$1 Billion Jackpot: Would You Take an Annuity or Lump Sum? [Financial Breakdown]
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- Опубликовано: 28 май 2024
- If you won the lottery, would you take a lump sum payment or an annual payout over 30 years? In this video, I did a financial breakdown of both options to see which one is best AND recounted how some other lottery winners went completely broke choosing the wrong option.
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Timestamps
Would You Take Annuity or Lump Sum (0:00)
#1 - Annual Payouts vs Lump Sum (1:09)
#2 - Investing Scenarios and Calculations (4:15)
#3 - Lottery Winners Who Went BROKE (8:03)
Lottery Winners Who Lost Millions: www.gobankingrates.com/net-wo...
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Disclaimer: The information provided in this video is for informational purposes only and is not meant to take the place of professional legal, accounting, or financial advice. If you have any legal questions about this video or the subjects discussed, or any other legal matter, you should consult with an attorney or tax professional in your jurisdiction (i.e. where you live).
Please be sure to give this video a like and subscribe to our channel so you don't miss out on future videos!
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Disclaimer: The information provided in this video is for informational purposes only and is not meant to take the place of professional legal, accounting, or financial advice. If you have any legal questions about this video or the subjects discussed, or any other legal matter, you should consult with an attorney or tax professional in your jurisdiction (i.e. where you live).
The number one most important thing is to do everything in your power to keep your name out of the news or any lottery promotionals. Hire a really good tax attorney and set up a trust that you can name as the winner.
Some states, including my Tennessee REQUIRES you to have your name and city published as a condition of your winnings.
@@JazzyMarineVet People have successfully challenged state disclosure laws in court. One method is to open a trust, and make the trust the winner.
@@JazzyMarineVet Day after your name is published, CHANGE IT and MOVE.
@@gotham61 Offshore trust to avoid taxes and theft by COURT (lawsuit).
With that kind of money, people will sue you for ANY reason.
@@crazysquirrel9425 In 2015 a New Hampshire $560 million Powerball winner successfully sued to keep her name private. The difficulty in her case was that she had signed the ticket, something they always tell you to do, making it impossible to transfer the winnings to a trust.
Annuity is the best way for me since I have not demonstrated the discipline needed to prevent bankruptcy in the future.
I have been telling people this stuff for years that an annuity payment overwhelmingly is a better financial option for the mere fact that you have to adjust mentally to operating on that wealth level. Great video!
I agree 100%...You give people an amount they have never had, they get a false sense that that amount of money will never run out. I would take the annuity due to the fact that if I mess up, I will be granted another chance to, hopefully, get myself together.
I was thinking if you take the annuity payment do you get a check or a deposit every week or monthly??
@@RG-lc6hc exactly!
@@RG-lc6hc Well, stupid seems to fit a lot of lottery winners. I don't think of myself as stupid, but money changes people. We all know that.
Do I want all the money and ensure I can’t go broke for 29 years or take half the money with a risk of being broke in a year?
If I was younger, I would take the payments. But at 70, the lump sum would allow me to enjoy the time I have left.
oh dude, that is awesome. Are you still spending the money?
Give me the payout !! Before Uncle Sam changes his mind 🤣🤣
Im 62yo, I would take the annual payout of 37 million before taxes and set up a family trust that gives certain members and annual sum. I know I may not live to see it all but it would benefit my family for pretty much the rest of their lives. Personally I would purchase and move to a secluded working farm. I also think to insure family dont nag me i would set up a trust that pays each a monthly amount with a few stipulations that if they violate could have them removed. Last thing I want is someone always running to me with their hand out.
exactly. I had planned a lump sum of maybe $50k, then stipied of $5K a month for 5 years for super close family who have been with me tight all along. If you get crunk and need bail money, rehab money or lawyer money..... you done. They should continue working, pay off all debit, pay cash for house/rental property/commercial property and grown their own nest egg. I fed them, then give them a pole and teach them how to fish.
Or better yet you don’t bother telling your family that you actually have money because one in the long run it is None of their dog gone business. If you have some money and to who say she gonna leave it to them, you might leave it to charity So that your family hooked I’ll have to find out about it because there’s always somebody in the family that always thinks they should’ve gotten more you can leave it to anybody in this world that you feel like could use a little bit here now and giving a hand up somebody else that might need a couple dollars just to get it out you know pay rent or somebody homeless to get a couple meals here now or somebody that needs it we know a couple days and or a couple months in a hotel room so they can have a place that they can receive mail for so they can actually get a job because they have somewhere they can lay their head out and shower and you know things like that it was a good endeavors then to just give it to your family and I’m sure take some of them could use a couple dollars here and there and you can also you know in a solid trustor Or have any will assign them out reasonable bout you know maybe 20,000 of 25,000 that’s reasonable to give to a family member you know without revealing how much more money there actually is or was good and you know you don’t have to tell them there’s more and you can specify that to your attorney when they read the will that just really don’t want him to actually know what the rest had or Hadn’t gotten and if you’re smart, you won’t say what you got from the will because it’s none of nobody else’s business what you got, and if you didn’t even get nothing and still nobody else business what you got no not gotten
Your gift tax liability will be through the roof.
Same
@@JazzyMarineVet Get Crunk? 😂😂😂 I think we all have at least 1 of those on our family.
there is no state tax on lottery wins in Ca. The lottery annuity is graduated, so you would start out with roughly 9mil and end up with a final payment of 40mil, which is almost the apposite of how I'd like to spend it, for example, buying my house, paying off my and my family's debt and going on a spending spree is something I'd like to do when I for got the money. When I'm almost 70 I'd be pretty much done buying things and would hopefully already comfortable.
Thats over 30 years, and youre not taking inflation into account.
@@machinist7230 option 3 does... invest some of your payments
Essentially these writers did no research, and have no idea what they are talking about. As the OP noted, the payments are graduated, and they pick out the state that does not tax lottery winnings as their example of how terrible it is to pay state taxes.
