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Why not choose the annuity?

Topic closed. 47 replies. Last post 2 years ago by Romancandle.

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Coin Toss's avatar - shape barbed.jpg
Zeta Reticuli Star System
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Posted: August 1, 2014, 7:39 pm - IP Logged

Now I see.  I didn't know the annual check drops after so many years.  That is really crazy!  Also, I didn't think about a change in taxes.

 

I still think it is terrible that you scratch 1 million and your take home is a little over 400,000.

As lottolaughs said, the same amount of money doesn't have the original spending power.

As for taxes that's in the U.S.

Other places such as Canada and England it's all yours, no taxes. Sweet huh?

That's been discussed on here a few times.

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.

    Romancandle's avatar - moon
    Upacreek
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    Posted: August 1, 2014, 8:17 pm - IP Logged

    If the annuity is such a terrible choice, then why does MM and PB even offer it?

    It is indexed towards inflation... and if taxes go to 50 to 60%... we got bigger problems as a whole.

    The annuity rates aren't that great though right now, so cash is king.

    -RC

      LottoMetro's avatar - Lottery-024.jpg
      Happyland
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      Posted: August 1, 2014, 8:50 pm - IP Logged

      If the annuity is such a terrible choice, then why does MM and PB even offer it?

      It is indexed towards inflation... and if taxes go to 50 to 60%... we got bigger problems as a whole.

      The annuity rates aren't that great though right now, so cash is king.

      If the annuity is such a terrible choice, then why does MM and PB even offer it?

      Maybe because it benefits the lottery? I heard from a site that shall go unnamed that somehow spreading the payments over time benefits the lottery more than the player. I know the payout is in reality the same though.

      I think the annuity rate would have to be high for me to take it. A 5% annual return on a starting balance of $25.55 million will be much higher than a 10% annual return on an average annuity payment of $2.3 million. You get to compound the balance faster and sooner

      If you plan to do no investing whatsoever or you find yourself unable to spend with control, than yeah annuity would be wise.

      If the chances of winning the jackpot are so slim, why play when the jackpot is so small? Your chances never change, but the potential payoff does.
      If a crystal ball showed you the future of the rest of your life, and in that future you will never win a jackpot, would you still play?

      2016: -48.28% (13 tickets) ||
      P&L % = Total Win($)/Total Wager($) - 1

        mikeintexas's avatar - tx avatar-1.gif
        Texas Panhandle
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        Posted: August 1, 2014, 9:16 pm - IP Logged

        Now I see.  I didn't know the annual check drops after so many years.  That is really crazy!  Also, I didn't think about a change in taxes.

         

        I still think it is terrible that you scratch 1 million and your take home is a little over 400,000.

        CT wasn't saying that, at least I don't think so.   I certainly don't want to put words in his mouth or misinterpret what he said, but I believe what he meant was that if taxes go up as high as they've been in the past ( they climbed all the way to 94% for the top bracket earnings at the end of WWII and decreased after that, but the rate was 50% as recently as 1982 - down from 70% the previous yr.)  then those last checks wouldn't buy very much. I think that's what was meant and I agree.

        I always opt for the cash value option and after the lotteries roll over, I check the new sum and multiply by .604 - which gives me the take-home sum after the 39.6% is taken out. (no state taxes in Texas)  (it may be more than that - someone in here mentioned a few percent more that's going to be added on for social programs, but I don't know about that)  Actually, you'd have to factor in your usual income and deductions, but it will give you a fairly accurate cash-in-hand figure even then.

        (unless you make millions a year anyway....Wink)

        You can check the annuity payouts in USA Mega:

        Mega Millions Jackpot Analysis

        Powerball Jackpot Analysis


        Then scroll down to your state and click the Annuity Payment Schedule link under the heading.  Lots of interesting financial information there.


        A people that elect corrupt politicians, impostors, thieves and traitors are not victims...but accomplices.
         - George Orwell

          mikeintexas's avatar - tx avatar-1.gif
          Texas Panhandle
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          Posted: August 1, 2014, 9:23 pm - IP Logged

          I see CT replied, so....sorry 'bout that.

