What's better? $1.5 million lump sum or $100K per year for life?

[gaussiansurface]

if your a good investor.. take 1.5mil.. invest it all.. make 7% interest a year... exponential growth.. more money in the end

this, everyone else is a retard

[drewsedg]

First, A bird in the hand is worth 2 in the bush so having cash in hand is a HUGE bonus. For all you know the lottery could go out of business 1 year after you win it and that lifetime payment could disappear. Ignoring that lets look at the numbers more closely though:

The $1.5M lump sum would end up as $997,686 after income tax.
The $100k/yr would end up as $78,383/yr after income tax.

If you were to invest all $997,686 a 10% yearly return certainly is possible. However, lets be conservative. Inflation is usually around 4% so we want to beat that. Lets split the difference between inflation and the decent 10% return and say you do 7%. At 7% the lump sum would make $69,838/yr. Now you will have to pay capital gains tax on that. To make things simple lets assume you get stuck paying highest possible amount which would mimic the income tax. That leaves you with $56,254. This is an inflation safe return meaning if inflation goes up your yearly yield should go up as well whereas inflation can and more than likely will make your static $78,383 worth less and less each year.

Now lets assume you want to hold onto the lump sum until it yields the same $78,383/yr after taxes. In order for you to make the same $78,383 per year with the $997,686 it would have to grow to $1,428,571. At 7% per year that would take 62 months without touching it. That is 5 years and 2 months.

So now lets compare the two scenarios in that 5 years if you decide to follow this.
A) You take the lump sum and wait 5 years. You have ~$1,428,571 in the bank and earn ~$78,383 in interest per year all after taxes.
B) You take the yearly payments and invest all of it for 5 years. It grows to $467,573 in the bank. The 7% interest on that is $32,730 but again you have to pay taxes on it. Unfortunately when added to the $100k from the lotto company you only get a combined total of $101,949 after taxes.

So even after 5 years you will still earn a little more per year (an extra $23,566) with the payments but you will have a lot less money accumulated ($960,998 less). I don't feel like doing any more math to find the exact point but if you were to save longer then the 5 years eventually the lump sum will eclipse the yearly income of the payments option and it will have a whole hell of a lot more money in the bank. My guess is that another year or two would accomplish this.

So which would you rather have now?

[muddyrover]

100k brah, then you don't have to worry about all those relatives asking for money.

and you can't buy a ferrari right off the bat

[jayohthatman]

I voted 100k but now im thinking 1.5 million....................id probably do that instead

[akarpus]

Rather take the 1.5mil. Since you live in Canada & assuming the economy isn't failing the 100k sounds decent. 100k after taxes though right?

you dont get taxed on lottery winnings in Ontario

[bloodthorne]

inb4 the person who wins "dies" within the first year

[akarpus]

First, A bird in the hand is worth 2 in the bush so having cash in hand is a HUGE bonus. For all you know the lottery could go out of business 1 year after you win it and that lifetime payment could disappear. Ignoring that lets look at the numbers more closely though:

The $1.5M lump sum would end up as $997,686 after income tax.
The $100k/yr would end up as $78,383/yr after income tax.

If you were to invest all $997,686 a 10% yearly return certainly is possible. However, lets be conservative. Inflation is usually around 4% so we want to beat that. Lets split the difference between inflation and the decent 10% return and say you do 7%. At 7% the lump sum would make $69,838/yr. Now you will have to pay capital gains tax on that. To make things simple lets assume you get stuck paying highest possible amount which would mimic the income tax. That leaves you with $56,254. This is an inflation safe return meaning if inflation goes up your yearly yield should go up as well whereas inflation can and more than likely will make your static $78,383 worth less and less each year.

Now lets assume you want to hold onto the lump sum until it yields the same $78,383/yr after taxes. In order for you to make the same $78,383 per year with the $997,686 it would have to grow to $1,428,571. At 7% per year that would take 62 months without touching it. That is 5 years and 2 months.

So now lets compare the two scenarios in that 5 years if you decide to follow this.
A) You take the lump sum and wait 5 years. You have ~$1,428,571 in the bank and earn ~$78,383 in interest per year all after taxes.
B) You take the yearly payments and invest all of it for 5 years. It grows to $467,573 in the bank. The 7% interest on that is $32,730 but again you have to pay taxes on it. Unfortunately when added to the $100k from the lotto company you only get a combined total of $101,949 after taxes.

So even after 5 years you will still earn a little more per year (an extra $23,566) with the payments but you will have a lot less money accumulated ($960,998 less). I don't feel like doing any more math to find the exact point but if you were to save longer then the 5 years eventually the lump sum will eclipse the yearly income of the payments option and it will have a whole hell of a lot more money in the bank. My guess is that another year or two would accomplish this.

So which would you rather have now?

This is in Canada you dont get taxed for lottery winnings that would be retarded

[EternallyMiscd]

The answer is 100k for life. ANYTHING ELSE IS WRONG.

You fuking morons need to shut up about investing the 1.5mm in stocks. You are acting like that return is risk free. You need to discount cash dividends every year at a much higher discount rate than ~2% risk free rate because of the risk of dividends being cut AND losing your principal if the stock price goes down. Go read a damn book, idiots.


(assuming it's people around our age... seniors are different)

Ever heard of bonds, preferred shares? Plenty of ways to construct a nice balanced portolio that returns >5% with little or no market correlation. You've obviously been reading the wrong books...idiot

You could even invest in a market neutral mutual fund if you're too stupid/lazy to do it on your own.

[drewsedg]

This is in Canada you dont get taxed for lottery winnings that would be retarded

I am in the US so I would be taxed. If you are Canadian you would have to do the math for yourself. Without taxes though the lump sum should actually overtake the payment plan in yearly profits sooner.

