Update: Bumping this from when it was posted for the previous record high lotto.
With tonight’s Powerball drawing now the highest lottery in US history at an estimated $1.9 billion, what would you do?
Originally posted on 10/23/18:
The highest jackpot in the history of the world will take place at 11pm EDT tonight when Mega Millions will raffle off a $1.6 billion grand prize.
Of course it’s only $1.6 billion if you take the payments over 30 years. If you want the payments in a lump sum today you would get $904 million.
DDF member farmbochur made this spreadsheet to calculate just how much you would get each year and what sort of interest you would earn over 30 years. It shows an initial annual payment of $24MM in year one which grows to a $37MM payment by year 10, a $60MM payment by year 20, and a $99MM payment by year 30.
He calculated an implied interest rate of 3.45%.
That’s not an amazing rate, but it’s a decent rate of return considering that there is zero risk of losing the funds.
Of course that’s hardly the only factor in play.
According to some estimates, 70% of people who hit the jackpot wind up going bankrupt. Taking the lump sum means you may just wind up giving it all away, overspending, investing poorly, etc. By taking the annuity you can mess up and spend your $24MM in year one, but you’ll still have $1.56 billion coming to you over the next 29 years.
Then again a good financial adviser should be able to help you invest the $1.6 billion in such a way that it earns more than 3.45% and provides you with enough income that you never need to touch that principal amount.
Another factor can be state and local taxes. If you take a lump sum payment you’re going to owe taxes on everything up front. That’s 37% to the federal government and potentially up to another 13% if you live in a high income tax location like NYC. If you take an annuity payment you may be able to move to a income-tax free state, say Florida or Texas, where they won’t tax the following 29 years of payments. Then again your original state and city may go after you for the full amount, so you’ll want to talk to a good tax lawyer about that. And of course tax laws for the wealthy can change over the next 30 years for the better or for the worse.
So, what would you do and why?
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186 Comments On "Powerball At $1.9 Billion: Would You Take The Lump Sum Or The Annuity Payments?"
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They should make lotteries on points and miles! I would take both the lump sum and the annuity… Lol
how valuable points and miles are, their value is that its a substitute to $, but you never had something that you can ONLY buy with point and $ cant buy it, so how much we love points, points cant get you $, but $ can get you a lot of points
Ask Dan, you can’t buy first pitch of a World Series game, etc.
Lump sums=> bonds, IF you dont want to get screwed when someone goes bankrupt.
Not going to live forever, might as well take the lump sum and and spend like theres no tomorrow!
Can’t trust the government .. take the money and run
True!!!
It’s not “the government” giving issuing the annuity
I’d see if I can get a better deal selling the annuity off to a market buyer. In the meantime, we’ll just be the biggest buyer in the country.
Sure, call JG Wentworth and sell it to them based on a 20% discount rate
Gotta know the wholesalers
Why would you get a good deal selling that off, since the interest rate is only 3.45%?? Wouldn’t make sense for someone to buy the annuity for more than the $904b you could get straight, since the rate on the annuity is so low.
Right away, easy to beat that rate especially with so much money. With such a high amount the tax implications of spreading out will be minimal unless I move to no tax state which I don’t want to do for 29 years.
If I were in my 20s I would do annual payments. Iny late 40s now I would do lumpsum
how do u know how long youre living
I think his point is that he’s more financially responsible at his current age
Correct. Given the low rate it makes more sense to take the lump sum, but someone in their 20s might just spend it all quickly and stupidly.
Why do you keep saying moving to an income free state can help for tax purposes. NYS clearly says if you win while you’re a NYS (and or NYC resident), you’ll be paying their taxes for the remainder of the annuity.
Not every state is NY, as I clearly said, talk to a good tax lawyer and see what can be done.
If you purchased the ticket in one state but live in a different state you many times will have to pay state tax for BOTH states. The state tax where you purchased the ticket will be less than the normal state tax but you would have to pay SOME percentage to that state and you would also have to pay the regular state tax amount to the state that you live in. This is all besides the federal taxes of course!