          Before anyone mentions it, I know that entire percentage isn't taken out at first - I believe it's "only" 25% and you'd have to pay the rest when taxes are due.  Another discussion in here was about not tarrying in picking up a HUGE jackpot win, especially one won just after the first of the year.  You could make a substantial sum of money even at low interest off of the money you'll eventually have to pony up to Uncle Sam.

          And then pay taxes on that interest.

            LottoMetro's avatar - Lottery-024.jpg
            Happyland
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            Posted: August 1, 2014, 9:30 pm - IP Logged

            I see CT replied, so....sorry 'bout that.

            Before anyone mentions it, I know that entire percentage isn't taken out at first - I believe it's "only" 25% and you'd have to pay the rest when taxes are due.  Another discussion in here was about not tarrying in picking up a HUGE jackpot win, especially one won just after the first of the year.  You could make a substantial sum of money even at low interest off of the money you'll eventually have to pony up to Uncle Sam.

            And then pay taxes on that interest.

            And then pay taxes on that interest.

            Not if you choose exempt municipal bonds Wink

            That's my plan....set aside the amount for taxes and try to make use of it as long as I can.

            If the chances of winning the jackpot are so slim, why play when the jackpot is so small? Your chances never change, but the potential payoff does.
            If a crystal ball showed you the future of the rest of your life, and in that future you will never win a jackpot, would you still play?

            2016: -48.28% (13 tickets) ||
            P&L % = Total Win($)/Total Wager($) - 1

              mikeintexas's avatar - tx avatar-1.gif
              Texas Panhandle
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              Posted: August 1, 2014, 10:25 pm - IP Logged

              exempt municipal bonds

              Doesn't that depend upon the laws of the state?  I don't know much at all about them, but I do remember someone in here saying that the current administration wants to put some limits on those federal tax breaks. (a quick search in another tab found this: Ending Tax Breaks On Municipal Bonds Shifts Burden To The Rest Of Us)

              I agree, though - even at a "measley" 1%, you could make a significant amount on several millions.  I remember figuring that on one of the last record jackpots, just a few months would be enough to buy a BMW.  The sad thing I also figured was that the total amount of the tax of that huge JP would be just enough to pay the interest on the natl. debt for only a few minutes.

                helpmewin's avatar - dandy
                u$a
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                Posted: August 1, 2014, 10:47 pm - IP Logged

                Someone won 1 million on a scratch off down the street from my house. He chose the cash option and the prize dropped to 600,000.  After taxes he only took home a little over 400,000.

                First off, I didn't know the highest prizes on scratch tickets had a cash option. But I am surprised the amount can drop so drastically.

                So in this situation would you choose annuity? Or why wouldn't you choose annuity and take the much lesser amount?

                Someone told me once the people who take Cash option is maybe Greed, maybe even desperation For example the 24 year old girl that just won 66 million settled for 27 million because she wants it all NOW! BIG DifferenceRed Devil

                Let it Snow Snowman

                  mikeintexas's avatar - tx avatar-1.gif
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                  Posted: August 1, 2014, 10:54 pm - IP Logged

                  I'm over 50... no lottery annuities for me! ROFL

                  Me too, Piaceri.  I wouldn't criticize anyone for what choice they made, but I don't want to be getting that last check and be too old to enjoy it.  (or not remember what bank it was deposited into!)

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                    Kentucky
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                    Posted: August 1, 2014, 11:45 pm - IP Logged

                    Someone told me once the people who take Cash option is maybe Greed, maybe even desperation For example the 24 year old girl that just won 66 million settled for 27 million because she wants it all NOW! BIG DifferenceRed Devil

                    That someone who told you was probably unaware of the fact every PB jackpot winner since 2007 took the cash and several said they talked to financial advisers before validating their ticket. After 30 years of paying taxes, taking the annuity means the $66 million is only worth $40 million and with conservative investments, $10 million in cash could double in 15 years and be worth $40 when the annuity ended.

                    It doesn't necessarily means she wants it now but the annuity ties up HER MONEY for the next 29 years. Next time you speak with your financial adviser ask which they would recommend.

                      Coin Toss's avatar - shape barbed.jpg
                      Zeta Reticuli Star System
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                      Posted: August 2, 2014, 12:04 am - IP Logged

                      If the annuity is such a terrible choice, then why does MM and PB even offer it?

