[ARCHIVED THREAD] - DELETE (Page 1 of 2)
Posted: 2/22/2006 10:56:41 AM EDT
Just fu**ing great. |
Lets see. 365 million divided up 8 ways is 45.625 million dollars each. For an average 50,000 dollar a year payout per million every year, they would receive roughly 2.25 million dollars per year for a 20 year payout. Instead, they chose to sacrifice THIRTY MILLION DOLLARS UP FRONT for a 15 million dollar immediate payout. Even when they get rich, they don't get smart. ETA -- With reasonable investments within 10 years they could turn the roughly 20 million they would receive into a significant ammount more and STILL be receiving their yearly 2.25 million dollar payouts. Again, a pretty stupid move. |
No, STUPID for them, as they would get 16 million dollars in just 8 years rather than taking 15 million up front. If they had taken the normal payout, each of them would have had over 45 million in the next 20 years instead of 15 million right now. They gave well over half of their money away TO THE LOTTERY PEOPLE. That, my friends, was f*cking stupid. |
I'll take that bet. Don'r forget, these are Nebraskans. Not a bunch of New Yorkers. 
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Not necessarily. You need some time and learning to figure out how to handle money. You aren't just born knowing how. With a steady 2.25 million dollar per year income, they could really make some serious investment headway, under the right circumstances they might even be able to earn 50% on their 45 million, leaving them with almost 70 million. It is easier to make money once you have it.
Legal battles are absolutely certain. Since they have already demonstrated a complete lack of financial sense, bankruptcy isn't a bad bet either. |
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Taking 15.5 million dollars of free money is pretty stupid when you could just as easily have over 45 million dollars of free money. It is a simple math problem. 45,625,000 > 15,500,000 |
Your figures are all wrong. If they took the yearly payout option (It's over 30 years) they would only be getting ~ $0.75 Mil/year after taxes. |
Not only that, but taking a 30 year payout is a risky scenario in terms of "unknowns" The democrats could come back to power and enact a 98% tax on payouts of gaming winnings, for example. Again, sometimes its better to go with the devil you know. |
Why is there a pronounciation guide for each of their names? (Em-Ceee-kneeel-senn) I think it's pronounced: Rich Mother-fvckers! |
Actually it's not a stupid move. It's a slightly conservative & eminently fiscally prudent move. Tell me how many of those people are guaranteed to live 20 years to collect their $2.25 mill per year. The annuity only pays out a lump sum, like they took, or a fixed amount per year for 20 years or UNTIL THAT PERSON DIES. Suppose that one of the people takes their $2.25 mill, buys a new house, several new cars, buys that farm/vacation home that they always wanted, goes on a few cool expensive vacations & is left with a few bucks to tide them over till the next payment. Then that person comes home & gets run over buy a bus. How could you say that you took the best care of your family that you could? You could be a hardass & say "WTF do I care? I'm dead anyhow" but how could you say that you took the best care that you could of your family? |
WHAT HAPPENS TO AN ANNUITY PRIZE IF THE WINNER DIES? A lottery 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. |
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It's not so much of a cut and dry decision. It all depends on what you think you can do investing (or having an investor do it for you). You can either take $15 million now (after taxes) or in reality take about $1 million per year for 30 years (again after taxes assuming the current tax rate of 35%). This is calculated by taking the $365 mil, divide by 8 members of the group ($45 mil each), times 0.65 for taxes ($30 mil each), then divide by the 30 year payout ($1 mil per year). A $15 mil investment now can add up to a lot more than the $1 mil per year if done right. The guy that handles our funds can reasonably be expected to earn about 10% per year on average (as high as 27% and as low as a 4% loss). If I take the initial $15 mil and plug in 10% per year, then it comes out to around $260 mil. If I take the annuity and keep investing with him, and calculate on the same 10% per year, then it comes out to about $164 mil. This, of course, is all dependent on whether or not he can maintain the investment numbers. If he doesn't perform well, then you're better off with the annuity. If performs really well, then you're much better off with the lump sum. |
The force of interest is not strong with this one. |
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You dont know much about investing, do ya? 15,500,000 x 1.0XX (Whatever rate you choose for whatever level of risk) over 20 years will produce more money then the 45,625,000. You're also not accounting for inflation. |
