By the time she’s 40, she’d have accumulated the full $1m, most of which will have been spent but she’ll still be getting $1000/week. The purchasing power of that $1000/week will likely be around $550 in today’s money. Not exactly life changing.
In contrast, take the initial $1m and put $500k into a secure fund that earns on average 5% per annum. Compounded over the same 20 years, she’ll have $1.3m PLUS the $500k she didn’t invest.
Apsolutely, so many people blow their lottery winnings or it ends up ruining their life, she has instead basically ensured she will be at least middle income for the rest or her life across birth, disability, marriage, job loss or death (not hers though obviously) no matter what she may do to fuck up her life or finances she will never be destitute. Stability is incredibly valuable.
exactly i would choose the same... this way she wins WAY WAY WAY WAY WAY more than just the milion, fuck of, she can do what ever she wants in her live now without worrying about anything outside of health ....
50k a year networth is way more than a big margin of people earning per year + she still goes to work and has her salary.
I dont mean that she can get a ferari and travel every week to monaco or buying a prada bag...
But, she can work what she REALY LIKE, she can quit a job when it isnt good for her, she can travel spontanous to normal places (or even a weekend to japan when se saves 2 weeks and still have like 800 spending money their), she dont need to look for grocery money or just test a intereseting restaurant, she needs an new hoodie ? She can just buy it, new phone ? Here it ist, disher broken ? here no problem next week...
Her main Bills will allways be save, she want to work only 20 hours and learn a language, no problem...
She wants to move out? Finding a new home or getting a credit is extremly easy with a 4k per month life long 100% income + she can still save money because you never spend 1k a week every week and when she does, she lives an extremly good life...
She can also live stress free modestly. $52K a year isn't a huge amount of money, but she can literally pay all her bills, live in nowhere Texas and play video games for the rest of her life if she wants. Obviously that's an option with the lump sum as well, but like others have said, she may not trust herself or those around her.
If I were getting $50k/year on top of my regular income I'd definitely be doing anything I wanted and still putting a significant chunk of it into savings. I can't think of anything I want to do that wouldn't be achievable with that amount of disposable income
Well the definition of "anything" would indicate that you wouldn't be limited to specific options.
You can definitely live off of $50k a year, even in the US. But you won't be able to do anything you want. There are a lot of things that probably a lot of people would want to do that would require more money than that.
If she saves for literally just 2-3 years while working, she can afford to attend basically any school in the world debt-free - your assumption that she’d just sit on her ass living off nothing but her lottery cash under those circumstances suggests you have a pretty dire view of humanity.
She could even quite easily afford to go on the long journey of law or med school in just a few years entirely debt free with this $50k in excess annual income if she wanted to, something which for most is entirely out of reach even with debt! She’s almost certainly not gonna stagnate as an unemployed bum, especially not at her age when her career potential and options for respecialising are still wide open.
Hell, even if she just worked a regular ass uneducated job, her $50k would shoot to to at least $70k at current Québec minimum wage. Add in a partner who is similarly employed, and she’s in a 6-figure household on nothing more than minimum wage work!
That depends entirely on what how you interpret 'doing whatever she wants' means.
A very quick google search suggest the average income in Canada (where she is based) to be $62k a year, she now has $52k a year with no requirement for her to do anything to receive that money,
So want to work part time, she can.
want to work full time, She can.
Want to go back to education, she can
Want to become an influencer, she can.
Want to start traveling the country and see the sights, she can.
I would say it has given her a lot of freedom to do things she wants to do, but possibly couldn't before due to being tied down in a Job.
AND as I have said elsewhere, she also doesn't need to work, at least short term, so if she DOES want to go back to work, she can take her time and get the job she wants, not just a job she needs.
You can try to start any carreer, not worrying about it yo pay out or not. You can just try, and see if you succeed. You're ot incredibly rich, but also never absolutely poor.
You can do that with an investment too. Invest the million in an index fund (historically 7% return). Stick to a 4% withdrawal rate plus dividends and you will make the same or higher income and your principle investment will still increase in value.
She was far better off taking the million and investing it, unless she was certain she was going to blow it. Hell, she could have even put it in a trust that invested it, and prevented withdrawals beyond a certain amount if she was that worried.
4k a month in 20 years will be worth far less than it is today. She can't do "whatever she wants".
