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Old 04-03-2018, 07:04 PM
 
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Quote:
Originally Posted by Trishim View Post
I get you don't get the entire amount for various reasons, but it's still a lot especially at the higher levels.
A: Because most people who take the lump sum are broke or bankrupt within 5 years.
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Old 04-03-2018, 07:41 PM
 
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but if you took the annunity, you never be broke because you would not have the chance to blow everything, you got another check coming in a year time
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Old 04-03-2018, 11:18 PM
 
Location: Silicon Valley
2,759 posts, read 1,211,909 times
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Quote:
Originally Posted by MLSFan View Post
how is it less? the annuity grows at about the same rate as you investing it

take the lump sum now and pay into the highest tax bracket then pay long term cap gains from then on

or pay into the highest tax bracket for the next 30 years... mathmetically it is all the same but you have less control over it

maybe if someone lived in a high state income state? they take the annuity so they can move states then buy it out then?
Regarding the growth, perhaps, but that's the nut of it I suppose. Why don't retirees put 100% of their retirement savings into equities...it grows more over time than bonds do. Of course, to get that haul they needed to save and select funds.

The lottery winner had to have the intelligence to spend a couple dollars on something that's a sure loser. I couldn't imagine actively investing $300M of my own money and I love trading stocks. How's some cashier going to do it?

No, the right answer is if you win that big of money, you put the money in the bank and you just consume...you don't even worry about making money because there's no point. Take the guaranteed gain.

The second answer comes to us from....the graduated tax rate system. You end up hitting the highest rate each year, but at least you can fill the lower tax rates first if you spread it over the years.
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Old 04-04-2018, 07:56 AM
 
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Your scenario makes a lot of assumptions about what is “right”.

Keep the money in the bank? How many banks to keep it fdic insured? Does having that many banks increase your risk of fraud and mismanagement?

By avoiding risk to your money by not investing, you’re basically locking in an even greater risk by having inflation chip away at it. While I wouldn’t put it in risky investments, I wouldn’t avoid market risk at the expense of taking huge inflation risk.

When you’re talking about the lower marginal tax brackets, that would barely put a dent in your effective tax rate. You would quickly hit the cap each year so it would be a minor consideration.

I’d rather have the money upfront and have the time value of money working for me. When you basically have f u money, I wouldn’t go purely to optimize my payout by slowly being paid. That takes away the allure of a huge lottery winning. Unfortunately, I’ll never win the lottery because I won’t play it. I’m too much of a nerd with negative expected values lol.


Personally, I would take the lump sum. Half would be open to spending. Half would be locked away to kick out returns for life. I would pay 2 or 3 elite financial advisers/attourneys for high net worth individuals working independently and they would be audited by one of the big four quarterly.

Then I would spend all of my time doing only what I wanted to be doing.

Last edited by Thatsright19; 04-04-2018 at 08:34 AM..
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Old 04-04-2018, 08:05 AM
 
Location: SW Florida
9,109 posts, read 3,927,959 times
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I would take the lump sum for a few reasons:


1) I'm 63
2) I don't trust the government to pay me if I took the yearly payment option
3) I could do a lot of good with my favorite charities with a large lottery winning
4) Nobody in my family would ever have to worry about money ever again
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Old 04-04-2018, 08:07 AM
 
4,580 posts, read 6,143,617 times
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Take the lump sum. Your still in profit mode and you make decisions on how and when to spend the money. Even if someone blows it all they are still ahead...Get professional advice and live..
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Old 04-04-2018, 08:09 AM
 
3,969 posts, read 1,596,412 times
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Quote:
Originally Posted by mysticaltyger View Post
A: Because most people who take the lump sum are broke or bankrupt within 5 years.
Those people would be broke or bankrupt with any windfall in five years.
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Old 04-04-2018, 08:11 AM
 
Location: Texas
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Lump sum is what I'd do.

I already manage my money well.
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Old 04-04-2018, 08:12 AM
 
Location: Texas
42,220 posts, read 49,768,169 times
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Quote:
Originally Posted by mysticaltyger View Post
A: Because most people who take the lump sum are broke or bankrupt within 5 years.
That has more to do with the nature of people who play the lottery than any issues with taking the lump sum.
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Old 04-04-2018, 08:40 AM
 
2,244 posts, read 1,388,386 times
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Quote:
Originally Posted by brownbagg View Post
but if you took the annunity, you never be broke because you would not have the chance to blow everything, you got another check coming in a year time
That in no way ensures you won’t still go broke just the same. You could manage your cashflow, ongoing expenses, and types of assets just as poorly with a stream of payments as someone could with a lump sum. Suddenly, those future payments aren’t yours anymore with ongoing legal obligations for it.

If a big revenue number coming in every year was enough to avoid problems, you wouldn’t have seen companies like GM or Sears go down.
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