$25k/yr for 20yrs = $390k lumpsum?

[JEDI]

Retailer’s mistake leads to man winning $25,000 a year for life | CNN

lite.cnn.com

Surprised lumpsum is only 22% less.
I guess high interest rates (5+%) on govt t-bills?

 

[Torn Mind]

The state lottery is always "invisibly 'hoping'" an old person takes the annuity and doesn't make it past the first year.

 

[Mai72]

The state lottery is always "invisibly 'hoping'" an old person takes the annuity and doesn't make it past the first year.

The guy in the article is 60. He will probably be around for a decade or probably two.

 

[ElFenix]

In this game it's "20 years or life, whichever is greater," per article, so I guess it's inheritable

 

[Torn Mind]

The guy in the article is 60. He will probably be around for a decade or probably two.

It's still only a payout of 250k instead of the full 390k for a lump sum. Point is, whatever costs the least to the state is the most "desirable" result. (It's not a living entity, but it's operation has preferences because humans still operate the entity)

People who frequent lottery ticket dispensers are going to places that usually do not provide exactly nutritious foods.


My Asian dad only made it 62...in 1996. (He had me at 55, lol)

 

[Lost_in_the_HTTP]

First off, you lose 20%-30% off the top based on potential taxes. That leaves maybe $18K or so, or about $1,500 mo.

I'm not even going to try to explain how (I could, but I choose not to), but that amount would dramatically increase my monthly costs to the point I wouldn't be gaining more than a couple of hundred over what I get now. And it's possible I just might yield less overall.

 

[AdamK47]

The smart thing to do is to take the lump sum (~$250K after taxes) and invest it. Most that play the lottery won't though.

10 years at a conservative 8% would amount to $540K. 10% = $648K. 12% = $776K. Plenty of ETFs can do that.

 

[dullard]

The smart thing to do is to take the lump sum (~$250K after taxes) and invest it. Most that play the lottery won't though.

10 years at a conservative 8% would amount to $540K. 10% = $648K. 12% = $776K. Plenty of ETFs can do that.

He did say that he would travel and save the rest. So, a good chunk could be invested.

You have a good idea, but I think we should add a dose of reality to the math.

1) A rule of thumb is that you should have roughly your age in percentage of your investments in bonds. That is because stocks can and do tumble for up to ~20 years. You need to be able to be fairly confident that you'll outlive a possible downturn. Someone who is 60 isn't guaranteed to live 20 more years and thus isn't guaranteed that stocks will have a positive return in his lifetime.

Thus, if he followed that rule of thumb, invested 40% in stocks at 10% total return (stock price + dividends) and 60% in bonds (or bond-like investments) at 5% return, he could assume an average 7% return after 20 years.

2) People are terrible investors. Really terrible. The average investor gets only 70% of what the market returns. Thus, if he was an average investor following the rule of thumb of 60% bonds, he should expect only 0.7 * 7% = 4.94% return. That is $385k in 10 years which is better than the annual payout. But not as rosy as your math predicts. And it doesn't include fees. If he invested with a broker at 1% annual fee, he'd barely break even with the annual payout (Yes low fee funds exist, but so do 2%+ fee investments).