3quartertime Posted June 6, 2009 Share Posted June 6, 2009 What a great story. A young fella whose family has been hit hard wins big. Hope he spreads the wealth around like he says to pay back some of the help he's gotten from the community. The story kinda makes you wonder thou... The one time payoff is about 88 million. Still tons of money, but drastically less. He's 23. How temped would you be to take the twenty year pay out and get all the money? Seems like his chances would be pretty good! Link to comment Share on other sites More sharing options...
ima45dv8 Posted June 7, 2009 Share Posted June 7, 2009 At his age, I'd consider it. I read that they take 44% off the top for a non-annuitized payout like that before deducting taxes. Link to comment Share on other sites More sharing options...
mdstihl Posted June 7, 2009 Share Posted June 7, 2009 Take the lump sum. There are no guarantees in life. Link to comment Share on other sites More sharing options...
LPatterson Posted June 7, 2009 Share Posted June 7, 2009 With Power Ball the pay out period is 25 years and you have to make special provisions to leave it to your heirs. Link to comment Share on other sites More sharing options...
Flexmoney Posted June 7, 2009 Share Posted June 7, 2009 Why anybody would take yearly payments is beyond me. Link to comment Share on other sites More sharing options...
Rob Boudrie Posted June 7, 2009 Share Posted June 7, 2009 Why anybody would take yearly payments is beyond me. You really need to crank a few numbers to determine if lump sum or all at once makes sense: What is the discount rate applied to the funds when calculating the lump sum? In some cases, the discount rate APR is much higher than can be earned on any safe investment. Who is responsible for paying you? The full faith and credit of the state, the credit of an quasi independent agency, or a third party investment house from which the state bought the annunity? What are the survivorship rights - does the 20 years get paid no matter what, or end when you die? What are the tax implications of all at once vs. annuitized. If you live in a state with an income tax, but plan on moving to a state without one, the yearly payout could save 5% or more (over 10% in NY state, due to their graduated income tax) How fast do you plan on spending it down? If you have stage IV cancer or have had three bypasses and want to spend it all before you die, you will need to take a lump sum and get busy. How much does Mike Dillon want to sell you one of his transferrable miniguns? Link to comment Share on other sites More sharing options...
et45 Posted June 7, 2009 Share Posted June 7, 2009 Take the lump sum.Who knows what the future holds. Link to comment Share on other sites More sharing options...
maineshootah Posted June 7, 2009 Share Posted June 7, 2009 Why anybody would take yearly payments is beyond me. You really need to crank a few numbers to determine if lump sum or all at once makes sense: What is the discount rate applied to the funds when calculating the lump sum? In some cases, the discount rate APR is much higher than can be earned on any safe investment. Who is responsible for paying you? The full faith and credit of the state, the credit of an quasi independent agency, or a third party investment house from which the state bought the annunity? What are the survivorship rights - does the 20 years get paid no matter what, or end when you die? What are the tax implications of all at once vs. annuitized. If you live in a state with an income tax, but plan on moving to a state without one, the yearly payout could save 5% or more (over 10% in NY state, due to their graduated income tax) How fast do you plan on spending it down? If you have stage IV cancer or have had three bypasses and want to spend it all before you die, you will need to take a lump sum and get busy. How much does Mike Dillon want to sell you one of his transferrable miniguns? +1 All excellent points. Link to comment Share on other sites More sharing options...
Flexmoney Posted June 7, 2009 Share Posted June 7, 2009 Thanks Rob. I didn't want to type all that crap. Link to comment Share on other sites More sharing options...
kevin c Posted June 7, 2009 Share Posted June 7, 2009 Cash is good (especially if you have the discipline not to blow it all, but to invest it and live on the earnings rather than the principal). Here in California, payouts are graduated - less in the first years, more in the later years. 20 odd years down the road, the bucks will be worth considerably less given even only a moderate inflation rate. Personally, I'd rather have the money up front, to control and invest as I see fit, even after being heavily discounted from the advertised pot. I'd rather not wait on somebody to cut me a check each year for money that is worth less and less. If a person has absolutely no financial discipline, then a structured doling out of the dough might keep him from blowing it all and being left w/ nothing. Link to comment Share on other sites More sharing options...