There is a one time 36% Federal tax on ALL lottery jackpots.
Annuity warning
There is a clause in the annuity
If the economy goes caput aka 2008
The state does not have to pay the lottery annuity.
The state may use the annuity payment
CA lottery annuity lottery winners did not receive 2009 2010 2011 annuity payment and were counted as paid
@@jamesmadison3580do you have a source for this annuity clause? I've Googled it every which way possible, and have found nothing confirming this or the claim that California skimped on payments for any year.
I would think they would have a hard time selling lottery tickets after that.
A couple of wrong things stated at the beginning. When the jackpot like the current Mega Million (13-Jan-23) is $1.3 billion, the cash they actually have is $707.9 million. So they aren't withholding $600+ million when they pay it out as lump sum, that money doesn't exist yet. It only exists in the form of annuity payments which they use the money to buy. While California does have income taxes they do not tax lottery winnings. I believe NY ends up being the highest taxed lottery winnings.
I know it is a short video and you can't get into all the options but here are some more advantages of taking the lump sum. To have guaranteed income for life you can take a portion and buy your own annuity. That would protect you from ever losing everything (as long as you don't borrow against that income). We don't know how tax rates will change, currently 37% seems like a lot but what if it changes to 45% or even higher? That annuity payment will potentially get even smaller if that happens. The lump sum also provides freedom. One of the biggest benefits to having lots of money is not being tied down by a single countries rules. If you have an annuity payment for 29 years, the USA won't make it easy to leave. Sure you can live somewhere else but they're going you as a citizen since you still have a tie to the country. With the lump sum if you choose, you are free to relocate ANYWHERE.
If I'm not mistaken, the US is one of the hardest countries to "get away from", meaning you are pretty much stuck paying taxes no matter where your money is earned/grown.
Uncle Sam wants his money and unless you are getting into areas like hiding your money somehow, he has long arms with nimble fingers.
I'm not sure how easy it would be to get out from under the government's microscope once they know you have that kind of money 😂
@@tracy419 Renounce US citizenship.
Also keep in mind that the federal government (the IRS) taxes you on Citizenship not US location. Therefore if you are a US citizen, regardless of where you live in the world, you have to pay income taxes on whatever the IRS deems taxable income and taxable income for the IRS is global income. So even with the lump sum, any portion of that lump sum that is taxable, (such as interest earned, etc) will be taxed regardless of where you live. The only possible option is to renounce / relinquish your US citizenship and that should be carefully considered with an attorney.
Or purchase realestate to offset your tax liability and consider a dual citizenship with a very friendly business taxing country but Yes definitely purchase your own private annuity with a death benefit for your children! Best comment thus far guys! You are right on point!
I have always favored the annuity payment for the simple fact of even if you make terrible investments, as long as you can survive until the next year, you have another check coming...
Why not an investment firm who has trackrecord? I have yet to hear millionaires loosing their money with spread out investments like etf's or index funds etc. Zero chance to lose
@@DarkoFitCoach Bull Shit, check FINRA and you can see how many Advisors who work for large respected firms steal from clients. Their is no way to stop an advisor who has access to your money from stealing.
I am taking the payments over 29 years
@Brenda-Burd Good choice. You've given your self a 30-year income stream which can be managed much easier.
Last time I checked, California does not charge state taxes on Lottery winnings. They do charge state taxes on any money earned off of lottery winnings once they've been in a bank but that's entirely different.
thats what i have seen also
on which lottery? annual or lump sum? No taxes on lottery winnings for sure?
@@user-hv6ij6cv6keither. It's in the lottery information small print at CA Lottery. The only taxes you pay for either annuity or lump sum is federal and they only take out 24% (even if the actual tax bracket will put those winnings in the 37% window).
I have always preferred Annunity and investing them. As I told my family. Lips sealed. I would create a LLC/Trust for the money., Each year: invest 3/4 of the money; the 1/4 would be 10% for donations; 50% for salary for payment of living expenses, debts, bills, insurances, etc. 10% for buying big ticket item like real estate, vehicles, or a piece of a dream wish (needs to be reasonable), the rest would go to kids, relatives or reinvest back into investments if everyone is already taken care of.
Youre trusting your state to continue to pay it. Illinois already held up lottery payments for two years because of a busget dispute. Live somewhere the state Government is deep in debt, and might declare bankruptcy? The top 4 are California, Illinois, New York and New Jersey.
@@machinist7230 If they screw anyone out of even a penny, lottery sales will stop
@@machinist7230 The case with Illinois might be for lotteries exclusive to that state. Games like Mega Millions and Powerball have around 45 states participating in them, so highly unlikely the lottery commission would be able to withhold the payments because of a state declaring bankruptcy.
This is a good strategy no matter how much (or little) money you have...
I Concur
Unfortunately, the annuity doesn't pay out the total sum in equal amounts. It starts with a lower amount and increases over the 30 years.
❤😘
30 equal payments is advertisement
You have facts of your statement?
It not equal payments, it actually increases by 5% year over year which is why the payments start lower. There's enough lottery annuity calculators out there
Your still a multimillionaire though during the first 5 years
True
If I won the lottery, I would take the lump sum, put the entire after-tax amounts into ETFs like VTI, SCHD, etc and collect the dividends. People have pointed out that the annuity payments start small and get bigger year by year. Taking the immediate sum and having it all compound gives you far more power in the long run.
I’d do it a bit differently, but overall investments would be the way I do it, not only that you lock in your tax rate at what it is the day you receive you cash payout. We all know taxes generally go up. They proper investing strategies you beat out the tax penalties even more.
However this method is only applicable for those with excellent wealth management, spending discipline, and willing to assemble a team of accountant, investment and lawyers.
