Davis may be getting in some jabs about some uses/conceptions of Kickstarter, along with any good-natured ribbing. It's pretty good lulz.
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Davis may be getting in some jabs about some uses/conceptions of Kickstarter, along with any good-natured ribbing. It's pretty good lulz.
Davis should have done a kickstarter to get that Monster HDMI Cable.
It blows my mind someone could be this excited over WWE.
[youtube]i8ATVk9ZbqQ#![/youtube]
Never be surprised by what alcohol can do.Quote:
Originally Posted by Dukefrukem
No, see bold:Quote:
Originally Posted by Irish
Quote:
The most frequently asked questions from lottery winners and those who just dream about being a winner is:
“Should I take a lump-sum or installments?”
Take the installments!
Despite everyone telling you to take the lump-sum. Your heirs will receive the balance if you die before collecting all the payments and at least 65% of your lump-sum amount will be gone within the first year due to discounting and taxes.
A lump-sum winning will typically get reduced by 45% or more for the time value of money (acceleration by 20+ years) and then the net amount is further reduced by approximately 35% or more for taxes — leaving a net amount of 35% or less of the gross winnings.
Installment collections will only generally only be subjected to the federal tax hit (depending on state rules) and the taxes are paid over the collection period. In effect, each payment includes a layer of interest earning and once the amounts are received, the recipient is free to make their own investment decision on those funds.
For jackpot allocations under $10 million, a lump-sum might be considered, but in the vast majority of larger prize winnings, installment payments offer significant benefits, including:
- greater income, gift and estate tax planning opportunities,
- significantly reduced income, gift and estate tax rates,
- increased budgeting and retention of winnings,
- reduced probability of family, friends and scammers accessing your winnings.
Following is a summary of the key points to consider:
Up until a few years ago, California Lotto players were forced to make that election at the time they bought their Lotto ticket – which was all the more difficult since the player had no idea of what specific prize they might win (e.g. sole winner, vs. shared prize, etc.). Now both SuperLotto and MegaMillions winners can make the election within 60 days of winning – so there is time to evaluate options. The default payout if no election is made is a 26 year payout.
Installment payouts are made annually over a 26 year period beginning at 2.5% of the gross Lotto prize and then increasing to 5.1% in the 26th year. And despite general confusion on this issue, if you die before receiving your entire payout, your heirs are entitled to receive it – unless the Sacramento legislators decide they might be more worthy recipients.
For a number of economic and tax reasons, my advice for the vast majority of taxpayers winning more than $10 million dollars is to take the winnings in installments.
There are a couple of negatives to installments:
1) If interest rates and/ or tax rates jump up, having your pay-out locked into an annuity format may work against you,
2) If the winner (and their spouse if married) pass away during the first few years of the payout, a large estate tax obligation may materialize before funds are accumulated. Life insurance and loans may be structured to mitigate this issue.
The first advantage of an installment payout is saving yourself from the grief of the double-whammy of:
- A “present value” discount from the state of 45% to 55% off the jackpot winnings to take into account the fact that the state is accelerating the payments for up to 26 years. Therefore a $100 million jackpot becomes a much less exiting $50 million (before taxes).
- Some good news – the state does not tax the Lotto winnings (but will tax interest and dividends earned on your winnings). However, the IRS will withhold at least 25% in taxes (applied after the present value discount) before you get your net check. Now the $100 million is sitting at approximately $37.5 million ($50M x 75% after-tax). And things will get worse when you end up paying another 10% ($5 million in this case) or more in federal taxes when you file your return for the year you won – since the maximum federal rate is 35% and the IRS may have only withheld 25%.
1. Since the vast majority of winners end up blowing most or all of the money for a variety of reasons, electing installment payments forces discipline for the winner to preserve their winnings and not go out on a spending (and/or giving) binge – although even an installment winner can accumulate large mortgages and other debt.
2. Another advantage of installments is effectively locking into a guaranteed rate of return on the deferred winnings. The specific rate of earnings is dependent upon what the bond market yields are at the time the state purchases the underlying bonds to support the payout. Therefore, current investment yields will be less than a few years ago. The downside of locking into an installment payout is that if rates rise or you believe you can consistently make better investment decisions, a lump-sum payout will give you that option – but be forewarned your investable to secure future investment earnings will be a fraction of what it is by leaving the winnings in the installment form.