[breadstick1234]

100k in 15 years is only worth (assuming only 4% interest rate) $55526.5. I'd take the lump sum easily. If I just stick a third of it in the bank at 4% I'll have $900471.8 in the fifteenth year.

[HDHC10]

Ontario lottery (lotto 649) is having this promotion where you can take either 1.5million lump sum or 100k per year for life.

even better. you punched in face daily.

[Spanners_Fapson]

I could live a care-free, very comfortable life on 100k a year. Although i'd get taxed out of my phucking mind in the dictatorship of Australia, so i'd probably have to finish uni and get another job.

[Xant1ppe]

The thing is, if you invest 1.5M you'll be making more than 100k per year right from the get go. So year 1 you'll get the 1.5M and 100k, and continue to get 100k ON TOP of the 1.5M

lol at miscers.


Someone missed finance class.

i work in IB

would still take the 100k without a shadow of a doubt.

lol at income tax on LOTTERY winnings ^

[iShredz]

Depending on house prices, would take lump sum, buy investment property, watch investment inflate overtime without even having to do a thing, plus renting out to tenants, that will be a little extra to top it off.
Don't know if people are aware of inflation, but 100k in say 20 years will be worth sweet fuark all (everything costs more as well as wages should increase).
So typically I would be up in profit with my assets over a short and long term. If invested properly.

[oe7Leo]

My god people are morans. 1.5mil at 5% interest = $75,000/yr. Plus you still have the $1.5mil.

[reyes12]

you could take 100k today and then get hit by a bus tomorrow...


1.5m for me...auto Millionaire and invest in rest.

this

[bottlez]

strong bump

[ralphlauren55]

this thread proves misc is retarded. 1.5 mil is wayyyyy better.

[saltcadet]

I'll keep the interest from my winnings, thanks. Also, I'd have full control over my assets - not have them be fed to me piecemeal. I don't need much and I would prize security over anything else at that point, so I'd keep out a little and put the rest in variously lengthed US bonds. I'd try to set it up so that I'd be able to pull out money each year. I'd probably only allocate 30-40k or something per year initially, and then work with inflation and adjust accordingly. It wouldn't make me rich, but I have sparse needs and playing it safe would make it so that I'd never have to worry about anything again.

[autrefois]

100k will be worth diddly in about 15 years anyways. get dat dere lump sum, invest, buy gold, watch the world burn

[TaxEvasion]

Whoever say's $100k per year over a lump sum of $1.5m is a terrible investor and business man.

[-MarkX-]

rofl

100,000x25

duuuuuuuuuuuurrrrrrrrrrrrrrrrrrrr

[wnc817]

1.5M easy. I would leverage it and buy 5 or so mil worth of real estate. Inflation would work in my favor.

[KennyPowers123]

My god people are morans. 1.5mil at 5% interest = $75,000/yr. Plus you still have the $1.5mil.

So where do you intend to make 5% interest? You'd be lucky to get that on a high-risk junk bond right now.

[Hautacam]

lump sum everyday of the week.

[Muneyy]

inb4 the person who wins "dies" within the first year

That would be pretty ironic... dont you think?










I'm pretty sure its not "for life" in the same way people get "life in prison" I believe theres a cap on how many years you get the $100k for.

[jackamo2887]

My mom was offered a lump sum of 900,000 or 1,000 a week for the next 20 years.

Apparently her financial adviser told her to take the 1,000 a week for 20 years as the 900,000 would have bumped her into the next tax bracket or some ****.

[EnderG60]

Always take the lump sum if you have half a brain.

Why would they even offer a payment plan if they werent making money off it?

[ses1357]

First, A bird in the hand is worth 2 in the bush so having cash in hand is a HUGE bonus. For all you know the lottery could go out of business 1 year after you win it and that lifetime payment could disappear. Ignoring that lets look at the numbers more closely though:

The $1.5M lump sum would end up as $997,686 after income tax.
The $100k/yr would end up as $78,383/yr after income tax.

If you were to invest all $997,686 a 10% yearly return certainly is possible. However, lets be conservative. Inflation is usually around 4% so we want to beat that. Lets split the difference between inflation and the decent 10% return and say you do 7%. At 7% the lump sum would make $69,838/yr. Now you will have to pay capital gains tax on that. To make things simple lets assume you get stuck paying highest possible amount which would mimic the income tax. That leaves you with $56,254. This is an inflation safe return meaning if inflation goes up your yearly yield should go up as well whereas inflation can and more than likely will make your static $78,383 worth less and less each year.

Now lets assume you want to hold onto the lump sum until it yields the same $78,383/yr after taxes. In order for you to make the same $78,383 per year with the $997,686 it would have to grow to $1,428,571. At 7% per year that would take 62 months without touching it. That is 5 years and 2 months.

So now lets compare the two scenarios in that 5 years if you decide to follow this.
A) You take the lump sum and wait 5 years. You have ~$1,428,571 in the bank and earn ~$78,383 in interest per year all after taxes.
B) You take the yearly payments and invest all of it for 5 years. It grows to $467,573 in the bank. The 7% interest on that is $32,730 but again you have to pay taxes on it. Unfortunately when added to the $100k from the lotto company you only get a combined total of $101,949 after taxes.

So even after 5 years you will still earn a little more per year (an extra $23,566) with the payments but you will have a lot less money accumulated ($960,998 less). I don't feel like doing any more math to find the exact point but if you were to save longer then the 5 years eventually the lump sum will eclipse the yearly income of the payments option and it will have a whole hell of a lot more money in the bank. My guess is that another year or two would accomplish this.

So which would you rather have now?

wow a real financial analysis.. surprising

[Hautacam]

Pretty simple, it will take you 15 or so years to get the same amount as the lump sum. Do you really think in that time period you won't be able to turn the 1.5 into 2-3?