So you can keep paying taxes on the money you won in capital gains? Yeah ok.
@@thanniss taxes on qualified dividends are 15% or 20%, about the best tax deal you'll get out of the feds. Same with long-term cap gains (not that you'll ever need them, if you have ample dividend income)
Let's say you get $100M after-tax lump sum. Putting it in a total-stock-market index would give you $1.5M/yr in dividends to live lavishly with, while the value of the shares will keep growing at ~8%. You could have $1B in 30 years
What would you do instead?
@@thanniss An ETF is extremely tax efficient. You don't pay taxes on the appreciation of the ETF shares unless you sell them, so you're only paying taxes on the dividends and the dividend tax rate is 15%.
@@2011blueman jumps to 20% taxation if you have enough dividend income
I’ve always said I’d take the annuity option so that when family comes asking for money, I could say “oh, I’ve already spent my money for the year.” 😜
But u ever thought about if u ran out of money and u having too ask one of your Ken folks for money don't be grinch sharing is caring
That's why most sites say building a Team around you takes those questions away from you. Let the person you pay so no to family and friends with VERY FEW (if any) exceptions!
yes that way you can swear up a few times and learn from your mistakes
KIN
@@BonifideGreatness
BULLSHIT MY "SIBILING HAD A FREE RIDE HIS WHOLE LIFE I NEVER ASKED HIM FOR A CONFEDERATE QUARTER @@BonifideGreatness
I've always said that I would do the lump sum because I am older but now leaning towards annuity. I'm pretty sure I can live on a "measly" $10 million a year! 😆
Yeah I agree with you on that
Got to do a little belt tightening but I think we’ll be okay with a little measly 10 million a year 😂
Depending on what State I live in at the time I win the jackpot. Because some States do not pay the annuity to your estate after you die. But I would lean towards the annuity at $1 Billion because that should be first years check of $15 Million (pre tax). It increases by 5% every year. I'm 57 do I expect to live to 87, well with this money I could get and stay healthy.
One state, illinois stopped making lottery payments for two years due to a budget fight in the state government. Unless you are completely incapable of managing your money, always, always, always take the lump sum and run.
@@machinist7230 I agree with you. I don't trust them. You really think they let you live 30 years to collect it all. Wouldn't matter where u try to hide they would find you.
Annuity for me makes more sense, than the lump sum. It’s all about maximising your lottery win. $37m a year is a tidy sum 👌🏿😊
~60% of that after taxes depending on the state.
That doesn't mean anything if you don't survive to see all of it or if the lottery commission doesn't survive to pay it.
You don't get even payments it's a sliding scale with a average of 37m
Depends on your age. If you are in your fifty or sixty, you will not be alive for the entire payout.
@@rchot84 If you die, they money continues to whoever you will it to... The lottery commission cant miss a paymnet to anyone at any time or no one will buy a ticket again
I took the annuity when I won 🙌
I've never even seen anyone comment they actually won I bought a ticket tonight maybe it's a sign
Congrats
The problem with this analysis is that the annual payout is not 30 equal payouts. The payouts are extremely backloaded so that instead of $38m per year for 30 years, your first payment would be roughly half of that, say $18m while your last payment would be closer to $60m. Since money now is worth more than money later (especially if it's money after you have died) the annuity is far less attractive. Of course, the lump sum is also much smaller, rather than getting 60% of the face value, you would get 45% to 50% (before taxes).
No, they gain 5% each year for cost of living. 1st payment would still be 38 mill, 2nd 38 + 5%, so on and so on as years go on
@@teenice894 close, but not correct. The initial payouts are about half of what the annual straight payout would be, say $19m in this case. This is so that by the time they keep adding that 5%, by the end of the 30 years the combined total paid comes to the total face payout and the average of the 30 years checks would be $38m. The whole point is to grossly exaggerate the value of the prize and be able to say that they are giving away $2bn when the real present value is about 40% of that because the payouts are massively backloaded.
@ tee WRONG.Has nothing to do with cost of living. Has to do with the structure of the annuity and the lottery having to invest a smaller lump sum up front to pay out the advertised jackpot over time.
It's funny, the first time the lottery reached over a billion dollars in 2016? I wanted to see what an annual annuity would look like. Surprisingly, there wasn't a valid formula online. So, I had to create my own, Excel formula. It started as a question? Where does the money go? The answer was to the winner(s) state treasury in the form of a US Bond. Your scenario of $1.1 Billion (1 winner) or $37 million a year has some other attachments you should know. Many are not aware of this, but as the newly appointed owner of a $1.1 billion dollar US savings bond (after the 1st yr) would start collecting interest! What's 1% (just an example, probably higher or lower. And would it matter?) of $1.073 billion? That right $10,730,000 gets paid out that 2nd year. This interest lowers annually with the balance and you still have to pay federal and state taxes (if applicable). I didn't bother to see if the interest is taxable, or at a different rate. I just assumed it was income. So, you can see why the annuity is far-far superior to the Lump-sum.
Oh, and the thing about taking a lump sum due to your age is all BS. The fear of most people (that don't care to know anything) is that the $1.1 billion is yours ( the winners) the government has no right to that money beyond taxes, which means the balance of the $1.1 billion is tied to your estate or the beneficiaries of your will or estate. If you died before reaching that total balance, the remaining* balance is either paid out as a lump sum or continues with the beneficiary (the death payout wasn't researched, it's only speculation*). Regardless the money doesn't just fold back into the US government because you died, that's stupid! This is why EVERY lottery winner should hire a qualified tax professional COMPANY, not a single individual that could steal your money and not pay your taxes. Also, get a Will and make sure you know what happens to all your assets when you are not around to use them. I would personally contract them with guarantees that they wouldn't swindle me out of my money and be legally liable if their accountant(s) went rogue. It does happen, it's a helluva lot of money. Anyway, that's what I found out roughly 7 years ago.