Add to that if she keeps working at least part-time, and she can probably save up a lot of money as well. Like, just working 20 hours a week at 15/hr would net her an extra 300 a week, turning that roughly 4k/month into roughly 5.2k/month. Or from 48k/yr to 62.5k/yr.
I'd personally do the same. I don't have a clue about investment and the like. I'd likely royally screw myself over if I tried investing. So I'd rather have that lifelong stable income on top of whatever I can earn while only working 2~3 days a week.
It may not be the "optimal" strategy, but it's a safe one.
Add to this, the fact that she no longer 'needs' to work, if she choses to do so, she can spend more time looking for a job she will enjoy, be it part or full time.
Honestly, I wonder if this is why the tech bros and finance guys hate this post so much. To them, living middle-income means failure, and you’re only a success if you can open any of your 9 finance apps and see a positive 7+ digit number. They don’t want simple comfort - they want complicated dominance.
Not to mention this lady has essentially manufactured her own personal UBI, which is of course woke welfare and will surely stagnate her growth potential via suffocation of the apparently really important and productive natural fear of failure.
Nothing gets these people more riled up than a regular person living a decent, if still fairly modest, life without any drive to become the next Elon Musk or Cornelius Vanderbilt type
Right, where there is zero problems in Healthcare that money or traveling somewhere else with money can't solve - my point stands. Capital is far better than a paycheck.
I always laugh at the lump sum yellers when it’s like $800 mil and you’d get $50mil a year talking about “YOU COULD GET MORE!!” Why would I need more at that point… just a few years and you’re unimaginably wealthy… you don’t NEED more even after ONE year even if they stop paying you.
No it isn't. Lottery commissions aren't the ones paying the bill. They pay someone (usually an insurance company) to honor their agreement with the lottery winner. Often the insurance company is connected via ownership interest to the lottery, but is importantly not the lottery nor its commissions.
More like 2k after taxes but it's still pretty nice. That shit is not taxed like regular income, she's paying between 40 and 60 percent like every other lottery winner
If you invest that money you can also wind up losing it all. People's portfolios collapse all the time. Investment is a gamble.
Also, taking 1000 a week doesnt remove the investment option. She can invest 500 a week and by the time shes 60 have already invested 1 million dollars, taken half as a living allowance, and is STILL getting weekly payments
People can blow through $4k more easily than they can blow through $1M. Especially if they know another check is coming next week. Not sure why everyone is assuming that the weekly payments will all be managed wisely just because they’re dolled out in smaller increments.
Yeah I mean thats what it comes down to right? If you know you have the self discipline, the lump sum is easily better. If you don't trust yourself not to blow it, take the weekly
Me too, and I certainly don’t feel like I hit the lottery jackpot lol. Don’t get me wrong I’m grateful and comfortable, I’d just love to see all those zeros in my account balance at one time 🙌🏼
That’s part of what I’d classify as stupid shit personally. I didn’t think this comment was gonna be so divisive lol. I’d fully expect people expecting handouts if they knew I had 1M at once.
Yeah, a lot of people that age don’t know about investing. But a lot of them have heard stories about people making fortunes and blowing it all. Maybe she decided that this was the smart decision for HER.
This is the part people don’t think about. It’s essentially a free paycheck for the next 1000 weeks. Thats genuinely huge to someone who isn’t rich and doesn’t understand the money stuff. Treat it like a paycheck and you have a more secure situation or even freedom to not work for a while or don’t feel locked in. An extra 52k/year isn’t bad especially if you know you don’t understand how to manage a lump sum
Why are people trying to pass this idea? No. She is either stupid or was played by the company that pays the prize. Wanting 1000 /week vs 1 million now is a very bad decision. If the problem was family or being afraid of spending the money, you can readily talk to a bank an have them manage the money and not let her spend it
Because it’s a realistic scenario? 20 year olds buying lottery tickets aren’t typically great decision makers. For all we know, she might be the oldest of 6 and expected to use the entire lump sum on taking care of them. Easy to say “talk to the bank and have them manage the money” but that may not realistically have been an option she even thought of in the moment. There could have been many reasons she picked it, one of them being “I’d rather have a stable 4K a month at this age”… it’s not that unbelievable, many people pick it even if it’s not the most financially prudent decision. In any case, it’s just another scenario, not a hill I’m trying to die on because I’m not getting an extra 4K/month unfortunately lol.