Then don’t use NYC as an example to show how moving after an annuity can help. I’m not sure it helps with any state that taxes nonresidents (and the vast majority of states do).
Does anyone know if wining an annuity is considered getting the full income on day one as far as taxes are concerned
Annuity is taxed on the amount paid each year. Best thing to do is see a tax lawyer. There is a way of collecting thru a corporation and making that inheritable. There is also much to be said that taxes will only go up from here on.
There is no way that won’t go to court and all types of litigation. Just assume whatever your current tax liability is will be that way on this income.
I don’t care what the state Officially says the fact is the law says if you live in New York state for more than 180 days out of the year you have to pay income tax to them if you Live somewhere else your subject to their rules but the cut off is 180 days
Now I’m not saying they won’t try to collect
I’m just saying if you plan this right & can prove that you live somewhere else for more than 180 days out of the year you should be able to win in a tax lawsuit against the state
Now I don’t know if this will work but it’s definitely worth looking at
Since you have six months to come forward and collect your lottery winnings first move to a state that has no income tax then come forward and collect your winnings it might work for even the first year if you don’t collect until the next fiscal year
Except that some states (eg NY) have rules on the books specifically for this lottery situation, that specifically states that if you’re a resident of the state on the day you win the lottery, you have to pay income taxes to the state for the entire lifetime of the annuity, even if you move out-of-state. But yes, it should work for states that don’t have a law like that on the books.
thats a large sum of money. it doesnt even fit under my bed. 🙂
But you’d be able to buy a bigger bed
Maybe add an option of, “First let me win, then I’ll decide”.
Good one
does annuity transfer over to next of kin?
If you have a will – most states only allow for you to write only one beneficiary that will receive lottery winnings after you pass away. This can be a problem if you really want to have it go to multiple heirs. If there is no will – it will go to your “Estate” and be distributed to your heirs based on a percentage that the states determine.
Set up a trust as first beneficiary
“considering that there is zero risk of losing the funds” How about if the lottery goes bankrupt?
The risk of the government entities behind the lotteries going bankrupt is slim.
The lump sum is 904 million and buying every possible combination would cost 604 million. Why are people not doing this???
Because if someone else also wins, you just lost a LOT of money
I would like to have this problem
Correct. Also after taxes its down much more than 904 mil.
This isn’t true, because you’re allowed to deduct the cost of the losing tickets to offset gains. So you’d only be taxed on the profit.
But you need to calculate that it would add most of the 600m to the jackpot
Cause others may win as well and you’d have to split the jackpot with all the winners.
Well that is called risk and reward. The risk is that happening and possibly splitting the pot but the reward is a net of 300 million. No different than any investment.
If another person wins you would lose
Because if 2 people or more split the jackpot you’re screwed, plus I imagine someone with $604 million lying around can think of better investments
1. After taxes the lump sum payout would be less than 604 million.
2. If multiple people win then the pot is split and you would end up getting way less than 604million once the pot is split.
Well, for point one, if you take the lump sum you will only pay tax on the net income which would be $300M
Somehow I think that would be extremely difficult to prove
The government on every level will demand taxes on the full amount & you would bear the burden of proof that it was an investment (if that is even an option) I just don’t think it would end well
I mean if you have the other 603,999,999 lottery tickets it wouldn’t be hard to prove the gambling losses….
Beside for needing the cash handy, if there is another winner or two, you’re out a couple of dollars…
Few if any people have $604 million cash lying around to invest in lottery tickets.
1) who has the money to do that?? 2) You have to fill out all the combinations by HAND (cannot be done with a computer) which would take months if not years and 3) If there are multiple winners then you have to split it with them and you might come out LOSING quite a bit of money.
1. Logistics is extremely tough
a) Need to have enough time to buy every combination (there are only 3 or 4 days between drawings)
b) Need to have enough cash on hand to pay for every combination (no credit cards!)
c) Need to have a good ticket management system to keep track of 10’s of millions of pieces of paper
Imagine if you only manage to get 85% of the tickets and not the winning numbers
2. Even if you win you might lose money. Multiple winners is a huge risk – it’s extremely likely that there will be 3+ winners
Taxes are not an issue though because you could deduct gambling losses $604M against the win and just pay on the net gain.