Did I convince you to take the annuity? I should have. The lump sum itself doesn't have the US Bond, the money is fully paid out and there is NO interest earned. That alone is why I would take the annuity, it's more money (that's probably 100's of millions over 30 years?) even if you didn't do any investing in 30 years (actually 29, but semantics) that's more money off the table? Why?
So are you convinced?
BTW: You are the owner and beneficiary of that US Savings bond. Not the State or the Federal Government. The interest earned can't be compounded and is paid annually off the balance. This was crazy, even if I was totally wrong above, which I'm 99.99% certain I'm not. I would NEVER take the lump sum, even if I was 90 yrs old! LMAO
The best benefit the annuity gives you is overlooked, for a million reasons..... you're guaranteed over 30 years of payments, so going broke is highly-highly unlikely. If you go broke with an annual payout plus an interest payout, then you probably should never have money, just saying.
I would pay myself $7 million and save $15m, and invest $5 in whatever I wanted to do. It's safe and I'm not using all or even half my money. Oh, and there is another thing you should know, if you give anyone (family) money it lowers your overall payout, and they get taxed on the amount you give. For example, if I gave $10m to my parents, they would have to pay $10m in taxes Federal/State. Even Trust funds have their stipulated tax rules, yet I suspect it would be based on annual payout?
Anyway, that’s my rant. Hope your convinced or not. Either way I would take the annuity of nearly any amount (over $500k) and never look back. It might sound crazy on lower amounts, but it’s still a guarantee for years.
I'm not an idiot I'd take the annuity purely because I've never had large sums of money and being bipolar I've gotten into debt in the past giving money away and buy people things when I was manic and very unwell ...I can safely say winning thr lottery would most defintely trigger a hypermanic episode for me 😅
You have definitely enlighten me on what I would do if I won the lottery. At first I always said I would take the lump sum. But I think I would take the annuity annually. Just makes more sense at this age
at any age
"And now for the rest of the story." (E. Murrow)
What this guy fails to mention is this: Those who opt for the annuity paid over 30 years is the annual payments are not equal. Nope. Initial payment is staggeringly low compared to the check you will receive at the end. From year one thru 30 it is what you got on year one plus 4 percent. Then year then year 3 is year 2 plus 4 percent. So each year's payout grows. Slowly at first with the big numbers coming late in the life of the annuity. So, the lottery commission pays you a little. They invest your money. They the reap rewards and toss you a bone. The commission's cycle of payment is totally opposite of what you'll experience, though. They get paid big, big dollars at the start and their rewards each year then shrinks. They go big to little. You go little to big.
Me? I'd take the lump sum. I trust me. It might cost me something I'd likely never really enjoy or miss. If that's the cost of not playing into the hands of the 'money men', well, I'm good with it.
@@misterdeeds2172 True but even with that the amount of each individual payment is going to rather significant compared to whatever their normal income is. I'd rather take the payments for the simple reason that I don't know how to manage that much money. I am going to have to hire people who do know and learn. The lump sum makes me a lot more vulnerable to mistakes that I might make early on.
@@olstar18 the people you hire can rip you off.. at least with annuity you get more money after being ripped off
@@olstar18there's definitely pros and cons for either option, but just remember (should you be so lucky🤞) that there are plenty stories of people taking the annuity and getting so far in debt by taking out loans (cars, boats, homes, etc) or gambling, or failing at business that they end up selling their future annuity payments just to get out from under it and end up just as broke or worse than before winning.
I think that either you have what it takes to find and follow good advice, or you don't and will likely end up the same no matter which option you take.
Personally I'd take the lump sum just because I'm not so trusting that I'm confident the payments will still be there 20 or 30 years from now 😂
i would say that the biggest problem with lottery winners is they lose track of how much value on stuff actually is
It is the first time that i have seen someone explain the way that you did. It made me understand a lot better thanks.
This is exactly what I was looking for. Thank you.
My biggest concern with the annuity payments would be passing away before the 30 years has elapsed. Yes, you would probably be able to have a beneficiary of your payments, but the concern is would the federal taxes that would be owed be on the entire balance of the annuity payments owing, which means loved ones could owe millions and millions of dollars in taxes the minute you die and I guarantee that they won't have the money to pay those taxes. That's my concern.
I'd be dead so I wouldn't care. They would still be well off regardless.
It's best to talk to an estate/tax attorney about what would be best for your state.
That’s why you form a trust fund then they will be fine.
Taxes don’t take ALL the money lol instead of 18 million it’s ONLY 11 million. Oh darn! However will they find a way to survive???
@@antwanthorogood4921 exactly lol
Awesome video. Thanks for taking the time to explain that as, it seems that, many people have no concept of the options and pittfalls.
Thanks for this video. I had plans to take a lump sum but after listening to you, I will rethink my option and go with the annuity.
At the start of the video I said I would have taken the annuity payments. At the end of this video you convinced me to stay with the annuity payments for the next maybe 5yrs to 10yrs, then I think I would take the lump sum after that point due to the age scenario you mentioned at the middle point of the video.
You dont get to switch after making a choice, and at least one state, i cant recall which, large jackpot owners only have 60 days to claim the lump sum, after which, it automatically transfers to annuity.
I like your approach ,and different facets of the terminology you use in different investments Thank YOU
at first i was thinking of the annuity if i won, then went with the lump sum, i switched because with the annuity you would get all the taxes taken out already and (hopefully) wisely use the money; also tax laws can change so every year more and more money would be taken from the annuity payments. then after watching this video, there was something, i hadn't thought of, age. i'm in my early 30's and if i don't blow all my money in a few years, i should be good. i think i'll go with the annuity, i'll deal with the changing tax rates, final answer.