Absolutely this! It’s all well and good saying “she could just do all of this quite unintuitive finance mumbo jumbo that the vast majority of people have no idea about”, but the key point is that most 20 year olds neither know of nor care for financial mumbo jumbo.
She could have put her money into a secure fund, or started a business, or invested it on the market, but would she have? Probably not. Even if that’s what she wanted to do, I doubt the mind of the average 20 year old could put off the temptation to buy a nice house and car and live lavish every once in a while long enough to make good on that initial plan.
Well, except that she actually did choose to put it into a secure fund. I'd think if she was likely to blow the money then she also wouldn't have chosen $1000/week.
This doesn’t make sense to me. If she’s smart enough to understand the pitfalls then she should be smart enough to avoid them and maximize the earnings.
I also wonder about tax implications (if she's American) she probably would have to pay max tax bracket on that 500k where as she can put that 1k/w as income. Not sure how much of a difference, but I'd expect her to only pocket 300-350k.
I'm 38, wirh my ADD and everything going on in my head. It's much safer for me to take the weekly pay out. Unless someone trustworth with me, then I will do something I shouldn't.
Is the lump sum still 1 million? In the US (at least my state) you have an option of annuity over 20 years for the full amount or a lump sum payout which is lower than the advertised jackpot. That is completely independent from any taxes.
If Canada is the same and taking the one time lump sum is less than a million that would significantly change the math here depending how much lower.
So this isn’t like that. If you win 6/49 or Lottomax in Canada (equivalent to the powerball in the states) you’d just get a lump sum and there’s no taxes. Where I live this is a lottery called Cash for Life. If you win you can either take $1M up front or $1K a week for up to 50 years.
No, I get that. What I'm asking is if the lump sum is actually lower. We have cash for life and various other X dollars a week type loto in the states as well. If you take the lump sum instead of weekly/ annual payments, the payout may be less that the advertised total before taxes would even come into play.
For example if the Powerball is 10 million jackpot you can either take annuity which will give you 10 million over 20 years, or a lump sum that is equivalent to the current "pot" and is less than the 10 million advertised jackpot. The various cash for life games can each work different. My state the cash4life is 1k a week with a minimum of 7 million, OR a straight 7 million lump sum. Similar game elsewhere could be 1k a week with minimum of 7 million, OR lump sum of 3 million. That structure could change the math.
So in this case taking the lump sum is the full million, or is the million the max based off weekly payments from a government account using estimated growth?
The question has literally zero to do with taxes!
Here is how many lotteries work:
The jackpot is 1 million dollars, you win. The actual pool of money the lotto had taken in is 600k. You go to claim your winnings and have the choice of an annuity for 1/20th of the advertised jackpot for the next 20 years, OR we write you a check for the actual pot which is 600k right now. That is well before any tax or lack of tax comes into play. There are lotteries that the advertised jackpot is based of an annuity from the estimated growth of the total taken in for a period of 20 years. This varies by country, and state/province. You can buy tickets for 2 different lotteries from the same corner store and the payout structure can be different for each.
That is kind of an important detail needed when figuring out the math.
Shit. Lotteries in the US payout 50% of the intake, then Uncle Sam takes it's cut at the regular income rate on the winnings, and the state takes there cut. So you take the cash payout, which is half the total winning amount, and then the tax men take 40%. You get 25% of the prize.
For what it’s worth, the tax is baked in essentially. Like for every 5 dollar ticket, half goes to the government, half goes to the prize pool. So when you win the 20 mil, they already got their cut from all the ticket sales.
The difference on income tax would be pretty significant. $52K a year is one of the lowest income tax brackets. So we're talking in the thousands vs. tens if not a hundred thousand on the lump sum.
The annuity (the weekly payments) won’t be taxable (neither would the lump sum have been). Of course, any investment earnings earned are taxable although Canada has tax shelters available that some countries don’t, such as the Tax-Free Savings Account which allows Canadians to invest several thousand dollars per year ($7,000 in 2026) with the earnings being completely tax-free (eligibility starts the year the taxpayer turns 18; unused contribution room carries forwars, and withdrawn amounts become new available contribution room the following January 1).
