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it really is a matter of math. you should figure out what goes into the calculation for the state and talk to an accountant. the tax issue could be huge.
What goes into the state calculation: calculate the net present value of the stream of payments for the standard lottery payout.
What goes into the JG Wentworth calculation: Based on past experience, what islowest lump sum payment we can expect this person to accept?
If it advertises with a jingle on late night TV, it is targeted at the segment of the population that is easiest to screw and most prone to having emotional buttons pushed. The advertiser does this because any person with reasonable math and critical thinking skills would work through it and find out that it's disadvantageous.
Any time I find myself even recognizing the existence of a late night advertiser, it's to add them to my mental 'guaranteed hosejob' category. If they've already imprinted the name on my brain (i.e. I let my guard down or failed to mute/ff through the commercial), I just have to make sure I never do business with or recommend them. Unfortunately, this JG Wentworth outfit wormed its way past the filter. They can't be a good deal; if they were, they would not advertise when and where they do. They wouldn't need to. And even if a few aren't complete hosejobs, it's safer just to throw them all in the mental trash bin. If that's unfair to a few, that is not my problem, as I'm not here to be fair to them.
Lump sum, take the money and run baby. You never know if some financial hardship will befall a lottery like megamillions or a single state run lottery. This way, you can do things you may not be able to do with an annuity or selling a ticket and getting less then it is worth.
Start a business, buy a house, buy a boat etc. But get that money.
Not to mention that income tax could go up which will cost you more in the long run. It could also go down I suppose but I laugh at that since I question the likelihood of that happening!
The default for lottery jackpot payment is a yearly payment over N years (I think 20 years is common).
The lump sum payment calculation is simply the net present value of the stream of yearly payments.
i guess i should have been more clear. you need to know the discount rate that they use to calculate the net present value. that will allow me to decide whether or not i want the lump sum. (i could figure that out on my own once they tell me the lump sum they are offering).
The California Lottery and Mega Millions both offer a cash payout option for winners. Is it better to take the payout or sell your winning ticket to someone like JG Wentworth?
There are all sorts of businesses that cash out annuities. You would have to know what they paid before you could decide whether or not to sell to them. It's possible that they might pay slightly more than the cash out option to purchase the ticket, in order to compete with the state itself. There would be a privacy benefit. There might possibly be an extra tax hit, although I can't see how. You are going to pay max taxes, no matter which way you go.
If you've already taken the annuity payment for the lottery, they will pay less than you will get if you are patient and wait for your yearly payments. Vaguely possible that with planning over time, a good tax specialist could save you a bit on taxes every year if you were taking the annual payments. Those annual payments are likely to lose spending power over time. Our money has a tendency to lose value at a fairly fast clip.
I think that a huge factor would be whether or not you are allowed to pass your benefits on to heirs in the event of your death.
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