a case.

                            He had a case? You do realize it doesn't matter what someone is sueing you for right? Anybody can sue anybody for anything. Whether or not it's foolish, worthy, or cut and dry will be determined by the judge. Why do you think the judge ruled in the lottery's favor? When you play a game, you read the rules. It's common sense. Granted, being this is the lottery, most people haven't bothered reading the rules. They're just looking for a way to get rich, but they don't have nothing to complain about when the lottery says there is an annuity option and cash option, regardless of whether or not the person read the rules.

                            Gonna win.Big Smile

                              sirbrad's avatar - Lottery-062.jpg
                              PA
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                              Posted: March 5, 2008, 12:21 am - IP Logged

                              yes the jackpot value is very misleading. But keep in mind the lottery does pay it, and are not the IRS. "We pay the actual amount listed" they told me a long time ago in an email. But of course they know it is not actual amount. and sadly most peopel think you get the advertised amount.

                              I am a lump sum guy, but if the jackpot is as high as it is now I would not have a problem taking annuity if I had to. I would never even spend the principle if I tried, and no worries about investing and taxes etc. But I prefer to live off of the huge lump sum's interest. But still the annuity would be more than enough. Almost $5 million a year is one heck of a paycheck.

                               

                               

                              Jackpot Analysis For Pennsylvania Powerball
                              Draw Date: Wednesday, March 05, 2008
                              Payment OptionsAnnuityCash
                              Jackpot Amount $173,000,000 $85,700,000 
                              Gross Prize 30 Annual Payments of  
                              $5,766,666 
                              Lump-Sum Cash 
                              $85,700,000 
                              25% Federal Tax -$1,441,666 -$21,425,000 
                              No State Tax on
                              Lottery Prizes 
                              No State Tax No State Tax 
                              Net Pay Yearly Net Pay: 
                              $4,325,000 
                              Total Pay After 30 Payments: 
                              $129,750,000 
                              Lump-Sum Net Payout: 
                              $64,275,000