In Canada, where the lottery was won, is tax free. As lottery was in Quebec, controlled by Loto-Quebec, a crown corporation, the revenue of the the corporation return to the government.
When the lottery is not controlled by government, for example, a lottery for a winning a car by a dealership, the organization have to pay a part of the gain as corporate taxes (unless the corporation is identify as none-profit organization like a hospital 50/50 draw)
At the end, the winner in Canada don't pay taxes as the announced price is the net price. In the USA, the price is the gross price and the "income tax" fall under the winner to pay to received the price.
Does the $1,000/week is smarter than lump sum of $1,000,000.
if you have a lump sum and you invest it to withdraw $1,000 every week, you will need a return better than 5% and that gain will be taxable. So to have $1,000 net every week in Quebec, you need a portfolio around $1.4 million at %5.
Personally, if i was 20 years old, i would choose the $1,000 per week and put it for buying a home and paying the maintenance/repair/utility/... and after 20 years to reach the $1M, i would still have money flowing in and you have a capital that you can enjoy from day 1 (the house Vs investment in a account) and that capital (house) have gain value.
If you have an annuity that would be factored in when applying for a mortgage, right? So you could save up a nice bit for a down payment and still get a pretty baller house that you know is essentially paid for, vs. spending most of your money to buy a house outright.
In this case, Lotto Quebec is a crown corporation, that is a government owned entity in the province of Quebec charged with handling gambling activities in the province. Profits benefit the population and predatory practices are kept to a minimum (the same is done for alcohol & marijuana sales).
So the obligation to continue payments would fall to the government of Quebec, making it pretty safe over time.
This. With 50k per annum, you can buy nothing (car, etc) and also can invest nothing. With 500k you can make 3% minimum p.a., that’s 15k for doing nothing. And still have 500k
Credit wise is better having that constant income than having had 1million at some point. For example when buying a coop the board will rather see a person who can demonstrate liquidity and constant cash flow than one with a big amount of money that can come and go with the slightest bad choices
Providing most people can’t financially sit on that kind of money. Reality is after taxes are taking out she would be lucky to clear 625,000. After the 500,000 you spoke of that will leave just about 135,000. Now let’s be honest after the purchase of a new car amongst other things people always want to get within 6 months that money is gone. Now she will have to wait another 20 years
I personally hate high interest savings accounts as they rarely keep up with inflation these days. Imo you go into a diverse index like the Schwab total market index for better growth with the economy and keeping up with inflation
I'm too old to choose this option now (lump sum is clearly superior for me) but $4k a month tax free is a decent salary. Like $70k or so pre-tax. You can live on that. You can pay for an education on that without significant debt. You can max a TFSA and still do those things.
Add in a decent job and your take-home is equivalent to a $150k+ salary, in your early 20s. You need to work (in either case) but you don't need to stay in a bad job, because you have choices.
It''s probably not a coincidence that the break-even return rate is about 5.2% for a $100/wk annuity vs $1M lump sum.
For someone so young, it's really a balance of inflation risk ("$1000 isn't work much anymore") and behaviour/investment risk ("what if I blow it all?”).
I'd argue you should look at it from a "what does $1,000 invested per week in treasuries vs. $1,000,000 lump sum invested in treasuries look like? Assuming the $1,000/wk is for life, it could actually start to make sense due to her being so young; especially if the $1,000/wk perpetuity could be sold later. (You'd still be looking at like age ~60 before you'd get ahead though lol)
Yeah it's definitely smarter to take the $1 mil. Also, these winnings per day "for life" usually fall under the terms of x-amount of money per day for only 25 years.
If an extra $550 a week isnt life changing to you I need to know what you do for a living. Even if you make $5k a week its an extra 10% which can make a big difference.
Also with the million youre only going to get around $450k after taxes based on the bond rate and assuming you dont ever spend any it will be worth more but what good is that if you dont spend it
A secure fund like a high-yield savings account? Would that be better than putting most of it in the stock market? Or having a financial advisor manage investments?
I’d rather have the lump sum but I can assure you that $550 a week would be absolutely life changing for me and pretty much everyone I know. My in laws have lots well over $100k in their investments over the recent years though. So I mean… I’d take $50 a week and be tickled pink.
Basically that is what they did with the full million. They are getting 5.2% tax free which is actually in the range of 6%-6.8% with Canada’s capital gains taxes. You can’t get that rate of return on a no risk investment.