3. If the above reasons are not enough, then another huge advantage of the installment option is the ability to apply long-term tax planning to your new-found wealth. For example, if you receive a net $50 million in 2010, there is not much you can do to shelter such a large amount of money in a single year. However, if you receive $2.5 Million to $5.1 million per year, which would be the case for a $100 million winner, there are various legitimate ways to mitigate the annual tax bite by offsetting the annual payments with retirement plan contributions, possible operating losses from active businesses the winner may be involved in, as well as mortgage interest, property taxes and charitable contributions. While full sheltering will seldom be possible on large winnings, a material reduction in overall tax liability is often possible. Even with likely rising tax rates, having time to implement these strategies is well worth the exposure to (future) higher tax rates.
4. Many families and some groups of employees have a history of playing the Lotto under a verbal (or in rare cases written) agreements to split winnings amongst participating members. The conclusion as to whether there was a pre-arranged “partnership” to share the winnings is very fact specific, but the courts routinely uphold these verbal arrangements to split winnings. This can offer very significant income, gift and estate tax advantages within a family unit – but can also raise huge issues within the family or co-worker ranks. Depending on the size of the group and the amount of the specific Lotto prize awarded, a determination can be made whether the installment method or lump-sum makes the most sense for the group or specific winners. This can get complex and it is unclear which specific fact patterns the Lottery Commission will honor and when “master” elections and “sub-elections” can be made by the winners.
5. There are numerous issues (including pre- and post- win residency status, estate and gift planning, verbal contracts, etc.) which arise for these lucky winners and before too many promises and plans are made, before claiming the prize and making the lump-sum or installment election the winners should contact a qualified attorney, investment adviser and tax adviser and meet with them as a group to insure that all the options and complexities are fully evaluated.
That quote is BS.
Did you really copy and paste that from some random CPA's website? Didn't your teachers ever tell you to do your own work? :lol:Quote:
Originally Posted by Derek
This is the only bit that was good advice:
Now, what do you think the chances are that the state's bond payments are going to offer a good rate of return? In today's environment, I'd guess it's going to be crap, and barely beat inflation.Quote:
2. Another advantage of installments is effectively locking into a guaranteed rate of return on the deferred winnings. The specific rate of earnings is dependent upon what the bond market yields are at the time the state purchases the underlying bonds to support the payout
The rest of the article is junk (less likely to be a victim of scammers? What?).
The other problems with his post: He doesn't address inflation at all, and ignores the effect of compound interest. Both of those are going to make the lump sum better than the installments hands down.
The simple math bears this out. Let's assume a $100 million win and an even 7% return every year.
With installments, you've got roughly $205 million at the end.
With lump sum, you're left with roughly $355 million.
This is neglecting the present day values and taxes, of course, and I'm simplifying the example to illustrate the point.
I think you (or really, that CPA :P) are right that choosing one over the other is dependent on taxes and the rate of return from the state.
But unless inflation and taxes decrease over those 26 years and the state offers some wildly good return on the money, then lump sump is still the way to go.
I was excited and I was stone cold sober!Quote:
Originally Posted by Dukefrukem
Excited enough to throw a chair through a TV???Quote:
Originally Posted by Ivan Drago
I actually didn't see the video because it was removed, so I didn't know that happened.Quote:
Originally Posted by Dukefrukem
Regardless, I wasn't that excited. But excited nonetheless, because I can't stand John Cena.
You continue to neglect however the fact that nobody is going to sit on the lump sum for 26 years. Having all at once 37.5 million dollars gives a lot of time to spend it away and every bit you spend, that total figure you quote above decreases, damn near exponentially if spent up front before interest can really start being accrued.Quote:
Originally Posted by Irish
I'm not saying which is better, and if you are a smart investor, then obviously the lump sum is better. But given the common person, it is very possible that the lump sum is the lesser option.
Heh, the main point of copying all that was that the lump sum is significantly less than the stated amount, so it's not as if your choices are, for example, $100 million up front and $10 mil for 10 years if you take the annuity. You're failing to acknowlege the fact that the lump sum is SIGNIFICANTLY lower than the listed winning value b/c that value is only the net present value for the annuity, which is not anywhere close to the amount that gets paid out in lump.Quote:
Originally Posted by Irish
Since you asked for my own work, here's what I came up with using a compound interest calculator and Excel:
I'll use a real example of an actual woman who won a lottery for $75 mil a few years ago. This amount is referring only to the net present value of the annuity option. If the woman took the lump sum, even before taxes, the lump sum was down to $36 mil. After taxes, this amount is down to about $24 mil.
