When is a million worth only $417015? (Star: homes, buying, taxes)

[Jowel]

Originally Posted by BoBromhal

if you play the lottery, please understand that you should pretty much always take the immediate payout. What you can invest it in is a much better rate than you're getting paid at.

Technically this may be correct. But is the typical lottery player (or most people who suddenly have a large sum of cash suddenly staring them in the face) going to typically be a knowledgable (and disciplined) investor?

[Crashj007]

Originally Posted by danielbmartin

The immediate option makes perfect sense for some individuals. Suppose you are 75 years old and hold this winning ticket. Would you elect the 20 annual payment option???

If I could put it into a living trust with me and the wife as beneficiaries and administrators and our children as surviving beneficiaries I certainly would.
Some States allow that but I don't know about NC. Sure would like to find out, though!

[Crashj007]

A good reflection on the lottery, also know as a tax on fools.
https://www.reddit.com/r/AskReddit/c...x0&sh=2397445d

[Jowel]

Originally Posted by Crashj007

A good reflection on the lottery, also know as a tax on fools.
https://www.reddit.com/r/AskReddit/c...x0&sh=2397445d

A lot of those problems are caused, at least partially, because most states (including NC) insist on publicizing the winners, making the winners easy prey for all kinds of nefarious characters.

Six states recognize that it's not always best to put all that information out there for the world to see:

https://www.today.com/money/powerbal...ow-stay-t66461

[Crashj007]

Originally Posted by twingles

$50K a year LESS TAXES every year off the claimed income x 20 years...there's no escaping the tax man!

well, the tax difference is if you take the annual payment you can invest what you don't spend every year. If you take the single payment the government grabs its lump right away.

[cjseliga]

Originally Posted by luv4horses

When a guy wins the Extreme Millions lottery, takes the immediate option and pays all the taxes.

North Carolina man wins $60 on scratch-off ticket, then buys another worth $1 million :: WRAL.com

But at least he won.

I'm not sure what percentage of countries with lotteries do this, but it seems that many countries (not the US of course) out there, that have a lottery, you pay little to no tax, if the prize is $1 million that's what you win in full. I always see comments from people living in other countries, especially Canada, when someone in the US hits it big in the lottery, that if that was Canada, you would get the entire prize in full.

Which is kind of ironic, countries with higher taxes to help pay for Universal Health Care or college education or many other social programs in their countries allow people to not have to pay taxes on lottery winnings, but the US, which has "relatively" lower taxes than those places, taxes the heck out of lottery winnings.

[cheapdad00]

Since this is a relatively small sum of money, compared to powerball/mega millions, it would certainly be worth doing the math. 50k a year might only push you up 1 tax bracket depending upon your income situation compared to taking the full amount putting you in highest bracket. Whereas a 300 million jackpot would always put you in highest bracket no matter how you received it.

[annabanana123]

You should always talk to your financial planner about how to take this sum of money. But in general Bo’s right - take and invest. Plus with inflation it may be better spent on something now, like that beach house you were dreaming of, if you plan to make a major purchase. Prices on real estate are only going to rise over 20 years.

[Broknrekord3]

It's also important to consider the time value of that money. While, yes, you'll get more over the long run, if you have a decent investment portfolio and we run through a period of high inflation-- which is very realistically possible with interest rates running at near-nothing for a decade-- $50k 20 years from now may only be worth $10,000 in today's dollars. If that money can grow alongside that inflation, you'll end up doing much better.

[TarHeelNick]

It is virtually always a better long-term financial option to take the "lump sum" be it in lottery winnings, lawsuit, settlement, whatever. That's personal finance 101 (seriously; that's a class I took in college...and that's was a topic covered pretty early).

That of course comes with the HUGE asterisk comment of * IF you invest the winnings wisely.