I’m sure Dan has a way on how to purchase lottery with credit cards. Mabey a different state how knows?
In clevland they take cards and the app
See movie JERRY AND MARGE GO LARGE
If you could buy 10 combinations every second, it would take 350 days to cover them all. And at least that long to find the winning one.
You can start doing this know for a future large jackpot. I believe the lottery slips are all all the same for each drawing. So let’s get to work now and hopefully in a couple of years when such a large jackpot rolls around again we’ll be ready!
You’re screwed if the lotto machine runs out of paper
Check the past for this. Think this was done years ago in florida and there was 60+ winners
U can’t buy all possible combinations, There isn’t enough time to print all this combinations(u only have 345.6k seconds)
A) if someone else wins with you…B)post tax you will maybe break even….and if you take it over 30 years the returns you will get by keeping your money in the bank for that period will be greater.
The lottery machine would jam, printing so many tickets.
You would have to have 10 machines printing 24/3
Because if you made it that rich you probably are not a gambler
You’d need to manually choose all 292 million possibilities. That would take a little more than 9 years assuming you can do one every second…
Is it possible to participate in this lottery online from outside US ?
Just drive down (or up) here, find a lotto store and stand online like everyone else. Eh?
Please add a “not sure” option to the vote.
$2 in my pocket vs giving up almost 8 years of sobriety. I’ll keep the 2 bucks.
Nice! You can’t put a price on recovery!
Congrats! Mad respect!
Major respect to you. Makes you realize no money can buy true happiness.
Yea but it does help a little…
Yup I give it all up to you
Risk free 3-month Tbills are now yielding 2.35%…. hitting north of 3.45% should be very doable… plus yields are increasing… lump sum is a no-brainer for the semi-sophisticated investors…
You can lose the money if the state or city were to go bankrupt such as the case of Detroit, anyone who hadn’t taken the lump sum lost the remainder of their money.
What a zchus it would be to get to give 90 million dollars to tzedaka for maaser!
Also, what happens if a non-profit wins? I saw a Chabad House in Israel offering the opportunity for donors to split the winnings if their tickets win. (I realize that them being in Israel complicates things but can you try answer it as if a Chabad House 🙂 in the USA won?)
Thanks
If the winner chooses to take it over 30 years and then passes away a few years later do his/her descendents inherit the remaining amount or not? If not it may be smart to just take the lump sum
They’ll give the money to the inheritors.
“Then again your original state and city may go after you for the full amount, so you’ll want to talk to a good lax lawyer about that.”
Freudian slip? LOL.
I’d take lump sum. Historically, it’s been quite easy to beat 3.45%, and there are steps one can take to avoid spending it all in go a raunchy, indelible, and overblown trip to Vegas.
Or as you have almost a year to claim it…you establish residence in a no income tax state..and then move out of NY for 180 days and you would not be considered a NY resident.
Although I agree with you on that, I figure you’d have the state hounding you for the rest of your life…
It’s based on where you buy the ticket not where you live
Never trust the government with anything. As countless citys an counties have shown, government is not immune to economic downturns and bankruptcies. Take it and run. Any competent financial advisor can invest in a mixture of treasury notes and AAA Corp bonds and will beat the <4% return from the annuity.
Good luck folks and remember your old friend when you win
GFC!
Lump sum! The interest through investment could easily beat out the amount that could be got from the payment being spread out over 30 years. Plus, there is the worry that anything could happen to the payment over the next 30 years.
Uh, please define your use of the word “worry”…. ;-p
Am I the only one here davening to win second prize?
The billion is a headache and a half. Two million? Not so much!
daven you should get it next week this week youll make headlines
LUMP SUM! Any knowledgeable financial adviser should be able to earn way more than 3.45% over 30 years. AND federal tax rates are actually at a historically relatively low level
Annuity to me is like winning the lottery every year for the next 30 years. Roi on the lump sum is just not as exciting. Another thing is it can slowly get you used to having money instead of buying 5 yachts within 10 days.