Agreed because unless You're reckless you'd still be sitting pretty.🧐🤔😎💖🔥💯
Most financial advisers ask you to take the lump sum because of uncertain tax rate and make you fear that the tax will only go up. But in fact, they lied to you and try to make use of your money since the next step is that likely, you are going to hire and pay them. They tried to ignore the fact that IRS will take inflation into consideration and change their tax brackets accordingly, as a result, you pay lesser tax over the years rather than paying all right now. i.e: in 2020 they tax you 37% on amount over $518,400 but in 2023 the 37% bracket only applicable if the amount is over $539,900.
@@dannguyen6503 good advice, thanks👌
A financial advisor salary is a percentage of money. Of course they want lump sum
@ Legofsnake No you don’t get the taxes taken out up front on an annuity. You get taxed each year based upon how much you get that year. When a lottery prize gives you the option of a lump sum the money that comes off the top is actually the difference between the advertised jackpot and the amount of money the lottery would have to invest up front to make the annuity payments. Then you get taxed based upon the payout for that year, which any payout , either annuity or lump sum, if it is inthe millions, the majority of it will be taxed at 37 percent Federal, and then whatever your state taxes that much income at.
I think annuity is the smartest route after looking at this over and over. The fear is that the govt will increase their taxation of anyone making more than 1 million a year back to 90%, like it was in the 1950's. But with the political environment, taxes are not going to be raised. 1.1 billion lump sum is 329 million after taxes of 37% +4% for my state. If you take the annuity you will end up with $639 million over 30 years. The annuity allows you to make mistakes knowing that you will receive another 12 million a year, progressively getting larger by 5% every year. It would be nice to buy a BelAir home for 40 million with the lump sum. But the annuity will still allow you to pay rent on a high priced home. I would recommend living in other peoples homes by renting for $600,000 a year and moving around. Hiring a chef, butler, driver. My kids would be set with the annuity. If I do the lump sum I will be paranoid about spending. Whereas, if I spend 100 million in ten years and then die, the wife and kids would be left with 539 million with the annuity, and with investing the money every year they will end up with 900 million before they die.
👌👌👌👌👌 Smart move
There are some online companies setup over seas, for example, Australia, that allow Aussie locals to purchase tickets as a non resident, on their website they indicate as a non resident, the fed taxes are 30% and the state in which the ticket is purchased has a 8% tax.
One thing you didn't mention is the depreciation of money over time. No matter how you calculate the depreciation values, one dollar today will not be "worth" one dollar in 30 years. (The buying power of a dollar decreases every year due to inflation, so you might spend two dollars in the future to purchase the same item you purchased today for only one dollar).
I say it depends on your age and the assets you already have. If you win at 21 and have nothing take the annuity. If you win at 45 and have a home. Wife and Kids, Investments, brokerage accounts, retirement accounts then take the lump sum and dump it into your present investments. You are more qualified to manage the money than a young financial advisor who works for a mutual.
As said, 'Life Accounting': I'm new to your channel/podcast; yet, (as I've also relayed to the 'Timothy Ward' podcast) what I initially like about your offerings, is that you get directly to the point without too much BS; only elaborating on really needed information (the mathematical calculations were highly informative, "we can actually get the picture") Seemingly, on the surface, you too are a straightforward person not trying to use any 'gift of gab' as to relay any alternate, subsequent type messages. Keep moving with this type of positive information and thoughts.
for state of California I thought they don't consider lotto winnings as income for state tax purposes. There's a few other states that don't consider it income and isn't subject to state tax. There's other state that would subject lotto and gamboling winnings over $600 to be taxed by state.
Annuity for me.
Why so?
Time Value of Money. Take it all now.
This is a classic test question in college economics. You will make more over the same pay out period (considering TVM) if you take it all up front, especially if you invest it.
In that scenario, not only do you come out ahead in TVM, but you’re compounding your earnings through investment.
This is the only reasonable way to do it.
I will seek you out when i win the lottery. you gave the first thing i was saying id do when i win, and that is how to keep the money and not go broke. and budget off of earnings instead of the advertised jackpot. Great information and you would be the first person i would invest in.
I would definitely go with the annuity. I admit I'm not the best with money, so that would offer a great safety net from year to year as I learn how to invest/spend the money.
If you have the right financial advisors, then most of the money would be invested with you receiving a monthly or annual check anyways. The Lump Sum will also pay you out more over the 30 years it would have taken with the Annuity option.
@Baba Ganush well if you won $350 million and liquidated $50 million, you could easily buy a $20 million home. $10 million in vacation homes. $3 million worth of cars. $5 million in art. $5 million + in just spending money, and still get paid out $20 million a year.
@Baba Ganush lol this is the problem. There are 3 types of lottery winners.
1. People that don’t understand their wealth and is hard to do if in the UHNWI category. They say dumb things like “I’m gone pay of my house and my car” with over $100 million in their account. Paranoid to change lifestyles and don’t understand how to maximize their time and potential. Would rather dig a hole in the back yard than listen to a team of investors.
2. People that don’t understand their wealth and overspend. No advice from wealth managers, private banks, tax attorneys, etc. end up buy super dumb things like Gulfstream jets and Yachts while giving away millions a year.
3. The Golden Goose. Gets a private bank. Hires multiple tax attorneys. Hires Estate Attorneys. Gets a solid predictable investment return. Clears all major purchases with their team of financial advisors. Takes a sizable amount for cash purposes for the first few years.
@Baba Ganush property tax, insurance for vehicles and arts, plus up keep with bills and maintenance would cost around $1 million per year. Your average return on investment for $300 million is $24 million a year. Literally leaves your $21-22 million to reinvest and to maintain that lifestyle.
My only worry with an annuity payment for the lottery is everything goes to hell in 15 years in the world and somehow or another the lottery your money ends up not being there after that. I'm not sure that I trust our politicians not to destroy that money coming in so I always thought it would be better to take it all
ditto
I belive they buy bonds for you with a 3rd party....
