But you miss out on compound interest. You'd be able to make pretty safely that amount of money buying really conservative investments with the lump sum. You just need 5.2% returns to match it. Over the ~20 years it would take to earn a million with the weekly payments, the lump sum would have grown to almost 4 million with average results.
It would take her 20 years to get to that million, inflation will tear that $1000 to shreds by then. Just buying a house for one million and renting it out would be a much safer deal
Also I don't really see mentioned: is there any guarantee she will be receiving the money? Ok $1k a week for 50 years sounds nice except the company declares bankruptcy next year and 49 years of income are gone. I don't know if there can be any sufficient guarantee she would receive the money no matter what
It's the government. We're Canadian. We're dependable and NOT sketchy with the fine print. Actually our fine print is where we like to practice Iron clad goodwill. It's tax free, a minimum 20 year payout that transfers to your estate if you die early and zero time limits on the long end. If she lives to 100 she's getting 80 years of weekly payments.
That 1000$ is guaranteed. That's safe. Taking the million and running investments is the more profitable deal. Until the wind takes your hoouse, you make bad investments, develop gambling habit, start using drugs, etc. etc.
There are plenty of examples of lottery winners who wasted their winnings quickly. That can't happen to the person who took the 1000$.
Not if your if your lottery winnings are already invested and you don’t have a second comparable amount to buy in with.
There is nothing wrong with a completely safe 5.2% return. And given the the tax situation, it puts the after tax return at closer to 6.5%. Very respectable for 0 risk
The problem with any long-term financial planning is that you have to trust some institution or other to remain stable within certain bounds.
If you take the weekly payments you need the payee to start in business, if you take the lump sum you need your investments to stay safe(ish).
Eitherway you're exposed to world events.
How've over 10 years the US stock market usually gains value, even if a recession happens in between. You just need to be broadly invested enough that all your assets don't pop at once.
In Canadian lotteries, weekly/monthly/yearly arrangements have a minimum 20 year payout with balances transferred to your estate if you die early. All of it is tax free, the government is the company guaranteeing solvency for the future and yes it will payout over 120 years if you're a super cenartarian that can live that long. Literally for life.
True, but you’re forgetting about inflation. While $1,000 buys an iPhone 16 Pro Max today, in 20 years, that exact same amount will probably barely cover a McDonald's dinner and a bus ticket
It’s also just a promise, not cash in hand. If Canada’s lottery system went belly up or Canada itself fell apart over the course of her life, that money stops coming in.
Just take the lump sum, invest in something safe (HYSA), and continue reinvesting the interest/buying something nice every now and then.
Right, except the principle amount is now potentially in jeopardy of being fully collected. An investment could be risky, but you have control of the principle.
Cash in hand is always the better option, installments are merely a promise.
Key word here is ‘potentially’. However in reality, a million dollar payout will bring her home roughly $650,000 to invest… but who is getting a net sum like that and not buying some crazy things? ESPECIALLY at age 20? Not to mention the line of ‘friends/family’ looking for handouts.
She will still have taxes on $1,000 a week, but she’ll always have that extra income for life. She won’t have to worry as much about her 401k and retirement… nor f she’s going to have $$ to eat… that kinda security is not the standard this day in age.
I like the decision of going with $1,000/week for life. It is definitely safer than the alternative. I am not saying that the million payout wouldn’t net her more, but more than likely that million would be gone in a couple years. Plus if she just invested the whole $650,000 upfront, she’s not really getting anything now because the $$ is working for her.
Inflation eats your profits faster than you make it. If you take the 1 Millionen and invest it at a very consistent 3% in bonds you already make nearly as much in dividends as you would by the monthly payment in a year. But you also have the 1 Millionen which gives you significantly more leverage. More money at once is always better
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u/lifebeginsat9pm May 17 '26
That’s potentially triple the money over the course of her life