Lottery options. Which would you choose?

Question

Question. If you take a lump sum award of $41.4 million today. Withdraw $1 million for spending immediately. Invest the rest ($40.4 million) at 5%. At the beginning of next year and continuing for 24 more years withdraw $1 million for spending (that's 25 withdrawals). Calculate how much remains in the account at the end of the 25th year.

Option 2: take an annuity of $2.948 million a year for 25 years.
Assume the payments occur at the beginning of each year (This means the first payment occurs today and the last one occurs at the beginning of the 25th year.) At the beginning of each year, withdraw $1 million for spending. Invest the remaining amount at 5%. Calculate how much remains in the account at the end of the 25th year.

Answer 1

There are additional considerations here. With the annuity, all income in excess of principal is taxed at ordinary income rates. Current Fed Income Ordinary Tax Rate is 35%. This does not include whatever state income tax you must also pay.

You can invest the money where the gains earned in excess of principal are subjected to capital gain and dividend tax rate, currently 15%. This is a huge savings on $40 MM plus.

Good Luck

Answer 2

young lady ,
why ask questions about the TAX on the poor , mathematically challenged and gamblers.
why not ask questions on how an IRA , Roth IRA and SEPA fully funded will get you up wards of 7.5 real million dollars to live on?
not wish questions.
Note some 85 % of all millionaire plus winners are divorced bankrupt or just plain broke within 10 yrs of ' winning '. lottery is loser game.

Answer 3

Do your own school work.
I already have a financial plan of what I'd do with MY lottery winnings.
It's called, don't quit your job for a year, then live off the intrest for life @ 7%.

Answer 4

Do your own homework and stop posting here til you do


Love Dad

Answer 5

win it first then calculate