Right now the powerball is sitting at $900,000,000. I'd take the lump sum. After taxes is about 300M. Skim 40M off the top and invest the rest. 40M would buy everything I've ever wanted and then some. 260M at 5% is about 11.2 M annually. Minus taxes is about 7.5M net. Yep, I think I could make it work.
Very helpful and interesting information. Thank you!
I always imagined that I would take the annuity, so that I would always have am income coming in, but with the state of our economy right now, I'd probably end up taking the lump and disappearing.
I already thought I wanted to take the annuity.
FIRST: I would hire people to scrub my entire internet presence and change phone numbers and move. Then, financial planners and lawyers and accountants to handle money. Since I travel ALL the time, you can't beg me for money when you can't find me.
I don't want more cars and things. I would put myself, my family and certain charities on an annual budget. I would skim a little off the top of the annuity per year and put the rest away in low yield, but safe investments. But this way, even when I died, I would still have the same donations forever.
Yes! You changed my mind. Great info! 😊
I ALWAYS said Annunity!! It's like financial pre-packaged Hello Fresh. Be ready to pay for taxes wherever you live, Have your plan of course ( Pay off all debt, cash envelopes system, 50/30/20, Trust, etc) Invest the LIVE AND GIVE like no one else like Dave Ramsey says.
Thank you for your video, I took the annuity! ❤
Annuities the best option.. You should also put in a trust and make yourself executor over it for the tax breaks the trust offers.
No, its really not. A number of state governments are up to the eyeballs in debt, and the chance of them mailling you an iou instead of check in the near future is high enough that i dont trust any of them to continue to make payments for the next thirty years.
Yes, you changed my mind because you pointed out if your 60yrs old, you would receive the full payout. Great point! 🤗
I think the lump sum is the way to go for 2 reasons: 1) You don’t know how long you’re going to live so mine as well get it ALL before you die. 2) There is no guarantee that the lottery is going to be there and fully solvent in the far future. Just look at some states that had issues with paying out the lottery winners’ annual payouts. With the multi-state lotteries, I am not sure if this is legitimate concern or not but I would trust myself more than the lottery.
I live in Las Vegas we don't have state tax
Lucky lucky! How long have you lived there?
@@LYFEAccounting 23yrs
I say it depends on your age. If you’re young take the annuity
Thanks for informing us
I always do annuity. I think in my state you get a beginning lump sum then goes up a few % the next year. The same % goes on the amount you receive thar previous year. Something to that affect.
Great video and it makes it easy to understand. Yet, I would only invest a small portion into investments. By a payout after all tases of 300 MIO, I would buy real estate and build assets instead of leaving it in the bank.
The annuity amount isn’t $37m. It starts around $9m and grows in increments over time with the last payment being the largest.
Depends on your state. Read up on your state lottery pay outs. Mega Millions is 29 annual payments. I assume equal. While Powerball is 30 graduated payments. for years I'd tell family and friends that I'd take the annuity, mainly because you get more of your money versus the cash payout.
@@DalHarpJr and in year 30 at 4% inflation a year your last payment is worth only 31.9% of year 1 dollars.
@@shag139 But you’re still getting MORE of your money with the annuity compared to taking the lump sum. Do the math..
@@shag139 by that time i will have purchased what i need
My concern with annuities is the nvp of the payments over the 30 year period. As inflation increases, the payments stay the same but the value decreases over time. Can you review lump vs annuity taking into account nvp?
Annual payments are best. Keep your job(so you will not get bored) or get a job you like. Live below your income and life will be great. More importantly after 30 years you will have wealth and can live off of the interest.
You just explained everything I’ve always thought about. But missed the one thing that I have to do, and give to my community to bring some happiness to the less fortunate.
If that's your goal, you can still achieve it by investing the lump sum or annuity. When it starts showing gainful returns use that to build a foundation for your charity.
My only question if I get the annuity what happens if the government shuts down? What are scenarios where in don't get paid.
I can see them raiding the lottery accounts just like they did with Social Security.
the govenrment doesnt have your money, The money is invested With 3rd party in bonds....
Thanks for the info. 😎
i have always believed annuity is better than lump sump. Your information just gave more confirmation. Awesome video. great information.
I’m lost on the 1 million per hour.
I would definitely take the lump sum and immediately hire your firm. 😊
Bingo! I like his vibe. Comes off as honest!
Did you know you would not receive 30 equal annual payouts? Nope. That ain't how it works. They start you off small and deliver big 30 years later. Yep, first year is a fraction of that 37 million you're banking on. Not going to happen. Each annual payment grows by 4 percent over the previous year. So, to reach a total of 1.1 billion over 30 years the earliest number are going to be damn small compared to what is received in the latter years. Year 30 is the big, big check. It is kind of like the one about would you work for an employer for 30 days if you start at 1 penny with the amount paid doubling each day. Day 30 is a nice day's pay.
You do realize that an investment firm or any investment can lose value (no offense to the man that made this video) Look at the FTX investiment idea! Ill pass on putting 100% of my funds in risky investmnets. A bank you put money in is only insured up to 250k.... They can go bankrupt too
@@williamhaynes7089that kind of money I'd put together my general goals and split the money evenly between a number of firms (say 10 to 50 million each?) giving them each the same instructions.
Let them each individually decide how best to reach my goals and really spread the risk as best as I can.
Something really bad would have to happen for each of them to lose it all, at which point money is likely the least of my concerns 😂
Thanks good stuff!
I see some people talking about the payouts and inflation, well if you can't make ends meet with millions of dollars a year it might be safe to say you might possibly go broke with the lump sum. If you invest wisely inflation should not be a problem.