G-ManBart Posted June 7, 2009 Share Posted June 7, 2009 Cash is good (especially if you have the discipline not to blow it all, but to invest it and live on the earnings rather than the principal).Here in California, payouts are graduated - less in the first years, more in the later years. 20 odd years down the road, the bucks will be worth considerably less given even only a moderate inflation rate. Personally, I'd rather have the money up front, to control and invest as I see fit, even after being heavily discounted from the advertised pot. I'd rather not wait on somebody to cut me a check each year for money that is worth less and less. If a person has absolutely no financial discipline, then a structured doling out of the dough might keep him from blowing it all and being left w/ nothing. Yeah, throw $88M into something very conservative and an annual 5% return is a cool $4.4M. I think I'd put $8M or so into a ranch with a couple hundred acres, nice range etc and then live off $4M in interest...enough to keep me in guns, bullets and toys! Link to comment Share on other sites More sharing options...
Les Snyder Posted June 8, 2009 Share Posted June 8, 2009 before you claim the ticket, set up a trust as the owner of the ticket, with you as the execuitor of the trust wishful thinking regards Les Link to comment Share on other sites More sharing options...
Trini Posted June 8, 2009 Share Posted June 8, 2009 I don't understand why someone would take the PB money in a cash pay out... The guy won 232 million and only receives 88 million. That means he gave PB over 140 million of his money that's right his money which is about 68% of the prize. Being in his early 20's he can expect to live another 60 plus years.. IIRC Powerball pays out over 30years. That way he doesn't lose it all by being ripped off, bad investments, etc. Have a bad year or two you still got 28 more years to collect. From the Power Ball web site. WHAT HAPPENS IF AN ANNUITY PRIZE WINNER DIES? First there will be a funeral. Then the estate will handle the lottery prize. A lottery annuity prize is just like any other asset. You can pass any remaining annuity payments on to your heirs or to anyone else. The Powerball game will even cash out an annuity prize for an estate. This may make it easier for the estate to distribute the prize. It also may be necessary to cash out the annuity to pay Federal estate taxes. We will sell some or all of the securities at competitive bid or will even just transfer the securities to the estate. We do not charge a fee of any kind. I think that this misunderstanding may come from the response that the prize "goes to the Estate" and some people hear "goes to the State." IS THE CASH AMOUNT THE JACKPOT AMOUNT AFTER TAXES? The prize of $XXX million is paid over 29 years (30 payments). Federal and State Income tax apply to whatever income you actually receive in a given tax year, whether it is wages or lottery prizes. If you take the cash amount (say $50 million), then you pay income tax on $50 million). If you take the annuity (say $100 million), then you pay income tax on the money you actually receive each year. Just like your wages, a withholding amount is required to be taken out immediately. The lottery will send you a W2-G form and you figure your actual tax at tax time. Link to comment Share on other sites More sharing options...
G-ManBart Posted June 8, 2009 Share Posted June 8, 2009 I don't understand why someone would take the PB money in a cash pay out... The guy won 232 million and only receives 88 million. That means he gave PB over 140 million of his money that's right his money which is about 68% of the prize. Being in his early 20's he can expect to live another 60 plus years.. IIRC Powerball pays out over 30years. That way he doesn't lose it all by being ripped off, bad investments, etc. Have a bad year or two you still got 28 more years to collect. There is something to be said for that, of course. The math isn't so simple though. Take the $88M, throw it in something at 5% for 30 years using simple compound interest and it winds up to be $380M. Heck, without compound interest it would still be $220M. A bird in hand.... I just hope this kid is SMART and gets someone he can trust to help him be smart about what to do. R, Link to comment Share on other sites More sharing options...
Flexmoney Posted June 8, 2009 Share Posted June 8, 2009 I don't understand why someone would take the PB money in a cash pay out... The guy won 232 million and only receives 88 million. That means he gave PB over 140 million of his money that's right his money which is about 68% of the prize. It doesn't mean that at all. You will want to look up terms like Future Value, Present Value, Annuity... The lootery (not mis-spelled ) doesn't bank the 232mil. That is just marketing. Link to comment Share on other sites More sharing options...
SA Friday Posted June 9, 2009 Share Posted June 9, 2009 Jees, doesn't everyone have a CPA on speed dial for these situations? Link to comment Share on other sites More sharing options...
Nik Habicht Posted June 9, 2009 Share Posted June 9, 2009 Jees, doesn't everyone have a CPA on speed dial for these situations? I do, along with a lawyer --- but only because they're USPSA shooters and buds..... Link to comment Share on other sites More sharing options...
