Like/Dislike ? = One Lottery Winner

It should work out to more if you take the money over the long run, but most, if not all, would want all the money at once.

The other big advantage of taking the annuity is if you are a total dumbass with money or have a problem saying "no" to people (because if you win just about everybody you know and about 100 times that of people you don't, will come to you with their hand out) then it ensures that you are going to have money coming in, and lots of it, for many years to come.

 

Yeah, that's why in my first post I said I would take the installments. I'd probably be the dumbass who couldn't say no.

Good Lord - I've heard about this - cat juggling! Stop! Stop! Stop it! Stop it! Stop it! Good. Father, could there be a God that would let this happen? How much do you want?
- Navin Johnson

 

I agree 100% and speak from experience. I had a large windfall when I sold my company and luckily had a long lead time when I was able to get everything in place including the right tax structures and private investment vehicles substantially reducing my tax rate. For this lottery winner the difference could be tens of millions if he doesn't plan ahead.

 

Not true at all. The lump sum is discounted along the UST yield curve, given the current rates and shape of the curve it would only work out to more if you couldn't get a little over 3.3% on your investments.

Heck, you can do better than that just investing in agencies which are roughly as risk free as treasuries. If you can even do just a few percent better you're literally talking about hundreds of millions of extra dollars you'd have over the long run versus taking the annuity. And this is after all tax considerations (and frankly you'd be stupid to actually pay the full tax rate when you're at that level).

Exactly. I work in the private investment industry (hedge fund) and our investors are mostly institutional but also some very high net worth individuals (e.g. well over $100MM in investable assets). We just focus on investments and are not tax guys by any stretch, but investors typically have their investments structured with us in ways to reduce or defer taxes . Even for the smallest investor that works out to millions saved.

And that is just the tax stuff. Other things you want to do are decide what bank(s) you'll use as custodian. Most of us put our money in a bank and accept the terms they offer, when you have that much money you can negotiate your custodial terms. Same with prime brokerage, etc. Anyone who doesn't prepare will end up paying a ton in fees and taxes just because of laziness, plus they would miss out on the actual investment vehicles the ultra-wealthy always take advantage of.

 

Gregg Easterbrook explains the lump-sum vs annuity payments of the lottery like this:

It's explained much more simply by the Steve Miller Band:

 

One fact that hasn't been mentioned ---
NY Lottery = takes HALF the winning prize amount.
Then, the winner is paid the amount left.
Not sure if Powerball is the same ?