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You guys seem to be pretty mixed up. For one, the yearly payout is over 30 years(changed last year). Next, it does not matter which you pick as far as the Powerball people care. If you take the lump sum, they deduct the amount of money they would otherwise get from investing YOUR MONEY over the 30 year period. If you take a yearly paycheck, YOU LOSE. This is because you could otherwise invest the money, but instead, Powerball invest it, and they keep the money earned off it. |
You know what they say to do if you win the lottery? I'mtalking about the people who are financial advisors and deal with this kind of thing? ALWAYS TAKE THE LUMP SUM! You are better off getting all the money up front and investing wisely than getting it dripped out over twenty years, losing money to inflation, and risking that you might be under a democractic administration that jacks up the tax rate to 50%. Take the lump sum, invest wisely, and you will be much better off than the ones who take the 20 year payout. |
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No, they gave up $15 mil up front - at least thats the way it works for most lottos. You win $45 mil. You sacrifice about 1/3 for the immediate payout $45-$15mil = $30mil. You have to pay about 50% taxes (which you would still get stuck with even with a yearly payout) = $15 mil. |
How do you figure that if they take it in yearly payments that they would get the entire 45 mil? That yearly payout is still gonna be taxed heavily and they won't get the entire amount. |
I played with the numbers a bit. If they took 5 million to play with, and invested the other 10 million in something with a return of 5% (very conservative), compounded annually, they would have $43,219,432 at the end of the 30 years. If they were good investors, and made 10% (which one could do with good financial advice in the stock market and a little luck) a 10 million initial investment would become $174,494,022 in 30 years. 10 million for toys, 5 million investment, 5% return = $21,609,711 after 30 years. 10 million for toys, 5 million investment, 10% return = $87,247,011 after 30 years. As for investment advice, its simple. If you don't know anything CALL CHARLES SCHWAB, or Merrill, or any of the other big-name investment companies. Taking the payout is like investing in the lotto company. There are much better investments out there. Find someone who will lead you to them. Edited to add: 30 years is an eternity with compound interest. Even small sums turn into huge numbers once they've been compounding that long. Compound interest is a exponential function, so think of how that graph works. That's why Fry was a multi-billionaire in Futurama from a 4 cent investment compounded over hundreds of years. |
I agree. Invest it and live off the interest. 
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Well no. There is such a thing called inflation adjustment. In that inflation erodes the value of money through time. Prime example is the cost of a house. In the 1950's homes were somewhere in the 30-50K range. Cars are in the 5-10K range. Where is the value of a home or a mid size car these days. The calculation used for lottery winning is based on the time value of of money. Inflation adjusted cost for 26yrs is roughly 60%, roughly a 5% internal rate of return. Then you take into account gambling tax of 40%. In all actuality. Investing in the funds in a decent mutual fund returning 10%, you would come out far far ahead. |
That is why you need to set up a trust or a corporation to claim the prize. Corporation would be best. Edges out any claims against it from so called "relatives" |
Not a lot of Finance 101 types here...  In (fairly) layman's terms: en.wikipedia.org/wiki/Time_value_of_money 
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  Time value of money! |
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It's simple. 1. You take the payouts over 30 years or whatever. 2. You borrow against sed payouts at fixed rates. You use your 1,000,000 a year for debt service. 3. You invest the borrowed money in real estate or whatever just so you beat the 5-6% interest on the debt. 4. Live off the juice. 5. Write off any interest and expenses you can, pay very little in the way of taxes by changing whatever your doing into some biz or non profit. With 1m govt guaranteed cash flow you can do a lot of shit and end up with a money machine. Much better then a comparatively weak and less secure return on 15 mill cash. |
er...no First, as stated, inflation decrease the value of your payouts over the years. Second, you could be screwed in 10 years when president hillary raises the tax rate to 60%. Always take the lump sum from the lotto. Always. |
Hate to bust your bubble dude. But LOTTO is not a GOVT guaranteed cash flow. It is a state sponsored pool run by a private company ie POWERBALL. They take the money from people playing it. Invest it in a fixed rate annuity that is annuitized for 26yrs if you go that route. If not they just hand you the cash. Since it is state sponsored, not GUARANTEED, hell states don't even guarantee their own bonds and have to get em insured to get a good rating. If they go tits up 10yrs down the road, they will give you whatever is left in the kitty and you are shit outta luck. So lordtrader, how do you know this??? I worked for one of the investment firm that handled the CA state lottery!! 
