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Where Does the Money Go?

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

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GoldenWhun's avatar - Lottery-043.jpg
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Posted: August 18, 2009, 6:39 pm - IP Logged

Ok say you win a 170 Million dollar Jackpot and decide to take the Lump sum. The Lotto gives you 105 Million BEFORE  Federal and State taxes are taken. Where does the other 65 million go to?

    Coin Toss's avatar - shape barbed.jpg
    Zeta Reticuli Star System
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    Posted: August 18, 2009, 6:58 pm - IP Logged

    Ok say you win a 170 Million dollar Jackpot and decide to take the Lump sum. The Lotto gives you 105 Million BEFORE  Federal and State taxes are taken. Where does the other 65 million go to?

    If you mean the $170 millions was the advertised jackpot and the $105 is the cash option, the other 65 million never existed.

    That's one of the things I learned here at LP, there's a thread about this somewhere.

    PB and MM are both pumped up right now, but the advertised jackpot amounts do not exist, the cash is not on hand. The advertised amount is what the winner would get over the course of an annuity.

    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.


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      Posted: August 18, 2009, 7:40 pm - IP Logged

      If you mean the $170 millions was the advertised jackpot and the $105 is the cash option, the other 65 million never existed.

      That's one of the things I learned here at LP, there's a thread about this somewhere.

      PB and MM are both pumped up right now, but the advertised jackpot amounts do not exist, the cash is not on hand. The advertised amount is what the winner would get over the course of an annuity.

      I found this out recently. I read the cash value is in a trust fund of some sort, example PB starts at $20M, only 10M is placed in the fund. I also read most of the monies accumulated is interest, PB puts little, if any more into the fund, which I dont believe. What you get is the cash value of whatever is in the fund. If you take the yearly payments you get the interest the money earns.

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        DFW, Texas
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        Posted: August 18, 2009, 11:20 pm - IP Logged

        This description may not be strictly correct in all the technicalities, but it can give a general idea of how this works.

        The cash value is the amount of money in the prize pool.  For simplicity, let's assume one person wins the jackpot.  If he selects the cash value option, he receives the cash value amount, which is money already held by the lottery commission.

        If the winner selects the annuitized payment option, he receives the first annual payment, and the rest (of the cash value) is deposited in an annuity.  That annuity pays the winner for the appropriate number of years.  The money left in the annuity collects interest, which is why the total payments equal more than the amount deposited.  The total of those payments is what makes the annuitized value of the jackpot, which is the value advertised.

        Mega Millions annuities pay an equal amount every year, for 25 years.  There are 26 payments; one is immediate, and the last one is 25 years later.

        You may notice that Powerball cash values are lower, relative to the annuitized value, than those of Mega Millions.  Partly, this is because Powerball annuities are paid out over 29 years (in 30 payments).  This gives the deposited amount in the annuity more time to grow.  Also, Powerball annuities are structured differently.  The annual payment increases by 4% each year.  As a result, the last payment is about three times the amount of the first payment, made 29 years earlier.  As another result, the earlier withdrawals from the annuity are smaller than they would be if all payments were equal.  This leaves more money in the annuity longer, so interest compounds faster.  This benefits the game, because they get to advertise higher jackpots than the equal-payment type of annuity would support.  It also benefits the winner who selects that option, because his annual income increases each year, to keep up with inflation, and because it increases his total winnings.

        I don't know if it does any harm to the winner who selects the cash value payment option.  The amount of the cash value is related to ticket sales.  I wouldn't think that would change whether the annuity has equal or graduated payments, unless the percentage of ticket sales set aside for the cash value is altered.  There may be a perception that the Powerball jackpot loses more value if you select the cash option, but I think it's more accurate to say that what you don't gain in the annuity is of higher value, relative to an equivalent Mega Millions jackpot.  In other words, the Powerball graduated annuity is a better investment, an investment you don't make if you take the cash value payment option.

        I hope this description has been helpful.

          BobP's avatar - bobp avatar.png
          Dump Water Florida
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          Posted: August 19, 2009, 3:00 am - IP Logged

          Even though the annuity earns interest, the whole thing is structured to close/end with zero on the final payment.

          I wonder what the annuity is invested in and whether the current low rate of return is having an effect on the advertised lottery prize.  After all an annuity based on 2% (current CD rate) should be less than one based on 5%. 

          BobP

            joshuacloak's avatar - Money Swim-uncle-scrooge-mcduck-35997717-677-518.jpg

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            Posted: August 19, 2009, 3:28 am - IP Logged

            in short like these nice people before me said

            they flat out lie to you, their is no pb 250m jackpot, its all in their heads!

            their is thro $124,800,000 jackpot , they just do magic with numbers and double the amount to get you to buy a ticket

             

            hell by the lotto ad marketing team logic

            i can turn a 124m jackpot in to a 1,000m jackpot,  and sell it as such

            just give me like 500 years to do it, and i be like in 500 years, you have 1000m :D

            LOL

             

            pb 30 years is way to long, i don't even know why they cant just market the cash,

            i mean you can invest the money your self, geez

              RJOh's avatar - chipmunk
              mid-Ohio
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              Posted: August 19, 2009, 4:12 am - IP Logged

              When most lotteries first started, annuities were the only option.  It has just been in the last 10 years that most of them started offering the cash option but they continue to advertise the jackpots as they did before the change.

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

                time*treat's avatar - radar

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                Posted: August 21, 2009, 3:47 am - IP Logged

                "i don't even know why they cant just market the cash"

                Because one does not sell more roses by promoting the thorns.


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

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                  Kentucky
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                  Posted: August 21, 2009, 12:04 pm - IP Logged

                  When most lotteries first started, annuities were the only option.  It has just been in the last 10 years that most of them started offering the cash option but they continue to advertise the jackpots as they did before the change.

                  It took the Ohio Lottery about 4 years until they began offering a pick-3 game and another 4 years before there had a lotto game. They couldn't start off with a $1 million cash prize without the means to pay off so they had to stretch it out over 20 years. I'm not sure if it was an annuity or just the 5% interest, but it wasn't until the volume of play reached a certain level where they could offer cash payments.

                  At one time we had to check either "cash or no cash payment" on the play slips and it was printed on the ticket. When the added the Kicker we had to say "yes or no" to that too. I'll bet the clerks heard "give me 5 auto-lotto/kicker/cash" in their sleep.

                    GoldenWhun's avatar - Lottery-043.jpg
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                    Posted: August 21, 2009, 7:33 pm - IP Logged

                    I understand now, thanks for the answers.