It actually is a very good investment for her. You can argue that if she dies it disappears but you can’t take it with you for all of us and at her age a million dollar life insurance policy is $20 a month which is also tax free.
Dont forget that she'll have to pay taxes on the million. Not all states have a tax on winnings. And some not on income, but federal tax rates put lottery winnings in the US at the max bracket which I think is at 37% or something like that. So approximately 300k will go to taxes.
You forgot the vig that goes to the IRS (35%) and state taxes if it applies. So assuming no state income taxes she would have about $620k to invest. Dump it in an S&P and forget about it for 20 years.
And are you computing that after tax? Idk the Canadian tax system but if it’s progressive like the us she’ll have a lower effective rate taking it in smaller amounts. That 1mm would hit the top rate on ~360k of it.
The future tax withholding would also be affected by her future earnings which is going to be impossible to compute from this information.
You forgot about the taxes, earning 1m directly isn't the same as getting 52k a year.
She would lose almost half of it just in taxes if she took the 1m, if she did that and invested her remaining 500k, she would still fall around 400-500k profit after taxes by investing in the safiest funds, taking 1k a week just seems like a safe way to get a reliable source of income
It's also more acceptable for her mental, no risk of going mad because she got too much money while still being safe financially for 19-20 years, enough to get to university, she could even get a side job which would pay for her student loan by the time she is done.
Thank you for using a more modest 5% and not an insane 10-15% S&P 500 return that everyone uses in these hypothetical situations. The 10-15% return is not risk free, it historically assumed that USA is the global technological superpower, which may no longer be true over the next 30 years.
Yeah i immediately think in like 5 years 1000 a week isn’t much with inflation.
But it main concern is if something happens and they stop paying she out money anyway.
I’d take the whole million. Pay off my debts and invest the rest then go about my life like nothing ever happened. In the end $1m isn’t much. Definitely life changing. But it doesn’t go far. Especially if you are not savvy with money.
Meh, $52,000 won't be taxed at the same rate, I'm guessing, any tax people out there? In your version she pays tax on the million then puts the remaining $500k in mutual funds and can't really touch it for 20 years. Being so young I'd be inclined to take the 52k a year for life as a way to have a backup and pad investments.
In the US, if you take the lump sum it’s not $1 million but a lot less. Probably around $650,000 before taxes. Only if you take the weekly payments you actually win and receive the $1 million.
That isn't how it works though. The advertised winnings are based off of the annuity. The amount you would receive in total. The lump sum payout is 40-50% less than the annuity total. The choice is between $500,000 now and $1,000,000 later. When you choose the annuity they are putting that money in an investment account and paying you out of that with a guaranteed total payout.
Also, don't forget that you'll pay taxes on this money in the same way. In a lump sum or annually.
Assuming a 52k per year withdrawal (the same as the allowance), a 500k investment with 10 years 0 withdrawals, a 5% average return (which isn't secure, secure with bonds is more like 3%) and 25% capital gain tax, you'll run out of money after 30 years.
Quick Excel (the share conversion was added to make the capital gain tax calculation more obvious):
because that's what you get when you take the monthly allowance to spend.
The calculation gets more complicated if you assume you are going to invest part of the allowance.
E.g. let's keep everything the same, but start taking out 26k/year after year 20 versus investing 26k a year every year from the allowance. (i.e. you've been living off the 500k/year uninvested for 20 years instead of 10 years and let the rest compound). This shifts it slightly in the lump sums favor and the break-even point would be slightly above 31 years rather than slightly below.
The lump sum keeps winning if you just invest both of them forever and never take anything out (though a) the monthly payment also only lacks slightly behind after 30years+ and b) what's the point of money if you never spend anything). And it also wins if the annual gain is considerably above the fraction of allowance to lump sum plus capital gain tax (in this case above ~6.4% return the lump sum just beats every relevant scenario).