Imagine the bank interest you could earn on the lump sum… that in itself is a small jackpot every year.
Bank interest would get you less than the annuity return. And there aren’t enough banks to get FDIC insurance on it all.
I hate to break the bad news but DDF member farmbochur is incorrect. If you are in NY or purchased the ticket from NY the actual first year amount would be $16,178,486. It really depends on the state that you live in (state taxes vary state to state). Here is a link if you win and live (or the ticket was purchased in) NY.
https://www.usamega.com/mega-millions-jackpot-annuity.asp?state=NY&d=
Here is a link so that you can check out the state that you live in (although it really depends which state the ticket was purchased from but this is a less complicated way of figuring it out – or at least close enough)
https://www.usamega.com/mega-millions-jackpot.asp
As I wrote, the calculations were before tax.
Any legit websites to buy a ticket from for Canadians?
I’ve decided to sell the winning ticket for $100 million to anyone who has that kind of money and leave me alone to enjoy myself in anonymous peace and quiet.
yep! i said the same thing! Question is how to go about finding a buyer………
I’ll buy it from you if you win
There are Wall Street investment firms that will buy your ticket at a discount. I would have a contract where I, the seller would remain anonymous and the cash would be deposited into a bank (or a few banks) that would also protect my privacy. No one really needs that kind of money and a smart person would realize that their privacy and lifestyle would be completely destroyed by the publicity and the constant banging on the door by lots of people, friendly and otherwise, looking for a handout. It would become hell on Earth and I for one don’t need more than $100m, or even $50m to be very happy for a long long time.
I bought one ticket. If GOD wants me to win, then I better have a ticket in my pocket.
sounds good! thanks
Excellent article on the topic, advocating for the annuity option.
https://www.nytimes.com/2016/01/13/upshot/dear-powerball-winner-take-our-advice-and-take-the-annuity.html
The article points out that if you die while it’s being paid out, you will owe estate tax on the PV of the annuity upfront, which in states like NY can’t be converted to a lump-sum. So heirs could end up stuck in that way.
It’s a fixed annuity over 30 years, so it gets paid out to either your named beneficiaries, or your heirs and assigns.
Annuity is not that bad. I would like to think that $24MM would last me more than the first year!!! Even if the state goes bankrupt, the amount that you get in the first year sounds years sounds like plenty..!
Being as I don’t believe America as we know it will be around in 30 years, definitely lump sum… Also, Moshiach!!!
Dan,
You left out one potentially serious issue with the 26 annual payments, namely Estate Tax.
Should the winner take the annual payments, and die, the family will be taxed as if the future payments is cash that they have.
E.g.. If person dies with 1 billion in future payments, they estate gets taxed on that billion NOW. There are stories where the families need to auction the future checks to pay the estate tax, and they end up still owing money even after they checks are auctioned.
Take the lump sum, invest it wisely, get taxed only on what you have.
To Quote Reb Yankle Miller: Buying a lotto ticket, means that you do not have Emunah that Hashem can make you lose 2 dollars some other way.
if you want to avoid taxes move to Florida before you claim your prize and take a on way flight and take an uber back to E.G. NY besides if you have most days 183 or more in the year in Florida you legally dont have to pay taxes so claim your prize January 1st and have fun in Florida
Domicile is NY even if out of State for over 180 days very hard to change domicile
Does everyone here have so much time on their hands that they’re discussing something which has less of a chance than getting hit by a meteorite three times on your way home tonight?
Why not discuss which hospital you’d recommend if someone gets hit?
And yes.. Guilty as charged because I too read the post.
The taxes make the actual rate on the annuity a little bit harder. On the annuity option, you pay income taxes on each payment, but the government essentially invests the entire $905MM principal on your behalf.
