...when the entire jackpot prize was already secured by the lottery office drawn from the accumulated bet.
Whoever answers this satisfactorily will get 10 points.... plus a little percentage from my winnings...no bull! - I'll put my contact number when I add comments along with my best answer choice.
2007-01-03 18:01:49 · 16 answers · asked by Mr. Kite 2 in Games & Recreation ➔ Gambling
It costs them less. They can make money off the interest from the lottery revenue and a million dollars 10 years from now is worth less than a million dollars today.
2007-01-03 18:02:40 · answer #1 · answered by Anonymous · 1⤊ 0⤋
When a lottery jackpot reaches a certain 'amount'. The lottery itself does NOT HAVE THAT MUCH money.
Let's look at the california lottery (just as an example).
A ticket cost $1
50 cents of that $1 goes toward the prize fund.... and half of THAT 50 cents goes toward the jackpot payoff.... this is a real eye opener for a lot of people (myself included)... they need to sell 4 tickets for the jackpot to go up $1
Now, the JACKPOT....
If someone hits the JACKPOT (say for $190,000,000).. the lottery DOES NOT HAVE $190,000,000. They have roughly $95,000,000. Yes, they have ninety-five million dollars. And, so, they can PURCHASE you (the player) a 190 million dollar annuity... -or- they can give you the 95 million dollars right then and there.
As you know (i'm sure) it takes about 23 years for an annuity to double in value.
The lottery is, thusly, not ripping you off.
It may seem that way though.
Hope this helps.
2007-01-03 18:11:12 · answer #2 · answered by rum_coconut_pineapple 1 · 1⤊ 0⤋
When you first purchase the ticket, you are given the option of a lump sum, or a 30 year installment plan. If you choose the lump sum, the entire amount is taxed, and the amount is given to you. However, the lottery likes you to choose the 30 year option because they just put the money in the bank and let it collect interest. So, even though they are paying you a predetermined amount every month/year, they keep the interest that is made. Hopefully this sheds some light on the process.
2007-01-03 18:05:38 · answer #3 · answered by Andy 3 · 0⤊ 0⤋
because the payout is from an annuity
For Example - If you won a $10 million lottery in Florida as a single winner - that is the estimated amount paid out over 30 years
If you take the lump sum - you get about 40% of that
why - because the 40% is what was actually raised in that drawing, or drawings up until a winner, and that is the money which is invested - and the annuity company guarantees to pay out your 10 mill over 30 years - and YES
they ALSO make money on YOU!
2007-01-03 18:05:21 · answer #4 · answered by tomkat1528 5 · 0⤊ 0⤋
More then likely it's because they gain interest on the accumulated bets. Maybe placed in some sort of account and gains interest? That ...plus other accumulated bets for the next draw. I think that in some lotteries you get a choice, but I think you get more if you take it by instalments then all at once.
Good question tho.
2007-01-03 18:07:36 · answer #5 · answered by gord's360 3 · 0⤊ 0⤋
Depends on the lottery. Read the fine print first!
Noticed that this practice is very popular in the USA. Could be because of some law. But in Canada, you usually get the full amount in one lump sum, on the day that you collect your prize.
2007-01-03 18:03:30 · answer #6 · answered by the secret is in the pudding 3 · 0⤊ 0⤋
I think it is easier for the winner to take the installments. If you get all the money at once I think that means you have to pay all the taxes due on it at the time of receiving the money. I would rather take the installments because I know that for X amount of years I am getting X amount of money and I know that I would not over due things.
2007-01-03 18:07:02 · answer #7 · answered by Anonymous · 0⤊ 0⤋
They can significantly reduce the actual prize that way. They invest the money, collect the interest and pay just principle. Over 25 years, the interest will equal the whole thing! AND in the U.S. you get to pay taxes on the prize, so they actually MAKE money on YOUR winnings. ridiculous! It isn't as if your costs in purchasing the tickets are tax deductible, eh.
In Canada, you get the whole thing in a lump sum....TAX-FREE!!
Another reason to move here.
2007-01-03 18:08:23 · answer #8 · answered by Ralph the Sage 2 · 1⤊ 0⤋
They're hoping you will die. A little known clause in the lottery stipulates that ALL winnings and interest default back to the state upon the death of the Lottery Winner. Lottery winnings cannot be passed on to your descendents. Additionally, there are currently no fewer than FIVE investigations looking into allegations that Lottery officials in several states conspired to murder lottery winners.
2007-01-03 18:05:16 · answer #9 · answered by Anonymous · 0⤊ 3⤋
So that the Lottery Commission can collect interest on the money during that time, instead of you.
2007-01-03 18:07:39 · answer #10 · answered by J T 6 · 0⤊ 0⤋