U.S. CitiesCity-Data Forum Index
Go Back   City-Data Forum > General Forums > Economics
 [Register]
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
View detailed profile (Advanced) or search
site with Google Custom Search

Search Forums  (Advanced)
Reply Start New Thread
 
Old 04-04-2018, 08:51 AM
 
Location: Silicon Valley
2,744 posts, read 1,207,954 times
Reputation: 5039

Advertisements

Quote:
Originally Posted by Thatsright19 View Post
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.


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.
So does your name, but in the event someone that's not ever made money before falls into substantial wealth that will pay for their lifetime consumption hundreds of times over, the last thing they should do is invest it and take on market risk. There's simply no such thing as risk free investment. There is such a thing as getting excess deposit insurance however.

Imagine going to prison for shoplifting candy at a store and being sentenced in a maximum security with death row inmates. You're seeking safety at that point amongst the wolves. Inversely, that's where the lottery winner is among the truly wealthy...and the smart one puts the money in the bank and just worries about consumption.
Reply With Quote Quick reply to this message

 
Old 04-04-2018, 08:54 AM
 
17,605 posts, read 12,197,156 times
Reputation: 12821
Quote:
Originally Posted by stan4 View Post
Lump sum is what I'd do.

I already manage my money well.
If you already managed your money well why wouldn’t you take the lump sum?
Reply With Quote Quick reply to this message
 
Old 04-04-2018, 09:01 AM
 
2,240 posts, read 1,385,700 times
Reputation: 4894
Quote:
Originally Posted by artillery77 View Post
So does your name but in the event someone that's not ever made money before falls into substantial wealth that will pay for their lifetime consumption hundreds of times over, the last thing they should do is invest it and take on market risk. There's simply no such thing as risk free investment. There is such a thing as getting excess deposit insurance however.

Imagine going to prison for shoplifting candy at a store and being sentenced in a maximum security with death row inmates. You're seeking safety at that point amongst the wolves. Inversely, that's where the lottery winner is among the truly wealthy...and the smart one puts the money in the bank and just worries about consumption.
The moment we just shared when I got it. I think I love you right now.

Last edited by Thatsright19; 04-04-2018 at 09:36 AM..
Reply With Quote Quick reply to this message
 
Old 04-04-2018, 10:16 AM
 
Location: Copenhagen, Denmark
9,864 posts, read 8,000,104 times
Reputation: 11210
If you won $1,000,000 in the lottery, which would you prefer , if your opportunity cost of capital was 5%/year and constant over time:
1. The lump sum, now.
2. An annual payment of $129,500/year for 10 years, or
3. An annual payment of $80,240/year for 20 years?

Why?
Reply With Quote Quick reply to this message
 
Old 04-04-2018, 10:25 AM
 
2,240 posts, read 1,385,700 times
Reputation: 4894
Quote:
Originally Posted by Frihed89 View Post
If you won $1,000,000 in the lottery, which would you prefer , if your opportunity cost of capital was 5%/year and constant over time:
1. The lump sum, now.
2. An annual payment of $129,500/year for 10 years, or
3. An annual payment of $80,240/year for 20 years?

Why?
Let me crack out the old tvm solver....

Or I’ll hire someone to do it because I’m off to the beach.
Reply With Quote Quick reply to this message
 
Old 04-04-2018, 10:42 AM
 
Location: Oregon, formerly Texas
5,242 posts, read 3,393,710 times
Reputation: 8783
I would take the lump sum no matter what & for one reason: I want control of that money, not the state, not a lottery fund. Lottery funds can disappear.

What if the state legislature closes the lottery fund due to financial exigency or corruption? Or any number of possibilities? At best I would have to pay lawyers to get the rest of my money.

No, give me the money now and I'll take my chances.

#1 lesson I remember from economics class: money now is always more valuable than money later.

https://www.investopedia.com/terms/t...lueofmoney.asp
Reply With Quote Quick reply to this message
 
Old 04-04-2018, 11:10 AM
 
Location: Phoenix, AZ
1,651 posts, read 1,885,330 times
Reputation: 2488
Quote:
Originally Posted by redguard57 View Post
I would take the lump sum no matter what & for one reason: I want control of that money, not the state, not a lottery fund. Lottery funds can disappear.

What if the state legislature closes the lottery fund due to financial exigency or corruption? Or any number of possibilities? At best I would have to pay lawyers to get the rest of my money.

No, give me the money now and I'll take my chances.

#1 lesson I remember from economics class: money now is always more valuable than money later.

https://www.investopedia.com/terms/t...lueofmoney.asp
Ha ha yes! I remember my professor distinctly in my finance class: "More is always better than less, and now is always better than later."

And I agree. I'm taking the money now because I am pretty sure a) if it's a big enough amount, and pretty much any lottery winning amount is going to be unless it's just one of the $1 million jackpots, I'm already going to have enough to last me the rest of my life, b) I don't need a whole lot to be happy and I don't think winning the lottery is going to change that much, and c) I have more confidence in my own investment and money management skills than I do any state government.
Reply With Quote Quick reply to this message
 
Old 04-04-2018, 12:51 PM
 
6,164 posts, read 3,249,243 times
Reputation: 12502
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.
I think most do. One reason being that something might happen (bankruptcy or whatever) that would stop your payments in the future. A bird in the hand theory. There may also be a law that your heirs don't get it, when you die, so may not get the whole amount.
Reply With Quote Quick reply to this message
 
Old 04-04-2018, 02:33 PM
 
Location: South Carolina
13,103 posts, read 17,634,355 times
Reputation: 22429
I would take the lump sum because how do you know you will be alive to enjoy all that money heck no give me the lump
sum. exactly and I would make a will also saying that I want the rest of it should something happen to me my kids and husband would share equally what was left .
Reply With Quote Quick reply to this message
 
Old 04-04-2018, 07:58 PM
 
Location: Saint John, IN
10,638 posts, read 3,311,331 times
Reputation: 12748
Quote:
Originally Posted by MinivanDriver View Post
There's no way I'd take an annuity.

First, if I died, the inheritance taxes on the total of the lottery winnings would immediately come due to my heirs. There have been cases of this.

Second, especially when you look at a state such as Illinois delaying payments on lottery payouts, I wouldn't trust the government in the future to make its payment to me.

Third, I'd rather have the lump sum just in case I decided to ever leave the country.


1000 Percent agree to this!!!!!!!!!!!!!!!!
Reply With Quote Quick reply to this message
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.

Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.


Reply
Please update this thread with any new information or opinions. This open thread is still read by thousands of people, so we encourage all additional points of view.

Quick Reply
Message:


Over $104,000 in prizes was already given out to active posters on our forum and additional giveaways are planned!

Go Back   City-Data Forum > General Forums > Economics
Follow City-Data.com founder on our Forum or

All times are GMT -6.

© 2005-2018, Advameg, Inc.

City-Data.com - Archive 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16, 17, 18, 19, 20, 21, 22, 23, 24, 25, 26, 27, 28, 29, 30, 31, 32, 33, 34, 35 - Top