Not sure how they are able to get away with this, but the actual value of these lotteries is only about 1/2 of what they say - this is why they say if you take the lump sum it is valued, not at $1.9 B) but about half...and if you spread it out over time it will be larger.
If I win a $1.9 Billion lottery, I should get (before taxes) $1.9 B.
I ran a road race years ago that promised cash prizes of $500, $400, $300, $200 and $100 for top 5 finishers. At the awards stand, they were not giving out $ or checks but instead saving bonds worth $500, etc. A $500 saving bond is not worth $500 dollars. IT is worth about 1/2 that....and in time will become worth $500 when it reaches its maturity.
The lotteries appear to be doing the same thing - inflating the value of the actual prize by making you wait to get the real value.
this is fraud!
false and deceptive advertising
Lawyers who take up this case should pay me a finders fee for making this discovery...I will accept 10%.
I ran a road race years ago that promised cash prizes of $500, $400, $300, $200 and $100 for top 5 finishers. At the awards stand, they were not giving out $ or checks but instead saving bonds worth $500, etc. A $500 saving bond is not worth $500 dollars. IT is worth about 1/2 that....and in time will become worth $500 when it reaches its maturity.
Not sure how they are able to get away with this, but the actual value of these lotteries is only about 1/2 of what they say - this is why they say if you take the lump sum it is valued, not at $1.9 B) but about half...and if you spread it out over time it will be larger.
If I win a $1.9 Billion lottery, I should get (before taxes) $1.9 B.
I ran a road race years ago that promised cash prizes of $500, $400, $300, $200 and $100 for top 5 finishers. At the awards stand, they were not giving out $ or checks but instead saving bonds worth $500, etc. A $500 saving bond is not worth $500 dollars. IT is worth about 1/2 that....and in time will become worth $500 when it reaches its maturity.
The lotteries appear to be doing the same thing - inflating the value of the actual prize by making you wait to get the real value.
this is fraud!
false and deceptive advertising
Lawyers who take up this case should pay me a finders fee for making this discovery...I will accept 10%.
Yep.
The total they claim is paid in equal installments over more than 30 years typically.
If you choose what they call the lump sum option, the total gets cut in 1/2 (estimate).
You then pay 37% federal income tax plus whatever your state tax is.
If you are lucky, you get about 1/3rd of the number they are hyping
Lotteries should be illegal. The state only pays out about half of the revenue in prizes, then takes a big chunk back in taxes. This is about 30-40% less payout than a slot machine.
State government run lotteries do more harm to poor Americans than just about any other cause.
Lump sum options were not the norm until fairly recently, used to most if not all Lotteries paid out over time. There was a pretty lucrative business in getting winners to sign over their winnings for a lump sum.
So some guy wins $2M, but it's going to be paid out over 20 years. You pay him X amount in a lump sum, and he signs over the rest of the payments to you. The winners would get themselves into such debt that often you could get them to settle for $200K.
I'm fine with lotteries, but I do think they should give away more prizes of less amounts. So instead of one person winning $100M, they could give away one hundred $1M prizes.
I'm fine with lotteries, but I do think they should give away more prizes of less amounts. So instead of one person winning $100M, they could give away one hundred $1M prizes.
Not many people play the lottery when the prize is "only" a million. Gets to $1.5 billion and it seems everyone plays.
I'm fine with lotteries, but I do think they should give away more prizes of less amounts. So instead of one person winning $100M, they could give away one hundred $1M prizes.
Not many people play the lottery when the prize is "only" a million. Gets to $1.5 billion and it seems everyone plays.
Damn right. headed out the door in a few minutes for my run today, with a stop on route to buy some tickets.
Got a screenplay i'm dying to buy. Heard it's really good!
You just discovered the time value of money? Congrats. You're a grownup now.
The annuity and the cash value are exactly the some.
The first business day after a lotto winner is determined the State lottery Commission bids for a portfolio of US Treasury STRIPS from a select crowd of 8-10 bond brokers to fund the annuity.
The age-old question of "which is better, annuity or lump cash" is moot -- it's an equal offering (outside of tax considerations). Lottery annuities, unless they are so-called lifetime annuities, are payable to your estate in the event of your untimely demise.
Ever wonder how to calculate your chances of winning all that money? Does it seem strange that a $10 million jackpot turns into a $2.5 million payout? Get the lowdown on the lotteries -- from the odds to the payoffs.
In order to guarantee that the funds for all of these payments are available, the New York Lottery buys special U.S. Treasury Bonds called STRIPS (Separate Trading of Registered Interest and Principal of Securities). These are also known as zero-coupon bonds.
Financial Pipeline: Zero Coupon or "Strip" Bonds for more details about bonds). A zero-coupon bond pays a certain amount of money when it matures. For instance, in March 2001, you could buy a zero-coupon bond that would be worth $1,000 in 10 years for about $610. The longer the amount time before the bond matures, the less it will cost you today. A bond maturing in 30 years for $1,000 would only cost about $260 today. If you did the math, you'd find out that if you invested the $260 at about 5.7-percent interest, in 30 years it would be worth $1,000.
When a winner claims his prize, the New York Lottery asks seven different bond brokers to quote a package of bonds that will pay each of the 29 future yearly payments. They buy the bonds from the broker at the best price for the complete package. An investment bank holds the bonds, and each year when one matures, the funds are automatically placed in the New York Lottery's cash account. The funds are transferred to the prize-payment account, and a check is written for the winner.
Typically, the whole package of 29 bonds ends up costing the New York Lottery a little less than half of the jackpot amount.
However, most winners don't opt for annual payments. About 80 percent of winners choose the lump sum option, which is usually about half of the jackpot amount. Since the New York Lottery has to pay a lump sum to buy bonds anyway, it is just as happy to give that same amount of money to the winner instead. It still goes through the process of getting quotations for the bonds, but instead of buying the bonds it pays the winner the amount the bonds would have cost.
Most people take the lump sum because they figure that they can invest the money and do a little bit better than the approximate 5-percent interest that the bonds would earn.
Most U.S. lotteries take out 28 percent from the winnings to pay federal taxes. But, if your winnings were in the millions of dollars, you would be paying closer to 39.6 percent (the highest tax bracket) in federal taxes when tax time comes. Add state and local taxes, and you might end up with only half of your winnings when you are done paying taxes.
If you had opted for the lump sum prize in our $10 million lottery, the prize would be about $5 million. After federal and state taxes, you'd be left with about $2.5 million.
I believe lotteries keep about 12% for operation expenses from the total revenue, roughly 60% goes to prize pool and the rest is distributed to participating states proportional to that states intake.
When they advertise a 1.9 billion jackpot in a 30 year annuity or 929 million dollar lump sum payout, I believe the lottery collected revenue close to 1.6 billion. 60%, or 929 mil, can be paid out immediately in a lump sum or optionally in a 30 year annuity with all future payments totaling 1.9 billion. Both have same 929 mil present value based on a assumed interest rate model.
That's better than if total revenue was close to 3.2 bil with almost 60% of that becoming the advertised 1.9 billion payout that gets a further haircut at the tune of almost 42% in either a 30 year annuity or lump payment.
