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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.
Statistics show it's literally best NOT to take the lump sum and that most people have no self control.
It's not like you can't go into debt and lose the annuity too.
Give me the winning lottery ticket and I'll show you how it's supposed to be done.
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.
Most people are stupid and don't understand that even before you claim the ticket that you need to hire and consult with lawyers and financial advisors.
Why? Why would you want to do that? I'm a stupid person — I would just spend the money by investing them into stocks and opening a bank deposit, so that at least one of these enterprises has a chance to become a sustainable source of income. Organize a business I always wanted to maybe. Certainly wouldn't spend a single dime on 'lawyers' and 'financial advisors'.
it’s generally best to take the lump sum
Why? I would assume it's the other way round.
If they die before they've been fully paid out, the lottery keeps the remainder of the money, and their loved ones don't receive the money.
That seems like a very unlikely scenario though unless you are very old.
The lump sum will grow to be worth more than the annuity over the same period if properly invested
if properly invested
Ah yes, the thing nobody is ever actually taught nor follows.
plenty of people do, they just don't have 400 million to do it with
like my brother used the cheapo student loans here in sweden to just chuck a bunch of money into low-risk index funds (i think that's the term) and he's gotten 2000 bucks from that for basically 0 effort.
now imagine doing that with millions of dollars
All kinds of low risk things go down occasionally. Think of the 2008 financial crash for example. On average, or over a long time, you are very likely to make gains. But that’s not nevessarily true for shorter periods like 10 years even if you invest in low risk assets.
Edit: I also invested some of my student loans in Finland. Or officially, my other income that was freed up due to the loan ¯_(ツ)_/¯
well he made the profit in like 2 years lol.
Also there's at least one bank here that specifically only has savings accounts, with pretty decent interest (like 2.7%) and free withdrawals at any time. And because it's sweden the state will protect any money you deposit under like $100k per person.
For the last year or so getting a 5% (1-3 yr) CD was not unheard of, so literally leaving it in a bank account is better than the annuity option by the above poster's math.
I don't think you quite understand what I mean. You can't extrapolate from the last 3 years. What you can extrapolate from is longer periods of time, where we occasionally see assets going generally down for some time. So you have maybe 90% chance of your stock portfolio going up in the next 5 or 10 years, and 10% chance of it going down (rough numbers but the point holds).
So you can end up in a situation where you lose money, but it's unlikely. If you are very risk averse, you would prefer a 0% increase over these odds.
Or... you know... it gets fucking wasted and scammed out of peoples hands because they have no idea to handle big money.
It's just down to generally investing the lump sum you can outperform the annuity option. If you search "lottery lump sum vs annuity" you'll get a lot of results. Here's one
80% taxes how does that work?
suddenly germany feels like a tax haven :D
It doesn't. Just headline gore.
Lottery payouts typically have two options: lump sum at half the value of the winnings or a 30 year annuity at the full value. So this headline assumes lump sum reward and cuts the face value on that alone, then does a bunch of other hand waving to get you down the next 58%.
News journals that are owned/advertised by anti-tax republicans love to run out the "lottery was taxed too high" story, specifically targeting people who fancy themselves future lottery winners. It's all bullshit.
It's not taxes... well not all of it. The lotto advertises its prize as the sum total of a 30 year annuity. Currently Powerball has an estimated Jackpot of 163 Million. You can take the lump sum up front though. At present that lump sum is 73.9 million. After you get that, then you get taxed on it, reducing it to probably something like 40-50 million.
That seems incredibly scammy to me. They're pretending the prize is double what it actually is and then claim even more of that back as taxes. If the actual prize money is only 20% of what you're advertising that's dishonest at best.
Where I am lottery winnings are tax-free and without an insane hidden 50% "claimed your winnings" fee. What they advertise is what you get if you win.
That seems incredibly scammy to me
Of course it does, it's the lottery