What would you choose if you were the one

[Alpha Marine]

A man in Illinois won a $1.04 billion jackpot a few days ago, now he has to choose how he would receive his money.
He could accept a total sum of $450 million at once or receive 30 payments in instalments for the next 29 years.
The lump sum of $450 million sounds nice, but when you consider the taxes, you might be walking home with just over half of that money at the end of the day. I'm not a tax expert, and I don't know the tax regulations of the US or the state, but from my rough reading, you'll have to pay about 40%-42% total in taxes for that amount.

If you receive payment in instalments for 29 years, you would receive about $34 million years. So if you take out a total tax payment of about 40%, you would receive about 20-21 million every year after tax.
So what would you choose if you were the one?
For me, I would choose to receive the payment by instalment. $20 million a year puts me in the top 1% of earners in the world, and I can do whatever investment I want to with that. With a payment like that, I may not even need to touch a penny from the other payments.

The full story here and Here

[Oshosondy]

Both options are good. But if anything happens to the person like he died, will they continue to pay the guy family the money? But that also has disadvantages.

I will prefer to receive $450 million and pay the tax. If it is payment on installment, I will still pay the tax. I will prefer the lump sum. Both the two options are good.

Common $1 million is not a small amount money. If I receive $200 million, that is more than a life fortune for me.

[free-bit.co.in]

I personally lean more toward lump sum. Because $450.5M pre tax together would have made it much easier for me to have complete control over capital allocation, Bitcoin, productive asset and other investment.

On the other hand, annuity will keep you dependent on future payment. And because of inflation purchasing power of $1 today will not be same 20 to 30 years from now.

But if it is difficult for you to manage large amount of money then annuity can be good as behavioral protection.

[Sim_card]

I will prefer the installmental payment for 29 years but at the same time, I am considering the debasement of USD in this duration of 29 years which can make me consider taking the money in lump sum and invest it into some good long term asset like hold, bitcoin, equity and stock.

[Findingnemo]

Anyone who chose to receive the money in installments probably has zero experience in investment in the real world.

$450 million after taxes is still a great one and even if they invest that money into a very basic thing like buy gold with all of that amount and assume it appreciates at an average of 5% for the next 30 years then you will end up with 2 billion at the end of 30 years. Now assume you take chances with high-risk investments that yield 12% or 20% returns.

[cryptomaniac_xxx]

For me I would have to take the lump sum, obviously you won't get the full prize because of the taxes. But still it's a huge amount and you can used that money right away in investment and live a good life.

Instead of installment for 29 years? You don't know if you would have to live that long and in case that you died early, then you didn't enjoy your winnings. And even if the tax is huge, if you properly investment your money, then you can get back that taxes and double it and for sure you will have to build generational wealth for you and your kids and your grand kids.

[mitchr4]

I am a bit unsure about the installment option. No one can know for sure if the payments will stay stable for the next 29 years. Many things can change over that much time, like the money situation or the rules about the payment. So I think it is better to take the $450 million all at once. Even after taxes take away more than half, that amount is still too good to skip.

[yahoo62278]

You know how many lottery winners go broke within a few years? Rather than take a lump sum and start frivolously spending and taking care of friends and family, I would take the payout over 20 or 30 years so I know my family is taken care of for many years. I'd hate to be broke 5 years after winning and have to change my lifestyle up.

[_act_]

I am a bit unsure about the installment option. No one can know for sure if the payments will stay stable for the next 29 years. Many things can change over that much time, like the money situation or the rules about the payment. So I think it is better to take the $450 million all at once. Even after taxes take away more than half, that amount is still too good to skip.

This is a very good point, no one knows if the company will fold up. If the gambling site fold up and not paying again, the person will not win any lawsuits at all. I will also prefer the $450 million to be paid at once and which is a very huge amount of money. It is better than installment payment that nobody knows if it will all be paid or not.

[Pandu Geddon]

That win is like a retirement allowance from a jackpot. But the installment payments stretch over a really long time. What if something bad happens to the lottery organizers? It's possible for the winner to also lose part of the remaining payments. 
A lump sum payment seems more convenient for anyone. Unless the lottery organizers actually provide a guarantee that they'll pay everything no matter what happens to their business.

[swogerino]

A man in Illinois won a $1.04 billion jackpot a few days ago, now he has to choose how he would receive his money.
He could accept a total sum of $450 million at once or receive 30 payments in instalments for the next 29 years.
The lump sum of $450 million sounds nice, but when you consider the taxes, you might be walking home with just over half of that money at the end of the day. I'm not a tax expert, and I don't know the tax regulations of the US or the state, but from my rough reading, you'll have to pay about 40%-42% total in taxes for that amount.

If you receive payment in instalments for 29 years, you would receive about $34 million years. So if you take out a total tax payment of about 40%, you would receive about 20-21 million every year after tax.
So what would you choose if you were the one?
For me, I would choose to receive the payment by instalment. $20 million a year puts me in the top 1% of earners in the world, and I can do whatever investment I want to with that. With a payment like that, I may not even need to touch a penny from the other payments.

The full story here and Here

Definitely the yearly installments as 20 million dollar a year can fulfill anyone dreams that they might have, the best average salary in US is 250-500k dollars a year and that is 40x that amount, choosing the other option would be not so smart as you are exposed to gambling for example. When you choose 20 million a year whatever happens every year you got another chance. The only motivation to get all at once is if you plan on buying businesses and starting something big on your own.