The other option was a 29-year annuity that paid out the full $75 mil minus taxes, which would pay out about $50 mil or roughly $1.7 mil/year for 29 years.
So here are your 2 options:
1) $24 mil now
or
2) $1.7 mil/year for 29 years
So obviously, much will depend on how much you think you can earn on the $24 mil in the next 29 years, but before you start factoring in compound interest on the WHOLE amount, you have to figure that at least some of that money will be spent immediately and maybe another chunk invested conservatively...but for realistic purposes, let's say the person spends $5 mil (or 20%) in the first year and invests the rest at, say, 6%.
To be fair, the annuity option will also spend 20% of their return until they spend $5 mil (to keep things equal).
So now we have:
1) $19 mil lump sum
or
2) $1.36 mil for the first 15 years (taking out the $5mil to spend) and $1.7 mil for the last 14 years.
At this point, we haven't factored in the fact that the $1.7mil/year will be invested at what state interest rate is out there...probably not good, but lets assume that's 3%...BUT for now, let's compare the winnings:
1) $19 mil lump sum NETS/= $102,949,370.
or
2) $36,813,957 (1st 15 years) + $41,712,685 (last 14 years) = $78,526,642.
So at this point, the lump sum still wins, but we still need to factor in the modest 3% that the future annuity payments will be earning before they're paid out, since instead of 29 equal $1.7mil payments, you'll actually be getting increasingly large payments as you go along WHICH will be added to the previous years payment, which will continue earning 6%...so the 1st payment will be 1.7, 2nd is 1.751, 3rd is 1.803, 4th is 1.857, etc.
Factoring in the very conservative estimate of 3% being earned on the future annuity payments, adding each of those payment to the previous total (continually earning 6% over the 29 years), the total earned comes out to be....
$199.2 million!
ONE CAVEAT: I did forget to take out the $340,000 per year for the first 15 years, but didn't realize until it was too late. I'm sure this would make the 199.2 mil noticeably lower, but I guarantee it'd still be more than the $102.9 million.
And this was calculated with very conservative estimates, both in terms of the small initial amount spent from the lump sum versus the amount saved and with very modest returns on the annuity portion of the payout.
So...there. :)
My brains hurt. I declare a tie.
Holy shit, Derek. That is an awesome post. Much rep owed.
I was thinking about my response when suddenly it occurred to me that it's kinda odd we keep talking about this, given that it's highly unlikely that we or anyone we know will ever actually win the lottery.
But that's still an outstanding piece of work. :)
It was more about the math than the winner being a schmuck.Quote:
Originally Posted by Raiders
And there's nothing keeping Installment Guy from blowing through his winnings every year by July, either. All the installments do is throttle how much he can spend at any given time.
Ivan The Rock is what WWE used to be, which was entertaining despite being cheesy as hell. John Cena is what WWE is what it is now, which is a product that I don't bother to watch or care about.
Was wondering if anyone here was watching. Fuck John Cena. He's the worst.
I don't watch regularly, but I did d/l'ed the clip of a certain somebody's return Monday night. Pretty sure it was going to happen, but I still marked out.Quote:
Originally Posted by Milky Joe
Thats good work Derek, but you forgot find the discount rate to which money over time will be worth less than its present value. That will hurt the final value significantly.
I've been on the phone with one of our most paranoid clients who often calls me just to talk when he's on a roll. Paranoia is such a difficult thing to deal with because you can't rationalize it away-- it's a part of the schizophrenia, and sense doesn't enter into it. The people following him and tapping his phones may not be real, but his terror of them is real, whether its justified or not.
He finally got kind of choked and said, "This isn't my fault. I was born this way. I couldn't help it."
It's just tragic. I feel weird using that word, because it feels melodramatic, but it's actually just accurate.
Do you ever want to play into it....
"We can't talk on the phone. This line has been compromised."
If you see someone bleeding on the sidewalk, do you kick them on their wound?Quote:
Originally Posted by D_Davis
I get that you're trying to be funny, but it's really not.
EA wonQuote:
Originally Posted by Dukefrukem
http://consumerist.com/2012/04/worst...ica-vs-ea.html
I have a feeling that these results were biased by video game nerds. Bank of America is clearly run by Satan. I only know of EA from the Madden games I play once every five years.
EA is responsible for the crap that was;
Dragon Age 2
Crysis 2
Dead Space 2
Spore
Abandoning the Battlefield games
The Takeover of Westwood Studios which ruined Command & Conquer
The Takeover of Maxis and why we haven't had a Sim City game in 10+ years.
And the downfall of Bioware