I'm 59 years old so I would definitely take a lump sum. Seems to me for a lot of people that they wanna say "do not spend the principal try to live off your interest payments", if you got 10 million dollars and you can invest in some fairly safe bank type investments, perhaps something that pays 3 or 4%, seems like that would be very easy to live on a salary such as that. That would be my plan to provide for myself and my daughter. All I would like to do is enjoy a nice comfortable retirement and maybe do some traveling I have no big aspirations for bunches of houses and land and all kinds of material junk. Perhaps a couple of cars that would be it. Personally I don't see how someone could win hundreds of millions of dollars after living the same type of blue collar lifestyle that I lead and then turn around and end up broke, that's just f*****g stupid in my opinion. Now admittedly I've never been put in that position (suddenly rich) so I don't know.
The lottery winner’s age will determine whether to take the lump sum or annuity. If I take the lump sum, I would buy stocks that pay dividends. Beside anything could happen to you.
@Tommy Dong Absolutely as far as age, but, here's my example. Some people talk about hundreds of millions of dollars, I'm thinking just say 10 million dollars.. Some people talk about possible 4% returns but I'm thinking anywhere from 2 to 3% returns on minimal, fail save banking investments. After leading a blue collar lifestyle , if you couldn't live a great lifestyle on 2 to $300000 a year even before taxes, there's something wrong!!
If you die, the money goes to whoever you wil it to.. it dont vaporize
The problem with taking the annuity and you dying is your beneficiaries will still be getting paid in the annual installments but the IRS considers that whatever is left on however many years of the annuity becomes totally taxable that year, and if there is a lot left, especially with the graduated payments that annuity will have to be sold for Pennie’s on the dollar just to pay the tax bill.
@HUBABUBA3167 Let me make sure I'm understanding you correctly, You are saying if you're owed like eight years payments, you have to pay the taxes on all of that all at one time Instead of just paying taxes on what you receive on a given year?
I’m confused because they said there’s no tax on lottery winnings in California…so where does that 13.3% come from?🤔🧐
Yeah I messed that up, I used them as a quick example... But I did forget CA doesn't tax lottery winnings
@@LYFEAccounting oh ok great I was scared for a moment 😂😂 I live in California so when I win the lotto I’m going to hire you as my financial investor…🤞🏽
I am almost 60. No state tax here. What I care about is paying off my and my wife's debt. Buying myself a new truck and her a new car...a nice place to live for us, not a mansion, just a nice place that we like. We'd have an income sufficient to allow us to pursue things we like to do. The rest would go to my daughter and grandkids.
Annuity bro!!! Absolutely. Appreciate the knowledge
2 things not taken into consideration in this video are inflation, and the fact that it is not 37m a year, it would start (in this scenario) at 16.5M (about 9 after taxes.) So the annuity investing option potential is much lower than described. Also, inflation is going to take a big chunk of that spending power away. For instance, in the last 30 years, the spending power of a dollar has been roughly halved, so that annuity is going to lose value compared to today's spending power.
All that being said, annuity is probably the best option for most lottery winners, as it builds in a bit of discipline that the average lottery winner would not generally have with their money. As always, the best option is to get a team of professionals together to advise on the legal matters and financial aspects of a win. Teh winner may not be a good investor, but a fiduciary would be able to grow that money much more consistently.
Do you have any info on where the annuity amount is kept while being paid out over 30 years? I’m hearing it sits in treasury bonds and that interest is given to the winners as well. Thats a huge kicker. The annuity route essentially gives you 3 streams of revenue. 1- the 30 annual payments. 2- interest off the treasury bonds. 3- interest off investments made from getting the original annuity payments. I need more info but annuity feels right for those that are patient
The lotto firm gets to keep the money they hold onto for you. You only get the payouts agreed too. You have to invest the money they give you yearly. You will receive more with the annuity, but they get to keep money and invest it themselves. So the govt and lottery are the true winners.
@@whysospicy if thats my only problem, then im the winner
@Devin That’s not how it works. When the lottery offers a lump sum they are giving you the amount they would have to invest initially in the annuity to make the payouts for the required amount of years at the current interest rates when the annuity is set up. The interest gets added along the way to end up paying you the advertised jackpot over the life of the annuity but it is nothing that gets added to your winnings so no it is NOY an added revenue stream.
@@HUBABUBA-il8fn most people think that they have all the money on day 1... and keep it... glad someone else understands
Thank You.
I would definitely take the annuity payments
I always liked the annuity option. If you go broke the first year you'll have a few do overs to figure it out lol
Yes! You can go broke 29 times and if you finally get it right on you last payment you can still live the rest of your life as a millionaire. lol
Exactly 😅
THOUSAND PERCENT ALL OF IF UPFRONT!!! You can’t trust that the lottery company will always have money. They could BK or who knows. NEVER do the payments over 30 years, PERIOD!!! Ask yourself do you really trust any corporation.
Lol the lottery isn’t going anywhere. If anything more will be created
Over the history of the lottery, our country has been in turmoil. 2008 I thought we were going to be ruined, yet the lottery was still solvent. If the lottery goes under it is because it is the end of the world and then banks and money would be worthless. Gold, silver, alcohol, and firearms would be the new commodities.
Exactly. You can put all your money in a Roth IRA and pay yourself a salary w a 3% increase each year to account for inflation if you’re worried ab over spending. Security of the annuity + the control of the lump sum.
@@cestmoi914 except year over year inflation is higher than 3 percent. Especially the last few years. You would need 10 percent to stay above inflation and still make a profit
@@matthewdurkee5673 that’s a great point, you’re right 10% is a better number thank you
Would definitely get a financial planner!
and they can rip you off, has happend
Hi my friend I would take the ANNUITY MAKE A CORPORATION AND INSVEST 1/2 of it. Do this foe the rest of the coming years. Thank you!
I respect your math good brother but run me my whole bag I'll sort it out
Annuity
How come?
Lump sum. Create your own investment annuity. Control it all. Live on the interest alone and in 30 years you’ll STILL have your original lump sum.
