Rockwall, TX
If you were wondering if you should take the lump sum or the 30 year annuity, here are some numbers for you to consider. I wrote this up for my family and friends to help explain the differences between lump sum and the 30 year annuity. All numbers were calculated by me using an Excel spreadsheet.
If you do not want to read this wall of text, the numbers come out to be about the same after 30 years, provided that you kept an annual budget of 2M-5M a year and invested the rest.
Some PowerBall Financial Numbers for those that live in a income-tax free state like Texas. If you live in a state that charges income tax, then the numbers will need to be adjusted, but the numbers would most likely be in the same ballpark.
IF YOU WIN AND CHOOSE LUMP SUM ...
Expected Lump Sum: 929,000,000
Expected Taxes: 343,730,000 (Tax rate of 37%)
After Tax Winnings: 585,270,000
If you pay yourself $1.9 Million a year and keep $100K a year for pinball hobby stuff, and invest the rest and earn 5% a year on your balance, you would accumulate $1.38 Billion after taxes over 30 years.
Over 30 years, you would earn $1.36 Billion before taxes in interest. You would pay $504 Million in taxes. This means that you would earn $858 Million in interest after taxes.
If you pay yourself $4.9 Million a year and keep $100K a year for pinball hobby stuff, and invest the rest and earn 5% a year on your balance, you would accumulate $1.23 Billion after taxes over 30 years.
Over 30 years, you would earn 1.27 Billion before taxes in interest. You would pay $468 Million in taxes. This means you would have earned $797 Million in interest after taxes.
IF YOU WIN AND CHOOSE 30 YEAR ANNUITY ...
Expected Annual Payment: 50,000,000
Expected Annual Taxes: 18,500,000 (Tax rate of 37%)
Annual After Tax Winnings: 31,500,000
If you pay yourself $1.9 Million a year and keep $100K a year for pinball hobby stuff, and invest the rest and earn 5% a year on your balance, you would accumulate $1.48 Billion after taxes over 30 years.
Over 30 years, you would earn $949.8 Million before taxes in interest. You would pay $351.4 Million in taxes. This means you would earn $598 million in interest after taxes.
If you pay yourself $4.9 Million a year and keep $100K a year for pinball hobby stuff, and invest the rest and earn 5% a year on your balance, you would accumulate $1.33 Billion after taxes over 30 years.
Over 30 years, you would earn $853 Million before taxes in interest. You would pay $315.7 Million in taxes. That means you would have earned $537.5 Million in interest after taxes.
Regardless of your choice, lump sum or annuity, I think you will be okay if you manage your money well.
Marcus
