Do you think you’re going to win the Powerball tonight of $1.2 billion? So do we, we’ve got quite a few tickets bought here at The DC Patriot headquarters.
If you decide to take the cash, you would actually pay out around $596.7 million as of this posting, or if you choose the annuity options that is twice as large, but paid out over 29 years. So what would you do?
Normally the winners of massive jackpots always take the cash, and financial advisers always say that’s a mistake. However we’re not promised tomorrow, and you can’t pass on the winnings to a relative, so is it really a mistake?
Nicholas Bunio is a financial planner from Downington, Pennsylvania, and he said he would take the annuity because it would so dramatically reduce the risk of making poor investments.
“It allows you to make a mistake here and there,” Bunio said. “People don’t understand there is a potential for loss. They only focus on the potential for gain.”
With annuities, the jackpot is invested and then paid out to winners over three decades, so they get more money, but a lot more risk in our opinion because if something happens to you, the money is toast.
Under the annuity plan, winners will receive an immediate payment and then 29 annual payments that rise by 5% each year until finally reaching the $1.2 billion total.
Lottery winners who take the cash don’t wait for their winnings either, and they figure they can invest the money on their own. Back in July a winner from Illinois got a Mega Millions ticket and ended up with a massive lump sum payment of $780.5 million after winning $1.337 billion prize.
As Jeremy Keil, a financial adviser from New Berlin, Wisconsin, put it, “There is no bad choice.”
Keil said Powerball’s annuity assumes a 4.3% investment gain of the jackpot’s cash prize.
“If you think you can beat the 4.3%, you should take the cash,” Keil said. “If you don’t, take the annuity.”
While purchasing five Powerball tickets at a Speedway gas station in Minneapolis, 58-year-old Teri Thomas said she’d rather take the cash prize because she doesn’t think she’ll live long enough to collect an annuity over 29 years.
“And I’d rather get all my good deeds done right away and feel good about the giving,” Thomas said, adding she would donate to groups that do medical research for children as well as help veterans, homeless people and animals.
Charles Williams of Chicago, who buys a Powerball ticket each week and always plays the same numbers, was adamant that he’d take the cash option.
“I want all the money. I want the cash out and then I’m going to spend it how I want it because ain’t nothing guaranteed in life,” Williams said.
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