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Cash Option vs Annuity

Topic closed. 25 replies. Last post 7 years ago by dk1421.

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Posted: August 20, 2009, 12:29 pm - IP Logged

Well actually out of the current $207 mill mega jackpot the cash option would be $130 mill. Taxes are going to consume at least half (if not more). So your left with $65 Mill at best after taxes.

If you do invest that into something with a higher return then you would have to consider effects of capital gains, etc. Just watch out for the Bernie Madoffs in the world.

    DC81's avatar - batman39
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    Posted: August 20, 2009, 3:58 pm - IP Logged

    Well actually out of the current $207 mill mega jackpot the cash option would be $130 mill. Taxes are going to consume at least half (if not more). So your left with $65 Mill at best after taxes.

    If you do invest that into something with a higher return then you would have to consider effects of capital gains, etc. Just watch out for the Bernie Madoffs in the world.

    Yeah this topic certainly does come up a lot.

    Taxes will not take that much of it in most states and even if it did, within 25 years (with the MM annuity) you could easily still exceed the annuity with extremely safe, low risk and possibly tax-free investments, if not tax free then at the very least incur less tax than you will with the annuity payments which would be taxed in the highest bracket which will soon rise.  Oh and it's a good idea to hire a tax attorney, you could actually end up with a refund depending on deductions.

    Also the annuity, like what's already been said, isn't exactly safe either. There are just as many, if not more lottery winners who took the annuity and have still gone broke than those who took the cash and ran.

    You can't predict random.

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      Kentucky
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      Posted: August 20, 2009, 7:00 pm - IP Logged

      Yeah this topic certainly does come up a lot.

      Taxes will not take that much of it in most states and even if it did, within 25 years (with the MM annuity) you could easily still exceed the annuity with extremely safe, low risk and possibly tax-free investments, if not tax free then at the very least incur less tax than you will with the annuity payments which would be taxed in the highest bracket which will soon rise.  Oh and it's a good idea to hire a tax attorney, you could actually end up with a refund depending on deductions.

      Also the annuity, like what's already been said, isn't exactly safe either. There are just as many, if not more lottery winners who took the annuity and have still gone broke than those who took the cash and ran.

      I Agree!

      And I don't see taxes in the higher brackets going down in the future but it's still "pay me now or pay me later". We know what the percentages are now and who knows what the tax will be in the future.

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        Posted: August 22, 2009, 8:31 pm - IP Logged

        Well either way, I will let everyone know what i choose to do with the $252 mill I win on tuesday. Sun Smiley

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          Milwaukee, WI
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          Posted: August 26, 2009, 7:10 am - IP Logged

          I WILL take the $147,000,000 cash money after taxes that I win on friday to a tax free state.  

          Then I only have to pay Obama.

          MarkP

            dk1421's avatar - Lottery-024.jpg
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            Posted: August 26, 2009, 10:38 am - IP Logged

            I have flip-flopped on this topic a few times. Originally, I was all for the Cash Option. Heck, I could invest it and possibly make more or the same - and I'm in charge.

            Then I thought about it. Personally, my spouse and I could use some discipline when it comes to money. Mostly our debt is from old medical bills, an occasional vacation, and that stupid hdtv that HAD to be bought when our tv died. So then I thought an annuity would be good for helping us budget. And yes, we would get a financial person and tax person too.

            But now...our NC governor took the lottery money for schools and used it for the state instead. If she can do that legally, what's to say she "borrows" the money that's supposed to go to my annuity every year to help pay other things off. Yes, it's illegal, but really - how many people are going to fight for the rights of a winning lottery player? There will be no uproar over it. Maybe just lawyers banging on the door to get their share of it from the lawsuit.

            So now I'm back to Cash Option - with a diverse portfolio. After all, if Madoff can fool a lot of smart people, who's to say I wouldn't fall for it too?

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              Milwaukee, WI
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              Posted: August 26, 2009, 11:05 am - IP Logged

              The economy is on the rise. There are many better opportunities out there, much better than the 3% that the lottery offers...

              But then you have to work at it... Who wants to work it it when you're rich... :-)

              Hey a Billion $$$ doesn't buy what it used to....

