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How are annuities created and paid?

Topic closed. 7 replies. Last post 10 months ago by macrowiz.

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Plano, TX
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February 19, 2016
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Posted: February 19, 2016, 1:38 pm - IP Logged

I can’t find a really good description of annuities for lottery winners and have a couple of questions: How is an annuity created for a Texas lottery winner? Is it done through an insurance company or some other way? And then who actually issues the annuity payments (checks, direct deposits, etc.) to lottery winners? An insurance company, TLC, the Texas State Comptroller, somebody else?

    savagegoose's avatar - ProfilePho
    adelaide sa
    Australia
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    April 11, 2006
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    Posted: February 19, 2016, 3:06 pm - IP Logged

    they take the cash jackpot and invest it in  muni bonds for the state that won. and pay out part of the captal+ interest over 30 years.  thats my understanding anyhow.  if you took the cash and bought  tax free state bonds you could sit pretty and not worry about taxes lol

    2014 = -1016; 2015= -1409; 2016 JAN = -106; FEB= -81; MAR= -131; APR= - 87: MAY= -91; JUN= -39; JUL=-134; AUG= -124; SEP = -123; OCT= -84  NOV=- 73 TOT= -3498

    keno historic = -2291 ; 2015= -603; 2016= JAN=-32, FEB= +12 , MAR= -86, APR = -77. MAY= -48, JUN= -29, JUL=-71; AUG = -52; SEPT= -43; OCT = +56 NOV = -33 TOT= -3297

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      Arizona
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      Posted: February 19, 2016, 7:20 pm - IP Logged

      From the Texas Lottery website:

      It's important to understand what happens when a Lotto Texas jackpot is won. If the jackpot winner has chosen 30 Annual Payments, Texas Lottery officials provide the Texas Treasury Operations Division of the State Comptroller's Office with the jackpot amount. The Division submits a request for bids from previously approved investment firms. The contract is awarded to the investment firm that will provide the jackpot amount, paid over 30 years, at the lowest cost to the State. The Texas Lottery uses a portion of the sales for that drawing - plus any money rolled over, if there is any, from previous drawings - to buy the 30-year investment. According to the State Lottery Act, the funds must be invested in such a way as to ensure the payment of the prize. All interest earned on the investment is a part of the prize.

      A similar process is followed if the jackpot winner has chosen Cash Value Option. Texas Lottery officials still provide the 30-year jackpot amount to the Treasury Operations Division, which still calls for competitive bids from previously approved investment firms. However, the investment is not actually purchased. Instead, the winner receives one lump-sum payment equal to the amount of money that would have been required to purchase the 30-year investment. This is called the "net present value" of the jackpot. The lump sum payout for a given estimated jackpot varies due to changing interest rates. 

      If you wish to obtain additional information about the investment process, you may contact an Investment Officer of the Texas Treasury Operations Division of the Comptroller's Office at (512) 463-4000.

        LiveInGreenBay's avatar - driver
        Green Bay
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        October 15, 2015
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        Posted: February 20, 2016, 1:45 pm - IP Logged

        From the Texas Lottery website:

        It's important to understand what happens when a Lotto Texas jackpot is won. If the jackpot winner has chosen 30 Annual Payments, Texas Lottery officials provide the Texas Treasury Operations Division of the State Comptroller's Office with the jackpot amount. The Division submits a request for bids from previously approved investment firms. The contract is awarded to the investment firm that will provide the jackpot amount, paid over 30 years, at the lowest cost to the State. The Texas Lottery uses a portion of the sales for that drawing - plus any money rolled over, if there is any, from previous drawings - to buy the 30-year investment. According to the State Lottery Act, the funds must be invested in such a way as to ensure the payment of the prize. All interest earned on the investment is a part of the prize.

        A similar process is followed if the jackpot winner has chosen Cash Value Option. Texas Lottery officials still provide the 30-year jackpot amount to the Treasury Operations Division, which still calls for competitive bids from previously approved investment firms. However, the investment is not actually purchased. Instead, the winner receives one lump-sum payment equal to the amount of money that would have been required to purchase the 30-year investment. This is called the "net present value" of the jackpot. The lump sum payout for a given estimated jackpot varies due to changing interest rates. 

        If you wish to obtain additional information about the investment process, you may contact an Investment Officer of the Texas Treasury Operations Division of the Comptroller's Office at (512) 463-4000.

        I'm wondering, if the stock market crashes is there the possibility of losing your annuity?

        Never give up.  Banana

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          Arizona
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          Posted: February 20, 2016, 10:57 pm - IP Logged

          I'm wondering, if the stock market crashes is there the possibility of losing your annuity?

          "According to the State Lottery Act, the funds must be invested in such a way as to ensure the payment of the prize."

          If the company providing the annuity goes bankrupt, you might be in trouble, but even then, the law will be on your side.

            ArizonaDream's avatar - Lottery-009.jpg

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            Posted: February 20, 2016, 11:11 pm - IP Logged

            From the powerball.com FAQ page--- 

            WHY IS THERE A DIFFERENCE BETWEEN THE CASH PAYOUTS IN THE POWERBALL AND MEGA MILLIONS GAMES?

            There used to be a larger difference between the two games, but the Mega Millions game was recently changed to mirror the Powerball annuity option. The difference (spread) between the cash and annuity jackpots amounts are now about the same. Both games offer an annuity that pays out in 30 payments over 29 years (the first payment is immediate). Both annuity options are graduated. Any difference will be the result of investement choices. Mega Millions is invested in U.S. government strips. Powerball is invested in a couple dozen types of securities; all backed in some way by the U.S. government or agencies. It is important to understand that the lottery is invested in these securities; not the winner. The winner has a contract with the states to pay the annual prize payment, no matter what happens to the securities.

              savagegoose's avatar - ProfilePho
              adelaide sa
              Australia
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              Posted: February 21, 2016, 1:01 am - IP Logged

              they should have a paid in gold eagles option. and thanks Mergatroyd.  nothing like going to the source to get correct facts, something i should do more often

              2014 = -1016; 2015= -1409; 2016 JAN = -106; FEB= -81; MAR= -131; APR= - 87: MAY= -91; JUN= -39; JUL=-134; AUG= -124; SEP = -123; OCT= -84  NOV=- 73 TOT= -3498

              keno historic = -2291 ; 2015= -603; 2016= JAN=-32, FEB= +12 , MAR= -86, APR = -77. MAY= -48, JUN= -29, JUL=-71; AUG = -52; SEPT= -43; OCT = +56 NOV = -33 TOT= -3297

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                Plano, TX
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                Posted: February 22, 2016, 11:50 am - IP Logged

                That's great input! Thanks!