If I were Filthy Rich
By Critical_Agency7861+44 Why would anyone opt for annuity over cash option?
I’m looking at the payouts and for example on the California Superlotto plus is at 23m this week. The cash option being approximately 8.9 million after taxes. Now the annuity is at 431k for the first year (after taxes) it gradually increases every year and the last payment would be made in year 26 topping off at around 880k.
Now my question is- why would anyone want to wait 26 years to receive their full payout? I would much rather take the lower amount today and have all my money all at once. That way I could generate interest on it let’s say a modest return of 4% on $8.9 million is 284k a year (after taxes). I would still never have to work a day in my life and will never have to touch the principle.
After 26 years of compounding interest you would easily surpass an income of 1 million a year.
Recent responses
+34 @Covid_45 I for one don’t want the stress or anxiety that comes with investing. Have a very small friend and family circle. No wife or children. No desire for multiple houses and fancy cars or world travel, unless I overcome my anxiety! Would be fine living on the guaranteed income of 400k or more a year! I’m pushing 50 so that may also be a reason for my choice. Here’s hoping I find out this Saturday!!! Fellow Californian here.
+23 @TheLizardKing89 The only time it makes sense to go for the annuity is if the jackpot is so low that you won’t be in the top tax bracket with the annuity payments.
+18 @PickleManAtl Could be a variety of reasons anywhere from just not wanting to deal with it and letting the payments come in every year without a second thought, or maybe they are young and don't trust themselves with the money. For me it would depend on how much the jackpot is on any game that I win. For instance, in Georgia, I tend to play a cash for life drawing. Grand prize is $1,000 a day for life, or, you can pick a cash option which is something around 5 million dollars. I would probably choose the cash option, and with guidance, invest some of it and do whatever with the rest. The second prize though is $1,000 a week for life, which comes out to something like $640 per week. I was laid off at Christmas, and I'm getting older and am handicapped. $640 a week isn't a ton of money, but if it's guaranteed for the rest of my life, it is a certain level of stability that I don't have right now - so if I won that prize, I would choose the annuity.
+18 @wegotthisonekidmongo Personally I'd take the annuity. Getting a paycheck every year for a long while sounds good. Yes I know the reasons why lump sum is a good choice too. I'd like to protect myself from any calamity. I plan on living until 100 or more personally so bring me the annuity. My choice. I have my reasons. No matter what happens to the money in a year, the very next year it's all brand new again. Plus the payments get higher as you go on. Sounds good to me and MY PLANS OF MY LIFE.
+13 @DecisionPlastic9740 They don't trust themselves to not blow through all the money.