[Su-asa]

As for me, I will choose to take the money at once because nobody really knows what tomorrow might be. To avoid unnecessary drama in the future, it's better to take all the money, pay your taxes, and invest the balance.
Honestly, there's no point in taking the money part by part unless they are going to add interest to the initial amount. If they won't be adding any interest to the initial amount, there's no point in taking part of it. Someone with the mindset of investment will not even hesitate to take all the money, pay off their taxes, and then invest the balance, but a lazy person will because they will think of getting steady pay for years without working.

[Dr.Bitcoin_Strange]

There have been a case like this that was discussed here, I can't find the thread but I still remember saying that I will go for the option of receiving the payment in installment depending on the condition, if the money can still be paid to a next of kin even in my absence, then I can take that option but if not, then I'd rather take the lump sum and think of something meaningful to do with the money so it grows.
The option that a gambler is going to pick depends on some factors such as, the condition for that installment payment, the person's lifestyle which could be someone that needs that lump sum so they can settle pressing debts or someone that has no debt and doesn't need the lump sum, the decision from third party (the family of the winner could ask them to take the lump sum). Personal, I will choose the installment if the conditions are good enough.

[blomen]

You know how many lottery winners go broke within a few years? Rather than take a lump sum and start frivolously spending and taking care of friends and family, I would take the payout over 20 or 30 years so I know my family is taken care of for many years. I'd hate to be broke 5 years after winning and have to change my lifestyle up.

i don’t think this is money that can be spent so easily, and it would even be hard to spend it all on purpose. but i do agree with you to some extent.

generally, people never stop when it comes to luxury spending and the pursuit of wealth, and for that reason, no matter how much money we have, if it’s a one-time thing, some problems might arise. still, if i were the winner, i think i’d take all the money because i trust myself to manage it.

[Hatchy]

I will prefer to receive $450 million and pay the tax. If it is payment on installment, I will still pay the tax. I will prefer the lump sum. Both the two options are good.

Common $1 million is not a small amount money. If I receive $200 million, that is more than a life fortune for me.

Exactly, both options are really good. Tax aside, $450 million is a big amount for someone who really knows what they are doing in life and can spend that money wisely. If they receive the installed payment, who knows if at some point they deny him of his money and bring up some shitty lies to cut it shut? It's not impossible. In this case, the man has very little to lose. He will also have enough to cover his life time losses in gambling with just this win so either option seems nice if you ask me but I'll go with the one time payment and find something to do with it later on. It all just pins down to your perspective on spending and money management. For someone who doesn't know how to control their spending, they might end up buying things that aren't relevant instead of investing the money..

[Porfirii]

-snip-
When you choose 20 million a year whatever happens every year you got another chance.
-snip-

I was about to choose to receive the full amount at once as the best decision, until I read your argument and now I doubt again. Inflation, uncertainty about life-expectancy, etc. These are powerful reasons to choose to get paid everything at the beginning, even if it means a big discount like in the case presented. But the fact that you think that managing so much money can be difficult, and that otherwise you make sure to a certain extent that no matter how badly you plan in a matter of months you will have another chance, and you can learn from your mistakes, is like rethinking that preference...

[cryptoaddictchie]

If you receive payment in instalments for 29 years, you would receive about $34 million years. So if you take out a total tax payment of about 40%, you would receive about 20-21 million every year after tax.
So what would you choose if you were the one?
For me, I would choose to receive the payment by instalment. $20 million a year puts me in the top 1% of earners in the world, and I can do whatever investment I want to with that. With a payment like that, I may not even need to touch a penny from the other payments.

Some say that money comes from any form of gambling will easily disintegrate whatever form it is and even its short or long term. But for me it depends on how a user able to spend it. He can choose either option cause its both a lot of money whatever the case already. If his a known spender then choose option 2 if he believes that he can manage a huge sum of lumpsum and still not be able to waste it then pick option 1. Either way, both options can really work up for him.

[Iranus]

Annuity is better or lump sum is better, neither of these is universal answer. This decision will totally depend on your financial discipline and risk tolerance. What will be the present value of future money is also an important factor. $1.04B is the total nominal payment received in 29 years. So the value of 1.04 billion today will not have the same purchasing power after 29 years.

So if I can get 5 to 6% return in long term from lump sum then the present value of the annuity goes down a lot. Present value of the 30-payment stream is only around $470M before tax. At 6%, it falls to roughly $411M. So in my case to get immediate control I would prefer lump sum.

[Rruchi man]

~

The two options are good depending on certain conditions.

If you already have a business plan that will require you to take the lump sum and invest properly, then taking the lump sum should be the better idea.

Otherwise, if you have no plan at hand already but just want to collect the lump sum and have it while making a plan, you will squander a lot of money even before you will be able to make any real plan. Without financial intelligence, you will make a lot of financial mistakes that can put you in debt after a very short while.

[Orpichukwu]

Taking the payment annually will always be the best option, not for tax purposes, as it’s always the same, but for the sake of preserving the money and also protecting yourself; if the first year, due to how the money came in, ends up being lavished, you will have enough time to reflect on yourself and be a better version of yourself in terms of spending from the upper year. It's not the same when we talk about receiving the money at once; it might all get misused. A lot of pressure comes with lottery winnings from family and friends, which will feel entitled to that money.