                      It is indexed towards inflation... and if taxes go to 50 to 60%... we got bigger problems as a whole.

                      The annuity rates aren't that great though right now, so cash is king.

                      They offer it because the advertised cash jackpot amount doesn't exist.

                      That's why they want the winners to take an annuity, and if not, why the cash amount is so much less.

                      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.

                        Drenick1's avatar - villiarna
                        USA
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                        Posted: August 2, 2014, 8:58 am - IP Logged

                        Someone told me once the people who take Cash option is maybe Greed, maybe even desperation For example the 24 year old girl that just won 66 million settled for 27 million because she wants it all NOW! BIG DifferenceRed Devil

                        Just because the jackpot was $66 million doesn't mean anyone would actually receive that amount over the course of the annuity. Once you factor in taxes (at current rates) you would end up with less than $40 million total and that is IF you pay no state income tax. There is no telling where the future tax rate may go and at this point the winner from Michigan made the right choice by collecting $27 million cash now instead of receiving under $40 million over the course of 30 years. 

                        If tax rates go beyond 60% in the future and it's highly probable, someone who had chosen the annuity would have received even less than the $27 million up front.

                          Pita Maha's avatar - 940d8157 d1fb-4f70-a715-6ad04d915489.jpg
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                          Posted: August 2, 2014, 10:52 am - IP Logged

                          That someone who told you was probably unaware of the fact every PB jackpot winner since 2007 took the cash and several said they talked to financial advisers before validating their ticket. After 30 years of paying taxes, taking the annuity means the $66 million is only worth $40 million and with conservative investments, $10 million in cash could double in 15 years and be worth $40 when the annuity ended.

                          It doesn't necessarily means she wants it now but the annuity ties up HER MONEY for the next 29 years. Next time you speak with your financial adviser ask which they would recommend.

                          As Stack47 mentioned above:

                          It doesn't necessarily means she wants it now but the annuity ties up HER MONEY for the next 29 years. Next time you speak with your financial adviser ask which they would recommend.

                          That's the biggest issue I have with taking the annuity if it were me.  That it would tie up MY MONEY that I managed to finally win after beating astronomical odds, a once-in-a-lifetime amazing occurrence that few get to enjoy, and .... I get it drip-fed to me over decades.   It's not about greed, it's about wanting control over your own finances and life, which is not a terrible thing to want. 

                          Some people feel they can't manage a whole whack of money at once, fine, the annuity option is there for them.  But do we know how many of those few who do take the annuity option end up regretting it and wishing they'd taken the cash option after all?  It might be a large percentage of them, you never know. So they got freaked out by the massive amount of money they won, decided to go the safe route at the time but feel limited and frustrated now that they've gotten used to having lots of money. 

                          I would think that there'd be a greater chance of having friends and family hanging off you for those 29 years too, that you couldn't just give a bunch of money to them at the beginning and be done with it.

                            Goteki54's avatar - Lottery-007.jpg
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                            Posted: August 2, 2014, 12:19 pm - IP Logged

                            On a million dollars, I would take the lump sum.  If I netted $400k after taxes, I would use the money to buy a house with cash, thus I could invest $15k a year from monthly savings from not having a house payment into investments. Now if the winnings was $100 million or higher, I would most likely take the annuity. It would be a safe guard against me ever spending all the money. When people retire, they care about cash flow income. With me knowing I would have money coming in for the rest of my life, I wouldn't have the need to be paranoid that someone or some factor will take it all, thus I can enjoy the money.

                            Following the trends and patterns means following the money!Banana

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                              Posted: August 2, 2014, 1:26 pm - IP Logged

                              Someone won 1 million on a scratch off down the street from my house. He chose the cash option and the prize dropped to 600,000.  After taxes he only took home a little over 400,000.

                              First off, I didn't know the highest prizes on scratch tickets had a cash option. But I am surprised the amount can drop so drastically.

                              So in this situation would you choose annuity? Or why wouldn't you choose annuity and take the much lesser amount?

                              Take the cash now, pay your appropriate taxes now, get your personal materials,now, for the future..future taxes are very unpredictable, especially with government growth, spending,control & the growing attitude of financial redistribution.
                              Prepare for a "rainy day"..... You won't be sorry.