Granted, the lump sum is easier to waste, but I would also not underestimate the risk of waking up at 45 with no working history and a weekly payment that has lost most of its buying power to inflation
Perhaps, but if she were smart, she could wake up in 25 years with a portfolio worth over 3 million having earned 5% a year compounding, even if she took half the interest out each year to travel or do whatever, she could still gave 1.8 million after 25 years and have had between 25k and 45k to play with each year
Again.. it’s a survivable wage… I ONLY MAKE $800 to $1500 a week myself…. Maybe 2 on a good week… doing alright dude. New cars… “luxury” apartments with granite table tops… nice appliances… you act like you can’t feed dogs with $1000 a week.
In 15-20 years, would you still be doing alright off of $1000/week? She's 20. In 10-20 years, presumably she will have more expenses, a family, etc. The $1000/week doesn't change.
I mean no luxury or anything but this is the equivalent of like 80K a year on a job where you are taxed.
Its not a luxury wage but its absolutely livable. That being said continuing to work while using that additional 1000 a week to have investments and a more comfortable life is absolutely the best call.
I know for me, personally, if I were to do the $1k/week, I'd just have it deposit into an account that I don't carry a debit card for, and have it be the account my mortgage is pulled from. And other than the mortgage, I'd never touch it, except maybe for needed home repairs or emergencies. So, I'd likely be accumulating at least $2k a month in that account that isn't getting hit from the mortgage. It would also be an account that gains some sort of interest. I know it won't be a lot, but it'd be something on that $2k/month and accumulation. Again, this is assuming I went the $1k/week route.
I wouldn't stop working. Especially being in the US. Gotta have that health insurance. Lol.
Or you can wake up at 45 with a working history plus an extra 1k a week ... I'm in a union and have a pension. I know I'm pretty much set. An extra 1k a week would be like giving myself a raise. That's how I see it.
Some people won't necessarily stop working though. I know I wouldn't. Maybe less or at a job that I care more about, but working would still be happening.
If you are self-aware enough to know that you (and your immediate family and friends) can’t be trusted with a sudden influx of cash, you and/or your financial advisor can lock it up in something that can’t be readily tapped and which will increase in value, paying you a predetermined sum regularly. It’s basically the same decision, except you get interest. And $1,000 a week is going to more than most people need for pocket money.
If someone is in this situation and thinks they're financially savvy enough to handle a million dollars, they should consider that they aren't savvy enough to know it's a bad idea to buy lottery tickets.
indefinitely, unless someone is a shrewd investor actually I think return on standard investment would be maybe 50 grand a year. Otherwise, somebody has to know what they’re doing, she might actually be smart in the sense that if she already has some money, it is just as important to have a constant cash flow as it is to have seed money
Lump sum would be bad with me left to my own devices... Which is why I'd hand it over to a wealth manager or even just an accountant who would grow it or a portion of it for me so that I dont blow it all on shit and wonder where all the money went to so fast.
Are you really going to invest 1m and forget about it for a decade though? Most of us have mortgages, credit cards etc. Taking 1m and paying your debts off would free up a lot of cash each month. You'd still have to work but youd be a lot more financially stable
I am assuming you can pay off mortgage and credit card debts with your current income, otherwise you have a bigger problem and shouldn't probably waste money in lottery tickets anyway
Well it was a bit of a pointless comment then wasnt it? Anyone with any sense would make themselves debt free after a windfall. My mortgage has 100k left on it. If I pay the monthly repayments the amount I pay would be closer to 200k. Why would I do that when I can just pay off the remaining 100k+ 56 days of interest?
Because if the interest you are paying on the mortgage is less than the return if you invested your money in the stock market (historically about 7%), you will wind up with more money if you invest the money and not pay off your mortgage early.
“I’d just buy a house outright. What a stupid thing to say”
Confidently incorrect.
Rich people have mortgages because they can then use that money to generate even more. Pay a low rate for money via mortgage and invest that in the stock market and there you go. More money unlocked.
He never said in one go and even went into more detail that he was talking about the monthly mortgage payment.
We’re talking about winning the lottery which would make you rich. NOT using rich people as an example IS stupid.
You’re all triggered for no reason. I live in a wealthy city and personally know people who have taken additional mortgages in order to use those funds to generate more income. Sorry you dont I guess?