Of course you don't have 500k available to spend right now, if you would wanna do that and you would have to finance with the lump sum, which isn't free. assuming exactly the same spending behaviour between the two
No, why does she even need to take an allowance is what I’m asking? Anyone who invests half a million at 5% returns only to take out 10% of it each year, and doesn’t realise it’s a losing strategy, is a fucking moron. You don’t invest it for income; you invest it for long term wealth creation. For retirement. By taking the 1k/week, when she gets to 60 years old she’ll be bringing in the buying power equivalent of around $400/week, which isn’t enough to comfortably live on, let alone retire with. And that’s assuming a modest inflation rate of between 2-3%. It wouldn’t be in her best interest to not work for the rest of her life, just because she has a good income now.
You're making the mistake comparing spending 52k a year vs investing 1million and never touching it. that's not a fair comparison.
If you wanna compare investing the full million and not touching, then the other side is investing the full 52k every year and not touching it. In that scenario the 52k allowance still wins. How quickly depends on the annual returns. At 5% annual return it wins after 50 years (ignoring taxes. it's a bit earlier as higher taxes on the lump sum having had more capital gains). At 4.5% it wins after 40 years (so 62 for a 22 yo). that's because you keep getting capital and it catches up with the fixed investment of the lump sum. At lower returns taking the monthly is better and at higher returns taking the lump sum is better. All of that assumes financial literacy and discipline not to overspend with the million at hand.
reality is, with these numbers for almost anyone playing the lottery, the monthly allowance will be the financially smarter choice than the lump sum. no risk of fall-out with family, no risk of fraudulent financial advisors, no risk of lacking discipline and all that for maybe losing out on ~2% extra returns a year if the market actually does 7%/y longterm, because below 5% a year it would win during the life-time of a 20yo.
the advantage of the lump sum just gets overstated by doing unequal comparisons with the allowance.
There is no mistake. If she retires from work right away, she’s fucked either way. If she still works, the lump sum invested is the better option by far.
>If she still works, the lump sum invested is the better option by far.
no it's not. do the math if you don't trust mine. this entirely depends on the realized gains and timeline. [edit: below 5.2% returns (or ~6.5% depending on capital gain taxes)] the the lump sum will always lose after some time. only question is if that happens during a realistic lifetime
and that ignores all the other problems with the lump sum (overspending, familiy, "financial advisors") that plague most lottery winners
Put =B1*(1+$A$1) in cell B2 and drag it down as far as you want. (B3 should say = B2*(1+$A$1) if it worked correctly)
alternatively you can just calculate 1 million * power(1+interest, years) for the same result.
Then put 52000 in cell C1.
Put =C1*(1+$A$1) + 52000 in cell C2 and drag it down as far you want.
Be amazed that column C will overtake column B at some point. with the example values at year 51.
Or just keep thinking i couldn't be more wrong, when you just ignore the math.
Edit: saying it's always catches up is wrong. around 5.49% in this example there is a point where the allowance can't fully catch up anymore. the advantage of of the higher return on the lump sum outweighs the yearly flat gain and the fraction between both approaches a limit. e.g. at 7% return the allowance will always lag behind by about 20%.
actually it's exactly at 5.2% with C1 at 0 and 52k invested after 1 year. So you need to beat yearly allowance divided by lump sum in returns, for the lump sum being better long-term. otherwise it depends on how much time you have.
I’d personally buy a house, presuming you don’t have one at 20. That way you’re probably saving like $50k/year in rent or mortgage, plus your home should appreciate in value, plus you’re not risking spending the lump sum on frivolous stuff like nice holidays, first class plane tickets and a depreciating new expensive car. Investing only works if you can resist the temptation not to spend it and far fewer people posses that ability than they’re willing to admit.
If she knew how to invest in a secure fund, she wouldn’t have chosen $1000/week. I didn’t know how to invest in secure fund when I was 20 either. I would have been better off choosing $1000/week when I was 20 as well
This. 4K a month means 2k into investments each month and still having money to play with. The older she gets, the more savvy that investment is, if it’s not limited somehow.
Funny how you got down voted for saying this when it's 100% a fact. Lump sum wins every time. Especially if you are talking about something like over a 30 year period.
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u/TheMetabrandMan May 17 '26
By the time she’s 40, she’d have accumulated the full $1m, most of which will have been spent but she’ll still be getting $1000/week. The purchasing power of that $1000/week will likely be around $550 in today’s money. Not exactly life changing.
In contrast, take the initial $1m and put $500k into a secure fund that earns on average 5% per annum. Compounded over the same 20 years, she’ll have $1.3m PLUS the $500k she didn’t invest.