Out of control spenders will spend it all regardless.
back in the 80's one of my neighbors won a local lottery..probably under a million. there was no lump sum option. his lifestyle didn't change much. maybe he got a better truck. worked at the same job. he took some great vacations though. brought the extended family to hawaii one year.
I don't care if you "only " win 2 million bucks & are 80 years old - TAKE THE ANNUITY. You AND YOUR HEIRS will always have money. I know of a guy who lived less than 20 miles from me that won 13 million- he took the lump sum and was broke less than 2 years later. He was MORE than generous to his family and friends but some of my former co-workers (an older couple that worked together with me) are now living in his "dream house".
Thats actualky a horrible idea - some states do not transfer the annuity upon death.
@@machinist7230 then why would you live in that state..? You must love the Government an awful lot to just give them the kind of tax money that Lump sum brings.
@@csnide6702🙄
People don't generally choose where they live based on rules of the lottery 😂
@@tracy419 But i would CERTAINLY know the rules of a game BEFORE i played it...... If not - too bad so sad.
*Even with the economic fluctuation, I am very excited to have earned $45,000 on my $10,000 investment every 10 days*
Oh please, how can someone get to speak with Mrs Angela Cole Carr!!?
@@christianamarcus5762 Reach her directly
私は非:常に👎👎
満:足してい る👉┼𝟏𝟑𝟎𝟒𝟑𝟏𝟓𝟐𝟖𝟓𝟖👈私は非常に満足している国人..........👈
@@mariahreform8612 Thanks alot, I just messaged her now and she responded nicely..
Lump sum here. But two particular investments I would do are start a club in the Dallas area similar to the Cicada Club in Los Angelas, CA. And purchase various properties, assign full property management firms to rent them out and take in the passive income.
In CA, IF you win a lottery, you only pay I believe 6% on your lotter winnings. So, not 13%. Also, you only pay federal taxes on your winnings ONCE. Not every year if you take the lump sum. Also, you need to factor in inflation if you take the annunity option.
This video is misleading. If you took the annuity you wouldn’t get 37 million/year. The annuity is paid on a scale that is increased .05% every year to account for cost of living increases. So your first payment would be 13 million and your 29th payment would be somewhere around 41 mil. Which after taxes is about 737 million rather the 435 mil if you take the lump sum. Literally making 10 mil a year more just by delaying gratification. I think majority of winners should take the annuity! Set up a trust and live comfortably. A lot of winners end up broke, filing bankruptcy, in prison and even dead, and they all have one thing in common. THEY TOOK THE LUMP SUM! Look at Cynthia Stafford. She won 112 Mil, 67 after taxes and she recently filed for bankruptcy. If you can’t manage 10k, you can’t manage 10 mil. The annuity is the safer bet! I would only take the annuity. I’m 37, and 29 payments means I don’t stop getting paid til I’m 66. I don’t care about taxes and inflation. That’s what investments are for. 13 mil a year is ball player money and I don’t play ball lol😂
🎯🎯🎯🎯🎯🎯🎯🎯🎯🎯🎯🎯🎯🎯🎯💯%
Yeah if your young this works out but if your mid 50's I am taking the lump sum 30 years naw and broke I would not be
In psychological terms with spending money, I agree with your logic. On the other hand, if you are smart and know how invest, the latter would be a better choice.
Not totally true. A few couldn't stand waiting a year and paid big bucks to convert the remaining payouts into a lump sum, losing even more than if they had started with a lump sum!
@@largol33t1 Go do the math. By taking the annuity you actually get more of the pot vs. taking the lump sum. Most people are impatient and wanna blow the money.
As a foreigner I'd be glad if you could tell me normally how much do we pay (average) for the service of attorney, accountant and financial planner? Thanks.
You can sell it to a company like JG Wentworth etc at any time if you change you mind on the annuity... they will pay you pennies on the dollar just like the 'cash option'
Hi there , nice video.
Do you have a video , how to invest lottery prize jackpot?
California doesn't tax lottery winnings, but before seeing a penny of the jackpot, the winner will pay a 24% mandatory upfront federal withholding that goes straight to the IRS. However the 24% withholding won’t cover the entire tax bill because the prize pushes the winner into the top federal tax bracket which is 37%
Awesome video!!
Another reason to think about taking the lump sum, Inflation! if you take the lump sum, you get it in 2023 dollars, not a bit each year ending up in 2053 dollars... Look at what $100 would be worth today if you got it in 1993:
$100 in 1993 is equivalent in purchasing power to about $211.15 today, an increase of $111.15 over 30 years. The dollar had an average inflation rate of 2.52% per year between 1993 and today, producing a cumulative price increase of 111.15%.
Thanks! I will take the annuity.
Really? I'm surprised that people are saying annuity. Why so?
@@LYFEAccounting It will give me time to learn about investments and getting used to having that amount of money.
I would take the annuity option. Money lasts longer, for those who aren’t financially responsible; savvy. Less taxes… and for the next 30 years, you will receive an 8 figure income.
One thing not mentioned, if you take the lump some, use ALL of it for down payments on Triple Net (NNN) properties, you’d be not only be worth over a billion , you’d be still make millions a yr. Billionaires are about assets, not liquid cash.
I would take the lump sum, because there's no guarantee you'll get all the money you're owed nowadays. If they can't pay out a few years down the road, you're shit outta luck.
When I retired in 2013 I could have taken the $191K in my pension fund account. Instead, I opted for the annuity which consisted of 2% per year for each of my 30 years times the average of my salary for the 3 highest earning years with a guaranteed 2% per year COLA escalator.
Over 10 years I’ve received $578,000 in pension benefits.
I’d go so far as to say, if I was looking to start a career today, I wouldn’t consider any job that didn’t have a solid pension plan.
The only way the lump sum pays off is if your pension has no survivor clause and you’re on your death bed.