Lotterys are usually paid out in annuities where you would get that amount over a period of 10-30 years. However, they also give a lump sum amount which is usually ~half the stated amount and after taxes you could expect to receive 1/3 the stated amount.
Still, it's generally best to take the lump sum unless you have very bad self control and would blow through the money.
Statistics show it's literally best NOT to take the lump sum and that most people have no self control.
Give me the winning lottery ticket and I'll show you how it's supposed to be done.
The issue is the mathematically best outcome in a vacuum does not take into account the fact that gambling has a negative expected value, and anyone participating in it was already more likely to be really bad with money. There can be a mathematically ideal outcome that is different than the statistically best outcome in real life situations. Probably anyone considering this the mathematically ideal option will work best, but the average gambler the statistically best is.
As i said
unless you have very bad self control and would blow through the money.
Which is why you can work with a financial advisor and other wealth management strategies to set yourself up for success.
But yes, lots of people have lack of self control but if you're going to throw around big words like statistics then show those receipts. And i mean actual studies not an article pulling numbers out of their ass.
Statistically, people may tend to blow their lottery winnings and end up broke if they take the lump sum.
Financially, the lump sum is the better option because if it's well invested, it will grow faster than the full payout over the term of the full payout. It turns out that if you have near unlimited money for the best financial advisors, you will make a lot of money.
It's not like you can't go into debt and lose the annuity too.
it’s generally best to take the lump sum
Why? I would assume it's the other way round.
It's just down to generally investing the lump sum you can outperform the annuity option. If you search "lottery lump sum vs annuity" you'll get a lot of results. Here's one
He'd get 14 million dollars a year for 30 years assuming the total payout was the same. I get that advice for people who are looking at a 100k payout. But at some point it's just irrelevant. His first year alone would be a respectable total payout.
Yeah but he would get 47 million in interest a year if he took the lump and spread it across the market using the 10 year average. 11%
So using your 14 million number, he could invest half and leave the rest in something guaranteed like bonds or savings accounts and make more money and guarantee his family has it in the future.
It's enough money to buy everyone in your family a multi million dollar house the first year and not have touched the original balance.. : /
They should hold onto the lottery ticket and borrow against its value.
Instead of taking out the lump sum, you can have it paid in installments, they probably asked for lump sum, thus they get a much lower value.
Then you can do the math of whether or not it's worth it to receive monthly payment or taking out the lump sum, paying off all your debts, then putting it into S&P 500 and drawing down 4% a year and never run out of money.
At 400 million, that's what, 16 million a year? Never have to work again a day in their life, can spend 365 days a week in a 5- star hotel at a 1000-2000 dollar a night a 250 thousand car every year and haven't even spent 1/16 of his yearly liquidation.
Such a joke. While I personally believe everyone should pay their fair share... Winning lotto or winning at the casino ect, should not be taxed.
However if you use that money and make more money with it you should be properly taxed.
I think if they only advertised the post-tax number, there wouldn't really be a problem. Like, "hey, the jackpot is some amount, and after tax you could win 400 million"—that would be fine. As it is, they're kinda just building resentment for taxes in general by making your final winnings seem so disappointing, even though it's still 400 million.
And its not like it is business profit, unless you can put the tickets you buy as business expenses. To me, it is in the same category as gifts. Should not be taxed.
I violently disagree with you.
Gambling and playing lottery is a method to take a risk and get essentially free money by doing nothing, other than taking the risk. Personally I think anything like this gambling related should be taxed up the wazoo. Definitely more than 50%. And that taxed amount should ideally go back to fund things like schools and stuff good for everyone.
Final note, if you ain't happy with 400M free money, you cray cray.
Or the winning amount should represent the money you get after tax just like in every other country.
I personally think the tickets should be hella taxed, not the winnings. However lotteries are immoral ASF anyways and should probably be banned so 🤷♀️
The stated jackpot isn't just before tax, it's the future amount that it would be worth after collecting interest for 30 years.
80% taxes how does that work?
suddenly germany feels like a tax haven :D
It doesn't. Just headline gore.
Lottery payouts typically have two options: lump sum at half the value of the winnings or a 30 year annuity at the full value. So this headline assumes lump sum reward and cuts the face value on that alone, then does a bunch of other hand waving to get you down the next 58%.
News journals that are owned/advertised by anti-tax republicans love to run out the "lottery was taxed too high" story, specifically targeting people who fancy themselves future lottery winners. It's all bullshit.
It's not taxes... well not all of it. The lotto advertises its prize as the sum total of a 30 year annuity. Currently Powerball has an estimated Jackpot of 163 Million. You can take the lump sum up front though. At present that lump sum is 73.9 million. After you get that, then you get taxed on it, reducing it to probably something like 40-50 million.
That seems incredibly scammy to me. They're pretending the prize is double what it actually is and then claim even more of that back as taxes. If the actual prize money is only 20% of what you're advertising that's dishonest at best.
Where I am lottery winnings are tax-free and without an insane hidden 50% "claimed your winnings" fee. What they advertise is what you get if you win.
424 millions is still a mighty respectable amount
Note that most of that difference is due to picking the lump sum, not due to taxes.
If the winner picks the lump sum, that $2.04 billion drops to $997.6 million.
Also I'm not sure where the $424M number is from. The federal tax rate is 37% (bringing the sum down to $628M) and California (where the winner is) doesn't tax these winnings.
Best. Billionaire. Ever.
Why does he look like lil bow wow
Should have bought the ticket in the Cayman Islands.
Or Canada.
I'm sure if I was the lottery winner I'd be salty in this scenario, but you only get half as a lump sum anyway, and having $1 billion taxed at roughly half is probably how it should be.
The thing that makes it painful is as OP said, all billionaires should be getting taxed like this, not just that one who can't exploit tax loopholes.
I'm kind of surprised the USA taxes lottery winnings and I live in one of the heaviestly taxed countries. We don't tax lottery winning or other winnings from games of chance. Only winnings from games where some skill is involved (like poker I believe) is taxed.
They say the taxes generated are used strictly for education but they just cut the amount the lottery tax generates out of the budget and using it on tax breaks for the wealthy and still continue to pay teachers dog shit. This country is truly depraved in every way.
idk what's worse. the punchline of this joke, with pre-existing elites not being taxed, or the fact that someone could look at recieving 420 million, and find an excuse to get mad about it
No one is mad about getting 420million. We're mad that there are billionaires.
I can tell you what I would do with $424m, disappear. I'd still do good with most of it but I'm going to leave human society and go join a herd of elephants.
OH NO! Only $424M USD?! How will he get by?
Good job to missing the fucking point
Technically, he isn't getting taxed like a billionaire either. He's being taxed like a lottery winner who took the lump sum. That's how lottery taxing works. Bro will be a billionaire and avoiding taxes easily with some financial planning