If you take the lump sum, you only invest the post-tax balance of the money (~500MM) and on top of that, you will pay taxes on the interest you earn. So while the interest rate on the annuity is only 3.45%, that’s interest off of $905MM – in order to “break-even” you’d need to earn almost double that, which would probably take riskier investments
If you don’t trust yourself, can’t you just put the lump sum in a trust? I would think that would easily beat the measly interest offered in the 30 year annuity option.
over 2 billion now
Mashiach is coming. Take the money and RUN
Take it now. Who knows where this crazy world is headed. 900 mil less 180 mil (20%) to set up a tzedaka foundation. 720 mil to play with. ENJOY !
What people here fail to realize is that the remaining annuity payments can be auctioned off
Dan, no post about the new Citi Prestige?
for some reason when i download the farmbochur spreadhseet it says corrupt. anyone else have that issue?
How do I win?
At 69, lump sum for me!
No thanks! Don’t wanna be a billionaire anytime soon. Marbeh nechasim marbeh daygis!
Emmunah hasn’t built our new shul (going on 7 years of a campaign), hasn’t prevented yeshivos from closing their doors due to funding, and doesn’t expand a long list of valuable projects. Emmunah is necessary in life, but doesn’t build the physical requirements in THIS world. If God wanted to make you a billionaire, one would be foolish to say he/she doesn’t want to be.
Dan, please correct the header, Mega Billion at 1.6b ….
Taxes are likely lower now than they might be going forward. But i think it’s pretty important to set up a personal annuity via a trust or something similar to protect you from yourself.
If I take it in payments can I decided after 15 years they should pay me the rest at once?
I’ll decide tomorrow 😉
I’m research which state to establish residence in Wednesday to minimize taxes. I’ll wait to claim the prize until residency in a low tax state is set. Any suggestions?
Dan
You buy real estate for aprox 1.6 billion and use the 27 year depreciation against your 30? year payouts
very little tax to pay
One small miscalculation:
You have to adjust for inflation rate.
A dollar in 1990 (28 years ago) has the spending power of $1.93 today.
We can’t predict the future, but if that trend held steady, $900 million today are worth more than $1.7 billion 30 years from now.
It’s not like you get the full amount in 30 years. It’s in payments over 30 years. So inflation is a factor but not as bad as you make it sound.
I feel that one will need it all at the beginning considering the fact that you’ll have every org. begging u for money that you don’t have & they wont understand how you don’t give enough maser etc. also the idea that you won that much may get you higher spending habits which you cant afford.
So many people talk. But don’t forget only one or 2 win.. So I think he can ask the right person what to do. So it’s nothing to deal before
how can I avoid 8.8% state taxes if my address is in ny? can i quicklly buy a property in a no income tax/lotto state tax state? or am i stuck paying the 8.8% tax rate?
DEAD.
Alive again.
DEAD.
Oh, sorry. Was taking a pre-lotto nap and was having a nightmare about my wildest dreams….
https://www.dansdeals.com/points-travel/hyatt/heres-what-i-paid-to-earn-2-years-of-hyatt-globalist-status-plus-how-much-my-local-hotel-was-reimbursed-for-my-stays/#comment-1308614
Lump Sum for a couple reasons in priority order (some have been mentioned previously)
1) if you spread out by 30 years you are extremely likely to spend as if you earn that every year. what happens after 30 years? If you have lump sum it’s easy to plan for your complete future, no matter what age, just simple math of how much to budget each year.
2) likely to do better on investing it yourself
3) even if you do #2 very conservative, or your investments don’t do as well as you expected you’re still likely to do better after inflation (unless you made really risky investments and lost a ton of money)
It’s really the opposite. It’s far more likely that a person getting a windfall will overestimate their spending ability than someone who has 30 years to mull over how they are going to spend their money. At least the guy who is getting it in payments will have a chance to learn from their mistakes.
And if you think that you cannot mistakenly waste 600 million, let me give you some spending examples where a guy who doesn’t have brains spends most of it within five years.
Let’s say the lump sum is $650 net after all taxes.
1) Buys a penthouse in NY for $75 million & a ranch in California for 30 million.
2) Buys a private Boeing with all the custom finishes it’s $100 million (on the cheap side)
3) Buy mansions for all his friends and family ranging from 1 million to 10 million for a total of 70 million.
