OT: Powerball rolled, up to 1.3 Billion

Submitted by MikeCohodes on
So none of us are filthy rich, yet, but no one else is either. Wednesday's drawing is estimated at $1.3 billion, though I'm sure that will climb even higher. I wonder how much you have to donate to get a building named after you on campus?

DairyQueen

January 10th, 2016 at 1:09 PM ^

Exactly.

It changes the way people relate to you, changes your goals, makes you question the meaning/purpose of your life, and very foundation of the way you live. An overwhelming people on this planet could not handle that sudden introspection, so quickly and without their own choosing.

You basically become alienated in every single facet/experience of soceity and the world around you.

And this isn't even considering people asking you for money.

It's the epitome of the term "Golden Handcuffs".

All those world famous people (Obama just said it himself) reveal that if they could buy/have one thing, it would be to go back to being anonymous, go to the store and buy milk, and not be bombarded, eat at a restaurant and have an honest conversation with your waiter/waitress.

The human organism wants homestasis. Too much of anything (anything!) will kill you.

MaizeAndBlueWahoo

January 10th, 2016 at 10:02 AM ^

Not true.  The annuity is an asset like anything else and can be transferred to your estate.

What surprised me when I read it, was an article that said in the past seven years only one jackpot winner has taken the annuity.  For smaller jackpots especially, the cash option is incredibly moronic from a tax standpoint.

Give me the jackpot and I'm taking the annuity every single damn time.  This big a jackpot, the first cash payment would be in the neighborhood of $20 million.  Fine by me.

MaizeAndBlueWahoo

January 10th, 2016 at 10:29 AM ^

Because the government taxes you on the money you make that year.  If you take all of it in one year, it's almost entirely taxed at the highest income bracket.  Take the cash, close to 100% of it is taxed at the highest rate.  Take the annuity, and for a $100 million jackpot (which is about what people usually win) only about 85% of it is taxed at the highest rate.

Sure, you can beat the taxman by taking the cash and then investing it such that the income isn't taxed at the highest rate.....but then, you're not beating the income you'd have gotten with the annuity, either.

bluebyyou

January 10th, 2016 at 10:52 AM ^

For 2016, at 415K for a single filer, you are maxed out with Federal taxes. If your talking about 100 million using today's rates as a benchmark, there is no way you aren't at the top of the tax scale every year.  http://www.irs.com/articles/projected-us-tax-rates-2016

Then there is the little issue of the future value of dollar.

MaizeAndBlueWahoo

January 10th, 2016 at 11:20 AM ^

Yes, you're at the top of the tax scale.  But not every dollar is taxed at the same rate.  If you earn $1 million as a single filer, $415K of that is taxed at something less than the top rate.  Only $585K is taxed at 39.6%.

Hence, if you break up the payments, you're moving more money into lower tax brackets.

PopeLando

January 10th, 2016 at 11:29 AM ^

There is only one reason you would ever take the annuity: you're bad at saving. Like really awful, and you know it. That's it. Period.

Would you rather be in the top income bracket for one year, then only worry about paying capital gains for the rest of your life? Or would you rather be in the top income bracket for the next 20 years PLUS capital gains?

Trust me, the lump sum is almost always the best choice. I work in both the financial field and the retirement field. If you win the jackpot, PLEASE hire someone to advise you. You don't appear to have thought thia through.

Alton

January 10th, 2016 at 12:16 PM ^

And that's my point.  Arguing that the annuity is better for tax reasons is more or less true right now, but who knows if the 1950's top tax bracket of 91 percent will ever return.

Another reason for the lump sum is the possibility of very high inflation, even a brief period of it, over the next 30 years.  If we get a period of 1970's style inflation, or a little worse than that, wouldn't you rather have your money in your hands as it's happening, so you have the possibility of letting your wealth keep up with the inflation rate? 

Badkitty

January 10th, 2016 at 8:38 PM ^

This makes absolutely no sense. After the first $585K your next $19.5 million is taxed at the highest rate. So only a small amount is taxed at the lower rate instead of the maximum federal rate. 39.6% is actually a fairly low rate historically. If you take the annuity you're betting that the government won't raise the highest rate. I'm not sure I'd make that bet.




Sent from MGoBlog HD for iPhone & iPad

Jonesy

January 10th, 2016 at 6:33 PM ^

You're getting fucked on taxes no matter what, better to take the lump sum and reinvest it.  The work that money starts doing for you immediately will greatly outweigh any tax considerations or the higher total payout plus you can make your big purchases right away like the inevitable new house and car.

 

As bluebyyou says the only reason to take the monthly payment is if you are horrid at saving yet somehow have the self-awareness to know this and the willpower to ignore your spending problem at the start.  Seems unlikely.

bluebyyou

January 10th, 2016 at 10:54 AM ^

If you have investing sense, and I'm not trying to be a wise ass, you always take advantage of the opportunity to minimize your tax burden.  For instance, most of my post-college life has been in Maryland, where I typically pay between 6-9 percent in state and local taxes.  The effect of the money I paid to MD versus the opportunity to take the same money and invest it over several decades is huge.

And as to an investing benchmark, if you are risk averse and want safety, your rate of return is much lower than many people think.

FA_Wolverine

January 10th, 2016 at 2:29 AM ^

If I won I'd donate 25 mil to the football program and 25 mil to the hospital on campus for cancer research and whatever upgrades they need!




Sent from MGoBlog HD for iPhone & iPad

FA_Wolverine

January 10th, 2016 at 2:30 AM ^

I'd also buy a piece of land somewhere secluded and build a home with a finished basement to make a wolverine man cave.




Sent from MGoBlog HD for iPhone & iPad