What would you do with 160 million dollars? If you happened to look in the paper a few days ago, you might have noticed the story of the couple who won a huge jackpot down south. They opted for a lump sum payout of 160 million dollars. Wow.
Now, like all people, I began to think about what I would do with that sort of money. Then I started thinking more. Why opt for the lump sum? The annuity payout would have been 10 million a year for 26 years. I am not sure how the taxes work in this sort of situation, maybe it works out that the taxes on 10 million go upwards as our government raises taxes. But I might want the annuity. Here's why. Say you take out 5 million out of your first payment for what you want-you know- the car, the house, college, the kids, the boat, the vacation......and so on and so forth. Then you take whatever is left after taxes-figure only one million is left of that ten million. Invest in a good broker and a mutual fund at a measly 8% (measly for many mutual funds). After the first year-you now have an extra 80,000 dollars sitting there. So you have to pay taxes on that money, but you probably still end up with 65,000 or so. For one year. The next year, you get another ten million (again, six after taxes). You spend another 5 million, and invest another million. Now you have a yearly income (in interest) of 130,000 dollars (after taxes) What a deal!?!?!? Okay, you hire an accountant, but still, you are making over one hundred thousand dollars after the first two year, and you have twenty four years to go!?!
My dad really taught me well about investing and saving. But, of course, you never know until you're in a similar situation. Maybe money blinds people and instant gratification kicks in? Or maybe the tax situation is better in the lump sum. But the point still stands. Invest as much as you can bring yourself to. Whether you win the lottery or not. I am putting away just 20 dollars per month towards retirement-I'm 18. And no, I definitely wouldn't mind winning the lottery.
I mean, come on, who wouldn't love being financially independent in two short year, plus spending 5 million per year on yourself? Again, I don't play the lottery, and probably won't unless work starts a pool on a huge one. But it is really fun to think about.
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3 comments:
All I can say is GIVE ME 160 MIL AND I'LL SHOW YOU WHAT I CAN DO!!!!I have to add though, I'm not sure if I'd take the whole lump sum or spread it out. Either way, that is a problem I am willing to work out anyday!
It's funny--the experts always say the annuity is the better deal, but the winners always take the lump sum. I've never seen them not take it.
It's fun to think about all the great ways to spend, but I agree, invest and save is the best way. You never know how long you will be retired and what your monetary needs will be. I started my retirement fund at 22 with my first full time job and have amassed a nice nest egg. I just might have to stop and get a powerball ticket though....
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