4) Buys a fleet of the most exotic cars on the market with a few vintage ones mixed in for a total of 40 million
5) Buys a medium size yacht for only about 5 million.
6) Maintenance on all the mansions (friends and family can’t afford the maintenance will come asking for money to maintain), cars, yacht and plane runs to about 25 million per year.
7) Buys expensive watches, jewelry & expensive vacations ranging from a 4.7 million dollar watch (from the cheaper watches because he wants to be frugal) to a 10 million dollar necklace, a 6 million dollar bracelet and 3 million dollar ring for their dear wife and finally a few week vacation in the North Island in Seychelles for 1.5 million. Total cost about 25 million.
By year six he is down to his last 100 million which will give him about 5 to maintain his vast amount of properties and expensive toys. He is well on the way to bankruptcy.
Of course if your an idiot you can blow all the money. If you spend like that then it doesn’t matter lump or not, you’ll likely be bankrupt either way. They might even take the annuity and then decide to sell it to get cash sooner.
If you are responsible enough and understand that you want the money to last the rest of your life then what I said applies. Otherwise, yeah, take the 30 year but your probably doomed either way.
What are the winning numbers?!?
5 28 62 65 70 mega ball 5
any winners?
“$514,233,090: What the Mega Millions winner in South Carolina will net for a lump sum payout after federal and state taxes are paid. That’s 33.5% of the advertised $1.537 Billion prize.”
Put $400MM of that in a fund with 5% interest annually, and let it accrue for 30 years, and you get $1.73B. Plus the $114MM you would take upfront in this scenario and you get way past the $1.6B. Obviously, the lottery advertising the FV of the price instead of the PV is dubious, but it’s not like it’s impossible to get that 1.6B if you invest it well, even in pretty safe investments.
What fund earns 5% with zero risk?
take all and invest- have double or more in 30 years!
Great article. Love the poll.
I am not buying it at all. It does not pay to have your life turned upside down.
That’s really a negative way of looking at it. Imagine how many beneficiaries of tzedaka organizations would expand, grow, and strengthen if one donated their winnings!
I would ask my LOR
I’m pretty surprised how many people would take the lump sum. If we’re expecting Moshiach pretty soon though…then again the money won’t be so relevant in that case. So, what’s wrong with half of $24MM/y plus interest?
You make an interesting point about the state tax on the annuity option, I haven’t seen that written on elsewhere, I wonder how that works in reality. I have read that it is possible in many states to initially take annuity, and then take the lump sum later, I wonder how that would work with your state tax loophole.
In terms of the 70% stat, while very interesting, I don’t think that means that every one of ‘us’ should apply that stat to ourselves. The lottery ‘contestants’ are in general highly skewed to financially illiterate individuals, hence the reason for a large portion of them going bankrupt after winning. That doesn’t necessarily apply for a fiscally savvy person who puts in a ticket every few years when the jackpot crosses $1B.
Is this a bad idea?
50% lump sum
Than
50% over 30 years
It gives me the kick now and then I should be fine for the next 30 years
AFAIK, there’s no option to split like that. If it was an option, I agree that it would be very popular. I don’t think I’d split it 50/50 like you suggest, but I certainly would want a portion of my portfolio in safe investment vehicles anyway.
Take lump sum and buy gold.
The US dollar will be worthless soon
(Not playing holier than thou) I would take the lump sum and buy (even if only a few) shares in every school, yeshiva, school, organization etc… by giving to them, and there would still be some remaining to continue living a normal life both in this world and next.
Lump sum for maximum control
On brand…I’ll be $2 richer not buying it. Because $2 is too much and a billion is not enough. If you or someone you know has a gambling problem call 1-800-Gambler or PM me on DDF. Thank you Dan for this Soapbox you so graciously allow me.
I would ask for the 800-Gambler disclaimer on these posts if you’re so inclined. Its on every lottery ticket anyway.
Good for you 12 years sober now (assuming your screen name is the same from the previous time you commented in 2018:)
no option for non of the above?
I don’t want to win the lottery.
Why not Abe? You don’t know of any yeshivas or Tomchei Shabbos programs which would benefit from tzedaka? If Hashem offers you a blessing, and you prefer to not receive it, it’s simply too bad.