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Agreed... Id take the 15.. 2mil invested in IRAs and such, 5mil is gold, 5mil invested in something to get an annual return, the rest to build my dream cabin on a few hundred acres and anything else I want  .
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The inflation rate in moot because the money is invested and the payouts are just for service of fixed debt. And Hillary could do a lot of things, but I'm not making my financial decisions based on it. I think it comes down to what you’re happy with. I would want to leverage the situation far beyond a sweet house, cars and such. To each their own, 15 mill cash is just fine for most. |
I did not know that, I though it was a state thing. Anyway my theory stands, and a fixed annuity sounds fine for my cash flow. Plus I’m more then willing to believe that the lottery will stay solvent for at least my lifetime. |
 [Steve Miller Band]Go on, take the money and run![/Steve Miller Band] $15 M after taxes, free & clear. At a minimum you can get 5% on that forever - that means that your principal basis doubles every 14.4 years! You are not locked into lottery gravy train for the rest of your life. Now you have freedom to do as you please w/ your $. |
Um, the only one showing dubious financial judgement is you. To turn $15 mil into $45 mil in 20 years, you need a 6% annual yield. 10-year treasury bills are paying 4.59% right now. About as low risk as you can get. If you want to be a little riskier, you could invest your money in tax-free municipal bonds. Even with lower yields, once the tax free aspect is taken into account, you can do a lot better than that 6% after taxes are factored in, or your $2.25 mil a year that you are advocating for our lottery winners. Taking the cash option is a no-brainer. Edited to add, since someone indicated the payout is over 30 years, 10-year T-bills gives you $55 million after 30 years, so it's even more lopsided for the cash payout. |
You should be pretty safe with the annuity payments. It is actually funded better than the US Social Security. Depending on the state, it can be double funded and reinsured. Most multi state lotteries are. There are also many small unclaimed prizes that goes back into funding it. They alway use large insurance companies for their annuities. Cos. like AIG, AXA, etc. Althought I heard the LA state lotto uses some local insurance company. Not really sure about that one. I am more familiar with POWERBALL, MEGA Million and most of the west coast state lotto's. These companies that run the lotto gives a cut to the states. Most supposedly give it to the school systems. But use like 75% of it for "administrative cost"  Then they have the audacity to publish the gross amount earned. NOt the amount after the "administrative cost" deducted. That really chaps my hide. BTW here's is the website of the company that runs POWERBALL MUSL
ET add: These state will have a lotto commission that audits and oversees operations of these companies. So you know that politicians are looking out for your best interest.  
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Actually J_W777 is mixing pre and post tax figures. The split would have been $45 million per person if annuitized (yearly payouts--I think LT is right, they changed to 26 years). Or $22 Million (NOT $15m) PRE-TAX for each of them. When I bought a ticket (hey, I'm a sucker, too). I figure to get 1/3 of the total announced Jackpot as a lump sum.....Basically for a $30m jackpot--you get a $15m Lump Sum minus roughly 1/3 for taxes. And, as several have pointed out....at a relatively moderate rate of return, that $15m grows pretty quickly. I think I read somewhere that before you even say you won the lottery, you should hire three people...A good Accountant/Tax Specialist, a Civil Attorney, and a Financial Advisor. AFARR |