Quote:
Originally Posted by Kebabkungen
The final scam is trying to fool you into picking the annual payments. People might forego the lump sum with the flawed logic "it is only 75% of the payout so Ill take the annual payments".
Over 20 years with interest the lump sum is more than 10x the value of the annual payments easily, probably more.
The only reason to pick the annual payments is if you are the kind of person who would waste all of the lump sum in a year on random garbage.
EDIT: Actually with the stupid taxes its probably a lot closer. CBA doing the maths.
This math was posted for Kessler's situation. Kessler has posted he has 150k in losses this year. So the lump sum offer was 805k. After losses and personal exemption from that total, his net check after taxes (including SS taxes) would be $565,354. The 20-year bond rate was 4.4% last week when he hit the 1.2 mil jackpot, (it is lower now), but based on 4.4% his after-tax total would grow to $1,258,112 after 20 years.
If he took the $60,505 annual check, his first year would be tax-free. Then in the following years, his after-tax check would be $44,586. (only a 12% tax rate vs 37% for the amount over $400k for the lump sum). These 60k + 19x44k payments at 4.0% over 20 years would grow to $1,400,877 if he has NO future gaming losses in future years. (highly unlikely). But if he averages -15k in losses in future years (very likely) his annuity would grow to $1,554,961. So he is much better off taking the 20 year annuity.