Lump sum or annuity?

[elessar78]

Now that the country is in the grips of Powerball mania, the question invariably comes up whether to take winnings as a lump sum or as an annuity? The question isn't only relevant for lotto winners but also if the question ever comes up of what to do with a pension disbursement given the choice.

Thoughts?

[bjl584]

Lump sum.

Pay the taxes up front then invest the money on your own. I'm confident that I could come out ahead as opposed to taking a yearly payment for the next 20 years.

[disneysteve]

Lump sum for sure. I want the money in my control, not someone else's.

[elessar78]

Lump Sum or Annuity? | The Baseline Scenario

I agree with you guys and the question was what YOU would do. But on general, the author argues that people are so financially illiterate that its better off keeping it in the annuity.

[bjl584]

Lump Sum or Annuity? | The Baseline Scenario

I agree with you guys and the question was what YOU would do. But on general, the author argues that people are so financially illiterate that its better off keeping it in the annuity.

Yes,
If you have no idea what your doing, then receiving an annual payment would save you from spending yourself into oblivion as quickly. But, in the end, it won't matter. You would still end up broke.

[disneysteve]

Realistically, when you are talking about the kind of numbers seen in this drawing, it really doesn't matter. If your annuity payment will be millions of dollars per year, I'd be okay with that.

[Bob B.]

Yes, millions of dollars, and lots of new "friends" you haven't seen for years and "relatives" you haven't met. Lot's of hangers on and a never ending stream of money in and out. I don't buy lottery tickets, primarily because my odds of winning are basically the same whether or not I buy a ticket. But, I'm really not sure I'd want to deal with the fallout of the above.

[siggy_freud]

A lump sum payout. What I'd do with it would depend on the amount. Had it been the 580 million. Well even after taxes I'd have a hard time spending it all in one life. I'd be selfish with 30%, and have fun giving away the other 70% to good causes.

[senter]

Now that the country is in the grips of Powerball mania, the question invariably comes up whether to take winnings as a lump sum or as an annuity? The question isn't only relevant for lotto winners but also if the question ever comes up of what to do with a pension disbursement given the choice.

Thoughts?

In the case of the lottery, go with lump sum. Once you are in full control, nothing that happens in the future to the lottery or related activity can have any adverse affect on the cash if you own it.

In the case of a pension, take the annuity. If anything happens to your pension, as things are now the Pension Benefit Guarantee Corporation (PBGC), a government agency, will take it over to make sure you get what you were promised. Pensions are funded to varying degrees, from as low as 50% and maybe less, to 100%. The company I worked for funded its pension 95%. That made the promise more reliable. But the PBGC will in most cases ensure you receive what your company could have or would have paid, even if it goes bankrupt. So go with the annuity regarding a pension.

[SavingSweetOneL]

I would be tempted to take the annunity, however, I'd get a well known financial planner to help me.

Everytime I have tried to invest on my own, it has failed. I lost money, even with a Roth IRA from AARP. Crazy.

The 2 winners will show up soon, and we shall hear thier stories.

SAw Dave Ramsey on a talk show, and he says he doesn't play the lottery, but, would recommend taking a lump sum payout.

And, Senter, cool to know that people cna still get thier pensions. With situations like Enron, I didn't know how people would, and thought it would be a loss.

SweetOneL

[senter]

Things to keep in mind:

The majority of people who invest in the stock market lose money. You almost have to function opposite your emotions to make money, or just dump a monthly amount into a mutual fund.

Diversification is important. Most people who retire with really, really good incomes receive income from different sources that may include pensions, IRAs, rental income, Social Security, royalties, etc.

And then diversify those whenever possible. In IRAs have some in variable positions, some in fixed assets, and maybe a tiny bit in precious metals. In variable assets, have some in stocks that appreciate, stocks that pay dividends, REITs, etc.

Pensions represent a source that is safe from creditors, cannot be raided for emergencies or fun, and are almost as reliable as Social Security. And they don't decline when the market falls. Creditors can access IRAs, annuities, bank accounts, and real estate in case of bankruptcy. But they cannot access pension principle or Social Security lump sum. But if you have the option of choosing a lump sum settlement on your pension benefits and if you take that option, you lose this protection.

[disneysteve]

The majority of people who invest in the stock market lose money.

Where the heck did you come up with that quote? That's ridiculous. Are there actually people out there who believe that garbage?

[senter]

Where the heck did you come up with that quote? That's ridiculous. Are there actually people out there who believe that garbage?

Rather than trying to turn this thread into your opportunity for personal attacks, why don't you look into it and tell us waht you find? Too much trouble?

[Bob B.]

This could be good.

[UnknownXV]

If I take the lump sum, I'd have about 300 million after taxes. Even at a very modest 3% interest, that's almost 10 million dollars a year.

Why take an annuity when the interest on the lump sum payment is likely to be almost as high? But then you have the added security of 300 ****ing million dollars in a thousand bank accounts and other investments.

Jesus would that be nice to have..

A good thing to know that if any of us on this forum wins the jackpot, we won't be one of those horror stories who somehow go bankrupt after winning.