SA Friday Posted June 9, 2009 Share Posted June 9, 2009 Jees, doesn't everyone have a CPA on speed dial for these situations? I do, along with a lawyer --- but only because they're USPSA shooters and buds..... Ditto. Does your CPA shooter automatically calculate stage's hit factors during walk throughs and then tell you how many points per second? Or tell you to the .x how fast you need to shoot a classifier clean for a xx% on it? It's awesome. Link to comment Share on other sites More sharing options...
Patrick Sweeney Posted June 9, 2009 Share Posted June 9, 2009 If you can't do compound interest problems in your head, you really need that CPA. OK, 232 million, 30 payments. 7.733 million a year, gross. The lootery does not bank that money, they don't have that money. They're going to pay it to you out of future revenues. In 29 years, when they pay the last 7.73 million check, a simple inflation rate of 1.5% means it represents about 4.5 million in today's money. Not exactly clipping coupons. Another calculation: 1/30th of the lump-sum payout is 2.93 million. Sock that away in something safe that delivers only 4%, and in 30 years you'll have 9.88 million, instead of the 7.73 the lootery would have sent you. Take the lump, invest it wisely, and you (or your heirs) can pocket a lot more than the lootery would deliver. Let your relatives in on it, and you could have a lot less. See? it's all so simple. Link to comment Share on other sites More sharing options...
McAllyn Posted June 9, 2009 Share Posted June 9, 2009 I'm a big proponent of the lump sum payment. Even the severe hit you take on the lump sum + taxes can end up being far more valuable in the long run if you have wise and reliable investment help. Lump sum or annuity payment notwithstanding, the amount of lootery winners that go bankrupt is astounding! Mac Link to comment Share on other sites More sharing options...
UW Mitch Posted June 9, 2009 Share Posted June 9, 2009 If I won the lottery, I'd take the lump sum, buy a big place, create a nice range and have USPSA matches every evening! Then after a year when I blew all the money, I'd go back to work ~Mitch Link to comment Share on other sites More sharing options...
ima45dv8 Posted June 9, 2009 Share Posted June 9, 2009 I've been involved in more than a few, "...the first thing I'd do..." conversations. I've decided if I ever won something like that I'd celebrate by making as my first task, the destruction of my wristwatch with a big hammer. For about 6 months I'd like to just not care what time it is (except for the start of USPSA matches, of course). Let other people's schedules be their worry and not mine for a while. Best answer I ever heard to the often asked question, "Would you quit your job if you won the lottery?" My brother, Hugh: "Nope. But it sure wouldn't take 'em long to fire me!" Link to comment Share on other sites More sharing options...
mlmiller1 Posted June 10, 2009 Share Posted June 10, 2009 Best answer I ever heard to the often asked question, "Would you quit your job if you won the lottery?"My brother, Hugh: "Nope. But it sure wouldn't take 'em long to fire me!" That is funny! I used to have this picture in my head of winning a big cash pot. I had a minimum amount before I would quit my job of $5mil. Then as the years have gone by, that has dropped steadily. For a mere $1mil after taxes, I would not show up to the fire station ever again to work. I might go say "bye" to the guys I work with. Guess I'm cheap or something. Besides, I am vested in our pension so if worse came to worse, I could live on that. MLM Link to comment Share on other sites More sharing options...
mdstihl Posted June 10, 2009 Share Posted June 10, 2009 If I won (which is unlikely since I don't play lol) the first thing I'd do is figure out how to retain my anonymity. 2nd would be set up a trust to filter some back into local charities. I'd probably still work; just take way cool vacations! Link to comment Share on other sites More sharing options...
Patrick Sweeney Posted June 11, 2009 Share Posted June 11, 2009 No anonymity. One of the lines of the fine print is that by buying the ticket, and accepting the money, you agree to be their PR shill. Of course, if you're really, really bad at promoting the lootery, they won't call you. Me, on the rare occasion I buy a ticket, I do so as much for the entertainment. I look at it this way: I can spend a few bucks on a movie ticket, and get two hours of entertainment. If, having bought a lootery ticket I can;'t get two hours of entertainment thinking about what I'd do if I actually won, well, shovel dirt in my face, I'm dead and just don't know it. Link to comment Share on other sites More sharing options...
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