“Of course it’s only $1.6 billion if you take the payments over 30 years. If you want the payments in a lump sum today you would get $904 million.”
please correct to “you would [b]ONLY[/b] get $904 million
So is the Chicago winner a ddf member? Or maybe even a poster in this thread?!
Checked in after Shabbos…. Winning ticket sold in Illinois….yes! Chicago area… yes! Des Plaines Speedway…. better luck next time. Consolation prize for also buying my ticket at a store on Touhy?
Lump sum.
The federal and state governments may raise the tax rates on big income earners, so better to pay the tax authorities their amount under current rates than gamble on future rates.
To be honest, 1.3 Billion is too much money, so I didn’t even buy a ticket.
According to the New York Daily News, 70 percent of lottery winners end up broke within seven years. Even worse, several winners have died horribly or witnessed those close to them suffer.
https://www.abc15.com/news/state/curse-of-the-lottery-why-winning-the-mega-millions-could-kill-you
https://time.com/4176128/powerball-jackpot-lottery-winners/
If you die within the 30 years, do the payments end? If the winnings aren’t transferable, then it’s risky that one will lose out on all 30 year’s worth of payments. A 70 year old would need to live to age 100 to fully benefit.
“but it’s a decent rate of return considering that there is zero risk of losing the funds.”
With AOC and the Democrats theres always a risk bigtime.
Better to convert into Shelels and move to Israel!
We all know what happened to Herzl’s Polish guaranteed pension
Cash value is now less than 50% of the prize, whereas IIRC, it used to be 60-65%?
Is that due to the increased interest rate environment?
Ya, after looking this up, I was right. (https://www.mlive.com/lottery/2022/11/why-is-the-cash-option-for-the-12b-powerball-drawing-so-low-the-answer-might-surprise-you.html)
Interesting to consider that even if the advertised jackpot achieves the world record, it’s partially because of the increased interest rate environment. The other 2 largest jackpots in the $1.5Bs paid out a cash value of ~875-975M, whereas here we’re looking at currently ~750M (even if it were to hit a record setting $1.6B, the cash value would be below $800M).
Before claiming the prize, purchase a home/condo in a state with no income taxes, claim full residency there, and then turn in the ticket. It would be a darn shame to pay ~10% to NY State, and nearly 4% to NYC.
“That’s not an amazing rate, but it’s a decent rate of return considering that there is zero risk of losing the funds.”
The zero risk statement is incorrect. Governments (and insurers/annuity companies) have defaulted on payments they owe in the past and will do so again in the future. Not saying its a slam dunk to take the lump sum (although I would) just saying the correct calculus should not have this assumption baked in.
1.9 billion for now!
No discussion of tax deductions and other offsets such as depreciation via real estate investments, which realistically have an annual limit so its much easier to lower your overall tax burden if you take the annual payments.
Unfortunately, depreciation on real estate is at best deductible as a business loss (for most people it is not allowed at all as it is considered a passive loss), under current tax law there is something called the Excess Business Loss rule which limits business losses to 500,000 per year above all business income. As lottery winnings are not business income the offset is very minimal. Good Luck anyway
Zeroth world problems.
Dan would you still continue dansdeals if you win?
Can I still buy one? Or is it too late
Been delayed so strange
I’m reading that ita actually a fixed, equal annuity, which makes the implied interest rate about 6%? Which is correct?
MegaMillions structures the annuity as fixed annual payouts. Powerball structures the annuity with payments increasing by 5% per year. The implied interest rate in this case is 4.3%.
OK, now we’re actually at the largest cash value prize in history. Over $1B!!
Can everyone please stop promoting the lottery, its called the poor mans tax for a reason!!!, stop relying on windfalls and make your own money….
Dan,
If a charity- Tzedaka wins this prize would it be exempt from taxes
Sure, if you want the IRS to scrutinize your charity, and what it was set up for, and what it’s doing with the winnings, and why it was spending its money on lottery tickets.
No option to redeem it in points?
lump sum – have you heard of inflation?