I gotta tell ya, hitting it would not suck. I would most definetely take the annuity instead of all cash, and I'd budget myself to spending no more than three-quearters of the net every year. Banking the rest, I'd be able to live my life in absolute luxury and comfort (by MY standards, no one else's) and leave a hefty chunk of change to someone when I'm toast. Sounds like as good a plan as any, right?
The largest Powerball jackpot was claimed just a few months ago in November, by a lone player in California. The prize, in that case, was just over 2billion - the biggest lottery win in not only the history of Powerball, but the lotteries in general.
Prior to that historic $2billion win, the biggest lottery jackpot history was also a Powerball jackpot - this time amounting to $1.586billion -that three ticket holders won and had to split in 2016.
Taking the annuity is a financial blunder, as evidenced by nearly every single winner of every lottery taking the cash value instead. The problem with taking the cash value is that the winner must then actually actively manage the money. The annuity may outlast your life; it won't outlast your family. The cashout can be a multigenerational event IF it is managed well.
ReplyDeleteThis is a little like the unique opportunity that Bush 2 created in the tax code in 2010- one could Rothify any amount of savings from an IRA, one time deal, pay the taxes. IF one had the cash (especially outside the IRA account), one could make one's entire retirement savings tax free forever (at that time- it's now life plus 10 years effectively). Very few people did that. Thirteen years later, my Roth accounts are worth >3x what they were in 2010, and instead of required withdrawals that would be taxed at 40% federally the year of withdrawal and every subsequent year on any investment earnings, I don't owe a penny on first year withdrawals and can let the investment earnings grow tax free for my life.
Short term pain, long term gain. A hard choice for most.
Taking the annuity is perfectly OK. It's not the optimal multigenerational wealth management choice. It certainly does avoid the risk of a profligate wasting the entire cash award on hookers, blow, and fast cars in a few months.
The Roth:
DeleteAlmost nobody trusted Uncle Sam not to devise/revise new rules to take your money from you; I congratulate you on being so trusting.
Depends on how long you have to live. This is something yo have to sit and work out. The lump sum might be a better option in certain scenarios. You'll also have to pay tax on the annual payments.
ReplyDeleteI can't buy a ticker but enjoyed the video as consolation. I think ridiculous amounts of money is a dangerous thing - my wife thinks I'd trade her in which I'd never do. Even Rick Moranis got lucky. So much great music from my youth.
ReplyDeleteThere's an old joke that goes "Pack your bags, baby, I won the lottery!"....."Where are we going?"....."We aint going anywhere"....
ReplyDeleteForgot my name on that last post
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