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I pity them in a way. They took cash option. That's 877 million...The IRS will then take half of that. They walk away with 435 million.....
I know it's not my money, but had they looked at it smartly, spreading it over 30 years means THEY get more, not less...
That is the most bizarre logic I've ever heard.
First, if you take a lump sum and achieve a 7% return on your investments (Just for comparison, the historical average of the S&P is 10%) from the outset, then that $435,000,000 becomes $1,349,000,000. If you actually earn the S&P's historical average of 10%, then you're actually getting $1,740,000,000. And that doesn't even include dividend income.
Second of all, if you die any time during those thirty years of receiving the annuity, the tax bill for your winnings comes due immediately, regardless of whether or not you've actually collected those winnings. There have been lottery winners who took the annuity who had to take out massive insurance policies just to cover the potential tax bill. And there have been people who learned that they needed to write a gigantic check to cover the tax bill of the family member who died.
Third, you're assuming that the government would be solvent enough to make those future payments. All you have to do is look at the State of Illinois to know that it's quite possible that a state might not meet its future obligations to lottery winners. OR the government (Federal or State) doesn't jack up the tax rate further. That's a definite possibility.
Fourth, you're not taking into account the discount rate, which is essentially how those annualized earnings decrease over time when you take inflation into account. For example, the purchasing power of a dollar in 1989 would be around 50 cents today. And that's with very mild inflation over the past thirty years. So that $29,000,000 annuity's purchasing power in 2049 would be considerably reduced.
Fifth, you can do a heck of a lot more with $435 million off the bat than you can do with your first annuity of $29 million. Move it overseas, for instance, where people can't get to it.
Last edited by MinivanDriver; 03-05-2019 at 02:31 PM..
Only thing I can think of is that the winner consulted a lawyer and financial advisers, and they said just wait a while and let the hype go away, then claim, and during this time, they set up everything and a way for the winner to simply just fade away, take care of things, etc, issues getting this much money would impact.
This is exactly it. The Lottery Commissions advise people to get their ducks in a row first before coming forward to claim their prizes. With a sudden windfall like this there is a LOT to do first.
This is exactly it. The Lottery Commissions advise people to get their ducks in a row first before coming forward to claim their prizes. With a sudden windfall like this there is a LOT to do first.
I don't disagree, but I think waiting 150 of 180 days was perhaps a bit excessive.
I figure when you have half a billion dollars coming to you, there's a financial advisor willing to work some overtime for you.
I certainly think waiting weeks to a month is a given.. I can see waiting up to 3 months. Past that.. You're halfway past the claiming period and.. Every day that goes by is another day that something could go horribly wrong.
The only thing worse than winning half a billion dollars would be losing half a billion dollars.
I don't disagree, but I think waiting 150 of 180 days was perhaps a bit excessive.
I figure when you have half a billion dollars coming to you, there's a financial advisor willing to work some overtime for you.
I certainly think waiting weeks to a month is a given.. I can see waiting up to 3 months. Past that.. You're halfway past the claiming period and.. Every day that goes by is another day that something could go horribly wrong.
The only thing worse than winning half a billion dollars would be losing half a billion dollars.
While I agree, and 95%+ of the lottery winners that win over $100 million tend to come forward in the first week or two, at most usually a month, but recently there was a couple who waited the entire 6 months to claim their prize.
If you remember the Powerball back in January 2016 that was worth $1.6 Billion and three tickets hit, one in Florida, another in Tennessee and the third in California, each lump sum ticket worth $327 million (before taxes) and the two tickets from TN and FL were claimed right away. But the couple from California waited until July 2016 to claim their $327 million, so it does happen with mega lottery winners waiting 5-6 months, it's just rare.
That's actually another potential reason why the winner hasn't come forward: He's changing residency.
The highest South Carolina tax rate is 7%. He'll save $52 million by simply throwing his stuff into a moving van and heading south.
We went through this in another lottery thread; winnings are taxed like earnings, that is in the state where won. This happens even if the winner lives in another state and or has moved away subsequent to claiming. In short winning Mega Millions, Power Ball or whatever lottery is no different than being employed in a certain state; it will take its cut regardless.
If winner does live out of state then then usually (as with employed in one state but living in an other), he/she will receive a credit on home state's income taxes (if any) for sums paid to state where winning ticket is sold. Should resident state's tax share equal more than what was paid in winning state, lottery winner will have to pony up the difference. OTOH if less, then credit and or maybe a refund enters into the picture.
"If you are a South Carolina resident, you are generally required to file a South Carolina Income Tax return if you are required to file a federal return. If you are a nonresident or part-year resident, you are generally required to file a South Carolina return if you work in South Carolina or are receiving income from rental property, businesses, or other investments in South Carolina. "
"You are a South Carolina resident, even if you live outside South Carolina, when:
Your intention is to maintain South Carolina as your permanent home; AND
South Carolina is the center of your financial, social, and family life; AND
When you are away, South Carolina is the place to which you intend to return.
You are a nonresident if your permanent home is outside South Carolina all year and none of the above apply."
it won't be a secret for long. It's south carolina - just look to see who suddenly has a shiny new set of plaster 7 dwarves in front of the trailer, or a brand new washer and drier on the porch.
I don't disagree, but I think waiting 150 of 180 days was perhaps a bit excessive.
I figure when you have half a billion dollars coming to you, there's a financial advisor willing to work some overtime for you.
I certainly think waiting weeks to a month is a given.. I can see waiting up to 3 months. Past that.. You're halfway past the claiming period and.. Every day that goes by is another day that something could go horribly wrong.
The only thing worse than winning half a billion dollars would be losing half a billion dollars.
I agree that five months is a really long time and that most people could make whatever changes they wanted in less time than that....... Maybe he just wanted to keep the suspense going.
That's actually another potential reason why the winner hasn't come forward: He's changing residency.
The highest South Carolina tax rate is 7%. He'll save $52 million by simply throwing his stuff into a moving van and heading south.
If he was a resident of South Carolina when he won the lottery, moving to Florida won’t change the fact that he will be paying some tax to South Carolina.
Power ball payouts are NOT a set amount for 30 years. Initial payments are less and the are increased over time. I think the annual increase rate is about 4%. Just a clever ploy for them to keep the money longer, and it also serves to reduce the NPV of the cash payout.
I didn't look into the mega lottery, but assume it is the same.
Minor pet peeve, but it’s actually just PV, not NPV.
Minor pet peeve, but it’s actually just PV, not NPV.
lol - uh, okay.
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