this post was submitted on 30 Dec 2024
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Lotterys are usually paid out in annuities where you would get that amount over a period of 10-30 years. However, they also give a lump sum amount which is usually ~half the stated amount and after taxes you could expect to receive 1/3 the stated amount.
Still, it's generally best to take the lump sum unless you have very bad self control and would blow through the money.
He'd get 14 million dollars a year for 30 years assuming the total payout was the same. I get that advice for people who are looking at a 100k payout. But at some point it's just irrelevant. His first year alone would be a respectable total payout.
Yeah but he would get 47 million in interest a year if he took the lump and spread it across the market using the 10 year average. 11%
So using your 14 million number, he could invest half and leave the rest in something guaranteed like bonds or savings accounts and make more money and guarantee his family has it in the future.
It's enough money to buy everyone in your family a multi million dollar house the first year and not have touched the original balance.. : /
Arguably he could borrow against his annuity and save on taxes with loans. He could also setup a charity in which he donates a max amount and set up family on the board avoiding other taxes and making write offs as if he is ceo he can buy company property stuff that he can write off too.
Then he could, just grabbing an example out of the air, pay a painter to paint a portrait of himself, get that painting evaluated and valued for several million dollars, and then donate it to the charity and write off the value. Not that anyone would do that mind you.
I wouldn't use the most aggressive numbers on that, I'd plan for 5 percent. Which is 20 million but then you also have capital gains tax. After which you'll have 15 million a year instead of 14 million a year. The annuity also generally comes with a larger total payout though. So in reality it'll be higher than 14 million.
So yes you can get lucky in the stock market to beat an annuity, but that's not the reason people get told to take the lump sum. Most lottery payouts are 100k or less and 10k a year isn't going to do much, while 100k starts a retirement fund. Once you're high enough that the annuity itself is "quit your job money" it flips. Then if you screw up you know you're getting back on your feet next January.
Those aren't the aggressive numbers though, that was the market average. So hoping for 5% is a little low but I understand it is always good to be skeptical. Any way we look at it though, it's fuck you amounts of money haha. When someone says what's your budget this month and their answer is "I mean I don't really want to spend over a million..". You know that guy really doesn't need to check the price of eggs that week.
Statistics show it's literally best NOT to take the lump sum and that most people have no self control.
Most people who gamble have no self control.
Interesting... The fact that they're eligible to win the jackpot makes them statistically unable to handle it ...
Feels similar to the Plato quote "those who seek power are unworthy of that power".
"I'm an cryptocurrency trader now, despite no finance education whatsoever. It's easy, just look at the chart and predict when it'll go up or down."
Isn’t that the entire plot of the movie “Trading Places”?
…which is a Christmas movie.
The issue is the mathematically best outcome in a vacuum does not take into account the fact that gambling has a negative expected value, and anyone participating in it was already more likely to be really bad with money. There can be a mathematically ideal outcome that is different than the statistically best outcome in real life situations. Probably anyone considering this the mathematically ideal option will work best, but the average gambler the statistically best is.
The expected value of buying a video game is about -$60, but people keep doing it, what chumps!
Some people get pleasure from playing the lottery occasionally. The value of the ticket, to them, is the same as the price. There are gambling addicts and people who buy lottery tickets as a way to try to make money, and they have made an error, but I don't think that's most people who buy tickets, even if it may be who most tickets go to.
I don't think those are even close to equivalent. The enjoyment from video games does not come from a hope of it "paying out." The fun of gambling is usually from the chance of getting a reward. If the reward were not there, would they still enjoy it? Probably not, so they're not just enjoying the act. Sure, there's some dopamine release that's driving the behavior, which is enjoyable, but there are methods to get this with better EV and more rationally.
As i said
Which is why you can work with a financial advisor and other wealth management strategies to set yourself up for success.
But yes, lots of people have lack of self control but if you're going to throw around big words like statistics then show those receipts. And i mean actual studies not an article pulling numbers out of their ass.
Statistics is a “big word”?
No, but it has meaning. So claiming statistics without said statistics is just speaking out of your ass
Ah, big as in meaning, not just “difficult big word.” Misread, and totally agree.
i've seen bigger
Statistics is a big word, yet you toss around "wealth management strategies" as if that isn't meaningless textbook bullshit.
I opened a bank account today and put $20 in it. It's a "wealth management strategy."
Yeah i knew you didn't have the data but thanks for confirming with this logical fallacy trash.
Wealth management are certified professionals who would be able to look at your entire balance sheet and help manage assets, provide financial advice, tax advice, etc. I specifically was referring to setting up an LLC or trust to claim the funds through and structure those entities in a way that you don't have direct access to all the funds to avoid burning through all the funds.
To your nonstatistical point: people have no self control, just look at you and me needing to reply to each other, but someone who wins the lottery will be able to afford professionals whose job it is to help beat those odds.
Anyway I'm glad you've saved $20 today and hope you have a great day
Statistically, people may tend to blow their lottery winnings and end up broke if they take the lump sum.
Financially, the lump sum is the better option because if it's well invested, it will grow faster than the full payout over the term of the full payout. It turns out that if you have near unlimited money for the best financial advisors, you will make a lot of money.
It's not like you can't go into debt and lose the annuity too.