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Post by mikegarrison on Jan 9, 2011 18:51:03 GMT -5
One of the two winners of $190M in the latest Mega Millions lottery has not yet claimed it.
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Post by BearClause on Jan 10, 2011 16:22:46 GMT -5
One of the two winners of $190M in the latest Mega Millions lottery has not yet claimed it. I do understand that technically a lump sum payment is better financially than the graduated annuity. For a large jackpot the average tax rate for the payments is not much less than the lump sum, and if well invested the lump sum will go a long way. However - some people can't resist the temptation to spend it all. I was listening to a radio piece by someone who was a former lump sum payment negotiator. He was apparently in the business for 7 years and met some strange people along the way, including someone who met him at a store where she was scratching off lottery tickets while he gave her the paperwork to sign. For the most part the lotteries have put a severe crimp in those businesses. I remember when the California Lottery first switched to a lump sum payment for Super Lotto. The request for a lump sum had to be made when the ticket was purchased. I never understood why then, but they eventually moved to the decision made on lump sum or annuity to the time the paperwork is filled out.
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Post by mikegarrison on Jan 10, 2011 16:50:09 GMT -5
One of the two winners of $190M in the latest Mega Millions lottery has not yet claimed it. I do understand that technically a lump sum payment is better financially than the graduated annuity. For a large jackpot the average tax rate for the payments is not much less than the lump sum, and if well invested the lump sum will go a long way. However - some people can't resist the temptation to spend it all. I was listening to a radio piece by someone who was a former lump sum payment negotiator. He was apparently in the business for 7 years and met some strange people along the way, including someone who met him at a store where she was scratching off lottery tickets while he gave her the paperwork to sign. For the most part the lotteries have put a severe crimp in those businesses. I remember when the California Lottery first switched to a lump sum payment for Super Lotto. The request for a lump sum had to be made when the ticket was purchased. I never understood why then, but they eventually moved to the decision made on lump sum or annuity to the time the paperwork is filled out. Well it all depends on what the discount rate is. How much is money now worth to you, versus money in the future? How old are you? How long do you expect to live? What do you want to do with the money? On a purely financial basis, if you predict that you can make N% return (factoring in inflation and taxes), then if the annuity provides better than N%, you should take it. If it provides worse than N%, you should take the lump sum and invest it yourself. Of course, there is less risk (but not zero risk!) in accepting the annuity, so you would want to factor that in too.
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Post by BearClause on Jan 10, 2011 23:11:22 GMT -5
Well it all depends on what the discount rate is. How much is money now worth to you, versus money in the future? How old are you? How long do you expect to live? What do you want to do with the money? On a purely financial basis, if you predict that you can make N% return (factoring in inflation and taxes), then if the annuity provides better than N%, you should take it. If it provides worse than N%, you should take the lump sum and invest it yourself. Of course, there is less risk (but not zero risk!) in accepting the annuity, so you would want to factor that in too. I'd still take lump sum if it were an option. Anyone with enough money (tens of millions) can secure the services of high-priced investment advisors who wouldn't even return the phone call of more modest investors. The important thing is to resist the temptation to spend it all. If I ever won a lottery jackpot with an after-tax lump sum in the tens of millions I'd probably just fix my car, fix my house, and invest about 90% of it. Maybe also buy a minivan to haul around the young'un. Other than that I tend to be cheap. It does change the dynamic if the neighbors know. I've read one recommendation that big jackpot winners should move.
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Post by mikegarrison on Jan 10, 2011 23:57:15 GMT -5
It does change the dynamic if the neighbors know. I've read one recommendation that big jackpot winners should move. In Pugetopolis there are lots of jackpot winners. We call them "Microsoft Millionaires," but it wasn't just Microsoft. The Bay Area has a lot of dot-com jackpot winners too, doesn't it? The idea that the next-door neighbor who seems pretty much like you may have ten or a hundred or (rarely) a thousand times as much money as you have isn't as unusual here as it would be in many other places.
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Post by BearClause on Jan 11, 2011 12:40:29 GMT -5
It does change the dynamic if the neighbors know. I've read one recommendation that big jackpot winners should move. In Pugetopolis there are lots of jackpot winners. We call them "Microsoft Millionaires," but it wasn't just Microsoft. The Bay Area has a lot of dot-com jackpot winners too, doesn't it? The idea that the next-door neighbor who seems pretty much like you may have ten or a hundred or (rarely) a thousand times as much money as you have isn't as unusual here as it would be in many other places. Somehow I missed out on the jackpot. I remember a billboard up on US-101 somewhere between San Mateo and Mountain View that had a picture of a young woman which read "She's a 28 year old retiree". It hinted that she got rich from stock options after her company went IPO. Still - a person well off from stock options isn't going to have the same publicity that a lottery winner has, and can likely remain more or less anonymous about their wealth. I've read some lottery rules out of curiosity, and for certain prizes at the very least one has to submit to name and city of residence. The big jackpot winners usually have to submit to having photos taken and the right to use their name. In the Bay Area most people who've hit it big move to upscale communities like Atherton, Blackhawk, or Los Altos Hills. There are also pockets of extreme wealth in some bedroom communities, although they tend to be separate. Or one could win a lotter jackpot, move to an upscale retirement community, and receive golf swing/relationship advice like in this series of Heineken Light ads:
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Post by lonewolf on Jan 11, 2011 14:23:10 GMT -5
If I ever won a lottery jackpot with an after-tax lump sum in the tens of millions I'd probably just fix my car, fix my house, and invest about 90% of it. Maybe also buy a minivan to haul around the young'un. Other than that I tend to be cheap. Splurge on a RV...then just drive around and watch vb matches.
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Post by BearClause on Jan 11, 2011 14:54:03 GMT -5
If I ever won a lottery jackpot with an after-tax lump sum in the tens of millions I'd probably just fix my car, fix my house, and invest about 90% of it. Maybe also buy a minivan to haul around the young'un. Other than that I tend to be cheap. Splurge on a RV...then just drive around and watch vb matches. Perhaps. I love camping, but my other half doesn't particularly care for tents unless it's warm. I'm told that it would be fine if we could one day afford an RV. However - I'm not too big on trying to handle a large RV and the camper shells don't seem like much of an upgrade over a nylon tent. I'd hope that I wouldn't be this family, which started with a 10 million dollar inheritance (after taxes) and lost it all buying a few fancy cars, some expensive property (with extensive improvements) that was difficult to sell, and finally losing what he had investing on margin when the markets collapsed. The head of the family says that he wished that he had invested most of it in more stable bonds. www.nytimes.com/2010/11/26/business/26fall.html
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Post by Not Me on Jan 11, 2011 20:34:49 GMT -5
If I won I'd buy a new house. then another new house for my wife. And it would be FAR FAR away from the first house.
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