              MarkP

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                Posted: August 27, 2009, 1:59 am - IP Logged

                The economy is on the rise. There are many better opportunities out there, much better than the 3% that the lottery offers...

                But then you have to work at it... Who wants to work it it when you're rich... :-)

                Hey a Billion $$$ doesn't buy what it used to....

                MarkP

                The only "work" I'd have to do after I get my cash option, is just watching my portfolio and talking to my financial advisor. You can certainly get 3% yourself by simply doing bond-funds. You can even go tax free with good muni-bonds. I would never just let any advisor/firm handle my money while I'm not watching. I want some say in how it's spent if something is not right because hey....it could all be gone tomorrow.

                 

                It's because people slept at the wheel that folks losts 41% of their wealth in the market. Though me personally, I got most of it back by simply buying more and not moving my money out of stocks. I think I'm .01 percent down, compared to 41% at the end of '08.

                 

                No I'm sorry...but I have never seen 7 figures in my life time....I couldn't fathom 8 or 9 or 10! I would need professional help. A CPA, A financial planner and a tax attorney. Those three would be my new best friends.

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                  Milwaukee, WI
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                  Posted: August 27, 2009, 7:16 am - IP Logged

                  > but I have never seen 7 figures in my life time....I couldn't fathom 8 or 9 or 10!

                  Same thing only more zeros. Keep it simple. IMO.

                  >I would need professional help. A CPA,

                  I would have some sort of accountant here all the time dedicated all the time.  I would probably need it.

                  >A financial planner and a tax attorney. 

                  Now here is where things need  to be kept as simple as possible. When they throw out things that I don't understand, or something to complicated, it would ALL stop.

                  Earn my money, pay my taxes.

                  Split it up into about 3 brokerage accounts and trade trade.  Move west were the market closes earlier.

                  MarkP

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                    Posted: August 27, 2009, 12:23 pm - IP Logged

                    Market opens earlier too. You want to be up at 6:30am for opening bell? I mean no question you'd have to, but still.

                     

                    I dunno if I'd want to trade myself (because that constitutes work...lol), but I would definitely want it broker/trader handled. BUT I just want to know at all times what I have and be notified when a buy is done/sell needs to get done. Or figure some kind of way to be involved but still leave it to the professionals.

                     

                    You are right about keeping it simple. Buying a $30 million dollar home would be easy for me not to do, regardless how much I won. Think about it, should all that money go away, you still have to pay TAXES on your $30 mil home, or else it is taken from you. I would much rather own a home that was at most 3-5 million, and have a seperate account for my tax bill one. MC Hammer taught me that lesson a lonnnnnng time ago. LOL

                    Even between the two of us, we could never really know how to handle this without some professional help because neither of are (currently) rich. Hopefully, one of us gets there. :D

                      dk1421's avatar - Lottery-024.jpg
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                      Posted: August 27, 2009, 4:06 pm - IP Logged

                      Market opens earlier too. You want to be up at 6:30am for opening bell? I mean no question you'd have to, but still.

                       

                      I dunno if I'd want to trade myself (because that constitutes work...lol), but I would definitely want it broker/trader handled. BUT I just want to know at all times what I have and be notified when a buy is done/sell needs to get done. Or figure some kind of way to be involved but still leave it to the professionals.

                       

                      You are right about keeping it simple. Buying a $30 million dollar home would be easy for me not to do, regardless how much I won. Think about it, should all that money go away, you still have to pay TAXES on your $30 mil home, or else it is taken from you. I would much rather own a home that was at most 3-5 million, and have a seperate account for my tax bill one. MC Hammer taught me that lesson a lonnnnnng time ago. LOL

                      Even between the two of us, we could never really know how to handle this without some professional help because neither of are (currently) rich. Hopefully, one of us gets there. :D

                      InItAndWonIt: I agree with you. Personally, I don't think I'd feel comfortable in a $30 million home. And that is where Hollywood is having problems - they own the homes but can't pay the taxes since they lost their money to Madoff.

                      I do remember reading a story about a rich, elderly lady who worked with a broker who lost all her money. What she didn't know is that he was able to lose her home, cars, everything! She was so embarrassed by not knowing this, that she refused to tell her neighbors or kids that she was now homeless.

                      So fully understand what you are getting into!