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It doesn't need an answer. The math and idea behind the lottery escapes you. They aren't going to offer you something that is a money maker for you long term plain and simple
If it is Power Ball she is talking about, the $1 Million prize is for getting 5 numbers right, but not getting the Power Ball number correct.
On any prize besides winning the entire Power Ball, there is no annuity option.
The prize for getting 5 numbers correct but not the Power Ball number is $1 million and paid in one lump.
($2 Million if the $3 ticket was selected )
So, her husband saved $1 on the ticket purchase but lost out on an additional $1 million
......."PENNY WISE AND POUND FOOLISH ........
I always buy the $3 ticket.
I disagree. This does NOT apply to lottery tickets. He saved on the loss of an extra $1. The fact they hit it big is just luck and more likely than not that was just a dollar saved.
Pretty much any mutual fund... Some of the top performers are closer to 20% gained over the past few years. There are ups and downs of course but over time it will always return an average around 8%.
Pretty much any mutual fund... Some of the top performers are closer to 20% gained over the past few years. There are ups and downs of course but over time it will always return an average around 8%.
But you really want to limit the annual draw to 3-4% because the average return or even the CAGR does not capture sequence-of-returns risk. If you have a market downturn early on and you are drawing 8%, you'll deplete the capital by selling more shares at discounted prices. When the market goes up again, you will have fewer shares to participate in the rally than you did to participate in the downturn, so your portfolio will not recover even if the CAGR is 8%.
But you really want to limit the annual draw to 3-4% because the average return or even the CAGR does not capture sequence-of-returns risk. If you have a market downturn early on and you are drawing 8%, you'll deplete the capital by selling more shares at discounted prices. When the market goes up again, you will have fewer shares to participate in the rally than you did to participate in the downturn, so your portfolio will not recover even if the CAGR is 8%.
I think the assumption is that the lottery winners are already earning an income and if the scenario you described comes to fruition, they could simply opt not to draw funds from their winnings that year and wait for a rebound. I think it's solid advice assuming they don't have any high interest debt.
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