So we do all realize that advertised jackpots are annuitized amounts and that the vast majority take the net present value lump sum, which is usually about half the advertised amount, right?
Winner probably got about six hundred million, of which roughly forty percent was taken for taxes give or take state income tax rates.
That takes something from being completely unreasonable to be understandable.
Why would taxing a gross income of above a billion US$ by ~66% be “completely unreasonable”? Imo taxes for such incomes should generally be higher if anything.
Yeah, obviously that should go for everyone. I realize it’s currently not very realistic in most countries, but I maintain that it would be reasonable. It’s also not without precedent, even the extremely capitalist US had top income taxes of above 90% from the mid-40s to the early 60s.
When you win the lottery you have two options:lump sum or annuity. If you take the lump sum you basically get half the advertised amount and then pay taxes on that. If you take the annuity, you are paid out over 30 years and you pay taxes on each payment. It’s also setup where they pay you more each year over the pay period.
If you go to USA Mega, you can see jackpot analysis for PowerBall and Mega Millions where you can see the complete breakdown on the payments.
The $1.28 billion is if you take monthly payments over a term of twenty or thirty years.
Very few people do that.
Instead, they take an up front lump sum payment.
That up front payment is the amount the lottery commission would put into interest bearing bonds to pay out over time, getting to the $1.28 billion.
The lump sum payment is usually about half the amount you would receive if you took payments over time. If this doesn’t make sense, it’s a tangential discussion on the time value of money and its net present value.
I got six hundred million by cutting $1.2 billion in half since this is casual Internet discourse, and I consider very rough cocktail napkin math for illustrative purposes to be perfectly acceptable.
Damn I think I would take the monthly payments. I wouldn’t complain about ~$3m a month for 30 years. Whatever problems you have that money would resolve would probably be resolved in the first month.
If you take the payments they put it in safe bonds to make a little interest and use that to pay you out over time.
If you take the lump sum, you can choose where to invest. And you can hire someone to tell you where and how to invest it at a higher rate than they’d get.
I think that it would depend upon your age and how long you expect to live.
For example, if you have cancer or other terminal illness with a low chance of living more than 10 years then you’re better getting the lump sum. Same if you’re older than 80 or so.
Yeah, it comes to a point when the prize is large enough that getting it in installments won’t make a difference vs getting a lump sum in terms of immediate need/gratification. $3M is an absurd amount for just 1 month.
I’m old enough that I’d probably not have to work again after receiving that first month’s payment. I definitely wouldn’t need to work after month 2 even with going on an annual holiday.
Taking the monthly payment also has another advantage. You can financially fuck up and you’ll be able to start again next month. Provided you don’t start borrowing money based on your future income you’ll be fine.
So we do all realize that advertised jackpots are annuitized amounts and that the vast majority take the net present value lump sum, which is usually about half the advertised amount, right?
Winner probably got about six hundred million, of which roughly forty percent was taken for taxes give or take state income tax rates.
Not being from the US I didn’t know that. That takes something from being completely unreasonable to be understandable.
I can’t believe some fake rich guy on the internet lied to us!
Still, if they’re not idiots the winner doesn’t have to work again so they’re still good.
Why would taxing a gross income of above a billion US$ by ~66% be “completely unreasonable”? Imo taxes for such incomes should generally be higher if anything.
Because that’s not how it works. It would be great if that was how it worked for all billionaires but it isn’t.
Taxing 66% of the winnings of someone who was previously not wealthy is unreasonable if you don’t also tax other rich people at the same rate.
Yeah, obviously that should go for everyone. I realize it’s currently not very realistic in most countries, but I maintain that it would be reasonable. It’s also not without precedent, even the extremely capitalist US had top income taxes of above 90% from the mid-40s to the early 60s.
You can take a lump sum payout or get it paid to you over 20 years. The lump sum is usually around 60% as the other poster said.
If you live in Canada as well lottery winnings aren’t taxed so you get the whole lump sum. Other countries probably vary too
I don’t think that you are taxed on lottery winnings in the UK either.
When you win the lottery you have two options:lump sum or annuity. If you take the lump sum you basically get half the advertised amount and then pay taxes on that. If you take the annuity, you are paid out over 30 years and you pay taxes on each payment. It’s also setup where they pay you more each year over the pay period.
If you go to USA Mega, you can see jackpot analysis for PowerBall and Mega Millions where you can see the complete breakdown on the payments.
I did not know advertised jackpots were annuitized. Thanks!
I was with you till the last paragraph. The numbers are already there for you, so I don’t know where 6 hundred million came from.
The $1.28 billion is if you take monthly payments over a term of twenty or thirty years.
Very few people do that.
Instead, they take an up front lump sum payment.
That up front payment is the amount the lottery commission would put into interest bearing bonds to pay out over time, getting to the $1.28 billion.
The lump sum payment is usually about half the amount you would receive if you took payments over time. If this doesn’t make sense, it’s a tangential discussion on the time value of money and its net present value.
I got six hundred million by cutting $1.2 billion in half since this is casual Internet discourse, and I consider very rough cocktail napkin math for illustrative purposes to be perfectly acceptable.
Damn I think I would take the monthly payments. I wouldn’t complain about ~$3m a month for 30 years. Whatever problems you have that money would resolve would probably be resolved in the first month.
If you take the payments they put it in safe bonds to make a little interest and use that to pay you out over time.
If you take the lump sum, you can choose where to invest. And you can hire someone to tell you where and how to invest it at a higher rate than they’d get.
Either way they’re still keeping a large chunk of it. If it means I get more money over 30 years, I’d rather have that.
I think that it would depend upon your age and how long you expect to live.
For example, if you have cancer or other terminal illness with a low chance of living more than 10 years then you’re better getting the lump sum. Same if you’re older than 80 or so.
Yeah, it comes to a point when the prize is large enough that getting it in installments won’t make a difference vs getting a lump sum in terms of immediate need/gratification. $3M is an absurd amount for just 1 month.
I’m old enough that I’d probably not have to work again after receiving that first month’s payment. I definitely wouldn’t need to work after month 2 even with going on an annual holiday.
Taking the monthly payment also has another advantage. You can financially fuck up and you’ll be able to start again next month. Provided you don’t start borrowing money based on your future income you’ll be fine.
But you didn’t need to do back-of-napkin math, at all. He got $433.7 million.
My point was that the IRS didn’t take the eight hundred million stated, but probably closer to two hundred million.
But we all love to get angry about anything and everything, especially when we think we’ve scored Internet gotcha points, so enjoy.
The 433.7 million is after paying taxes on the lump sum.
Nominal Jackpot: 1.2B
Lump sum: ~600 M
Taxes on lump sum: ~167M
Post-tax winnings: 433.7M