Powerball "technical glitch"?

#126
#126
Vol423 said:
Your final statement is humorous. You assume that the person is going to be ignorant and incompetent with the money. If you're really bad with money, GVF is correct, the annuity option is probably better for you.

While interest rates were incredibly low, you were MUCH better taking the discounted net present value immediate cash payment option. With interest rates FAR higher now (thanks Joe!), the scenario is a little more complex. However, by taking the immediate cash payment option, you have locked into the current known income tax rates rather than rolling the dice that future income tax rates aren't much higher (and they likely will be due to government greed and incompetence). While interest rates were low, you would almost have had to not invest the money at all to not clear the discount rate.
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Do your homework on lottery winners that are now broke verses those that are not. People are ignorant with money as a whole. Winning a jackpot does not infer a change a person's financial accumen.
 
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#127
#127
kiddiedoc said:
Actually, I'm pretty sure that the taxes are much higher if you take the annuity because you are only taxed on the money you receive (which is roughly half with the lump sum).
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It's a little more complicated than that since the annuity will pretty much pay out the full amount while your starting point for the lump sum is far less. The lump sum for that last PB comes in at well over 900,000,000 less than the annuity. (before taxes on either) I think tax rates (so where you live would matter for instance) would be a big player.

I posted this earlier.

Annuity or lump sum? Calculating how much a $1.9 billion Powerball win is worth
 
#128
#128
GVF said:
Do your homework on lottery winners that are now broke verses those that are not. People are ignorant with money as a whole. Winning a jackpot does not infer a change a person's financial accumen.
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I agree with that. I just found it humorous.
 
#129
#129
Vol423 said:
I agree with that. I just found it humorous.
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Guess we will find out with the newest winner. Someone in Cali hit that $2B.

Incidentally, Here's the break down on that jackpot for the cash option:

Cash option payout after NPV discount = $929,100,000
Total fed tax owed 37%
In the pocket >>>$585,333,000 (Est 50%+ of cash payout) (No Cali state tax on lottery winnings)

I do have to correct statements after looking back up. I had it backwards. THe cash option is the amount on hand for that jackpot that was actually collected from ticket sales. THe advertised jackpot amount (1.9b in this case) is the total projected annuity payout over 30 years after the commission invests the cash option in Gov't T-Bills at the going rate. So, the jackpot is not a discounted NPV. It's a projected T-Bill investment value based on prevailing interest rates.

In reality, it is only a $2B jackpot if hte winner chooses the annuity. Based on ticket sales cash payment it was just under $1B.
 
#130
#130
utvolpj said:
How does this work? They don't need the whole amount because they don't pay out $1.9B and the tax rate is still less than 40%
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They pay out roughly 60% of 50% to the winner so this one is roughly 600 mil to the winner after taxes.
 
#132
#132
Vol423 said:
Your final statement is humorous. You assume that the person is going to be ignorant and incompetent with the money. If you're really bad with money, GVF is correct, the annuity option is probably better for you.

While interest rates were incredibly low, you were MUCH better taking the discounted net present value immediate cash payment option. With interest rates FAR higher now (thanks Joe!), the scenario is a little more complex. However, by taking the immediate cash payment option, you have locked into the current known income tax rates rather than rolling the dice that future income tax rates aren't much higher (and they likely will be due to government greed and incompetence). While interest rates were low, you would almost have had to not invest the money at all to not clear the discount rate.
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I don't give a **** what the interest rates are, I'm taking the ~$600 mil and hiding it. I can live off of that amount very comfortably.
 
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#134
#134
Vol423 said:
Your final statement is humorous. You assume that the person is going to be ignorant and incompetent with the money. If you're really bad with money, GVF is correct, the annuity option is probably better for you.

While interest rates were incredibly low, you were MUCH better taking the discounted net present value immediate cash payment option. With interest rates FAR higher now (thanks Joe!), the scenario is a little more complex. However, by taking the immediate cash payment option, you have locked into the current known income tax rates rather than rolling the dice that future income tax rates aren't much higher (and they likely will be due to government greed and incompetence). While interest rates were low, you would almost have had to not invest the money at all to not clear the discount rate.
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However, earnings on the invested lump sum will still be taxed at the tax rate in effect the year of the earnings, not necessarily the tax rate in effect the year the lottery is won.
 
#135
#135
GVF said:
If the fed tax rate of 24% taken immediately on the lump sum is the same fed rate applied to annual annuities, in the case of this $2B jackpot it's $480mil sliced both ways. $2B by 20 years is $100m payment per year. Apply the 24% to that times 20 years and its all $480mil. Unless there is a different fed tax rate on the annual annuity than on the lump sum, the only variable is changing tax laws and rates over the course of 20 years. When you apply the fed tax rate, plus NPV discount, a TYpical lump sum payout will hover around 50% of the jackpot. THat's not accounting for additional state and local taxes depending on what state you live. A prudent person will make up the NPV with proper investment. most jackpot winners go broke. A lottery commission is contracted to pay the amount whether lump sum or annuity, so you don't lose the payments if you die.
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The federal income tax rate would be more like 37% on either a lump sum payout or an annuity basis.
 
#137
#137
Pretty bummed about this. My $20 investment yielded nothing and I had already picked out my 23,000 acre ranch in Montana that I was gonna buy. Glad I held off on getting quotes on those Ferraris.
 
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#138
#138
FLVOL_79 said:
Pretty bummed about this. My $20 investment yielded nothing and I had already picked out my 23,000 acre ranch in Montana that I was gonna buy. Glad I held off on getting quotes on those Ferraris.
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You might have gotten a better deal on property in Wyoming. There may be a family selling because they no longer have to pretend to live in Wyoming.
 
#139
#139
SuzyVol said:
You might have gotten a better deal on property in Wyoming. There may be a family selling because they no longer have to pretend to live in Wyoming.
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I had picked out 23,000 acres in Montana, 15,000 in Tennessee, 3,000 in Florida, and a few other 200+ plots in PA and GA. I told my family if anyone won I only needed 75,000,000 for the land, guns, houses, jet skis, and Ferraris. I'm a cheap date.

I was going to make them all large food plots and just hunt and drink for the rest of my life.
 
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#140
#140
FLVOL_79 said:
Pretty bummed about this. My $20 investment yielded nothing and I had already picked out my 23,000 acre ranch in Montana that I was gonna buy. Glad I held off on getting quotes on those Ferraris.
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Same here, wife will just have to settle for a Subaru.
 
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#144
#144
FLVOL_79 said:
I had picked out 23,000 acres in Montana, 15,000 in Tennessee, 3,000 in Florida, and a few other 200+ plots in PA and GA. I told my family if anyone won I only needed 75,000,000 for the land, guns, houses, jet skis, and Ferraris. I'm a cheap date.

I was going to make them all large food plots and just hunt and drink for the rest of my life.
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I was fixing to say it sounded like you chose all the good hunting states, then I saw the last line and thought to myself how inuitive I am.
 
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#145
#145
FLVOL_79 said:
I had picked out 23,000 acres in Montana, 15,000 in Tennessee, 3,000 in Florida, and a few other 200+ plots in PA and GA. I told my family if anyone won I only needed 75,000,000 for the land, guns, houses, jet skis, and Ferraris. I'm a cheap date.

I was going to make them all large food plots and just hunt and drink for the rest of my life.
Click to expand...
Hunting and fishing. Two out of three ain't bad.
 
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