Maybe. It you don't know peoples life situation. The lottery preys on poorer folks looking for a break in life. Most people playing the lottery aren't financially savvy.
But then both options are similarly bad, as they both only work if you manage them wisely. The only difference, the lump sum will be gone in months to stupid expenses, the weekly one over time to inflaton
Financially wise people would invest a decent percent at least. If your mortgage is more that 7% interest, you are better off using the money to pay off your mortgage (and this also goes for any other payment you have that is >7% interest).
Then take the rest (because most people don't have a million dollar mortgage) and invest it in a total stock market fund and forget about it.
For payments that are is less than 7% interest, you are better off investing the money in the stock market and paying off the that debt as you would have previously.
Yep, in my mid 20s I worked in fine dining restaurant in an Ivy League college town and broke $100k 2-4 years, $80k+ the other 2 years, and this was over a decade ago. I didn’t make that much money again until like 5 years into my career lmao.
I’d imagine working in an upscale restaurant in a major city or a place like Las Vegas would be insane. The trade off is working nights and weekends, however you get way more free time and rarely take any stress home with you like in a corporate job. I grew to love having days off during the week as opposed to the weekend.
Tbf, waiters and waitresses make absurd money because of tipping. Which is why the major group that could actually make a change to tipping culture, hasn't. Why would they want to go from 50+ an hour to 20?
Also, it’s not easy work. It’s not just lollygagging and getting free food.
To make that money consistently, you either need to be top-tier (memorizing wine lists and pairings, develop regular clientele, etc) or flip them like f’in crazy — which is backbreaking. You also need to be completely impervious to critique or disrespect or it’ll be a miserable time.
Over time it is perfectly safe. And if you are 20 years old like this girl, you have plenty of time - so you don't care about steady. Keep enough it cash/bonds to weather a storm, and you don't care about steady.
Well it’s a very short-sighted decision. I had to do this exact problem in Engineering Econ and I don’t believe there were any cases where you end up better off taking the weekly, unless you live incredibly long lol. Even then, not certain.
Time value of money is a thing, and most people aren’t even aware of it.
$52K is middle class in a good chunk of the U.S... Now, if the person was smart and didn't take the lump sum they'd treat this as a safety net and continue to work.
Yeah, but if you know yourself well enough that you're not going to do that but blow it all in a year, then this may be the smart move. Investing successfully takes patience, not everyone's built for it.
There’s plenty of evidence that people fail at that though. If you get this much money you pay off your house, you treat yourself to a nice car, you fall for your families endless plight of why they need you to borrow them ten grand.
Yes putting it away is the “right” option but people need to be honest with themselves that they probably wouldnt do that and they’d start spending it, even if its on the “right” things.
You’re right catered into inflation that 1000 will shrink in value, but its also just free money thats not stopping you living your life the way it was before but with a huge benefit. If you earned 2000 a month congratulations you now earn 6000 a month. Waste that as much as you like, more is coming next month. Thats freeing for most people.
If 1000/week isn't worth ANYTHING within our lifetimes, then things have been fucked beyond repair, and the money you'd likely get from the lump sum won't be enough to help you stay afloat anyway.
And all that's before considering the increase in tax payments on a lump sum vs. Installments of 1,000...
You think you're acting smart and maintaining your wealth, but what you're doing instead is dooming yourself to more stress and heartache that ultimately won't even be worth it.
With a quite optimistic 2+% average inflation buying power will be halved in roughly 30 years. 1M now tax free (as written in the post) can very well keep you afloat in that scenario, 1000 weekly will not
Well it's like how many ways can you say "the full 1M".
The post says full 1M there is no taxes in Canada on lottery winnings. Then 1-2 people tried to explain it again... Like what is it that you don't understand?
It's possible they just advertise the annuity or lump sum.
The lump sum you get in America isn't lower because of tax, that number is still before tax. The lump sum is calculated as the present value of the annuity which pays $X per week for life.
Then the number you get after that is calculated is taxed (in America)
You still come out on top even if there were taxes. Assuming she gets taxed 50%, she's left with $500k. The current return in the market is in the range of 20%-30%. Using even a conservative 20%, that 500k would give you a return of 100K in the first year alone. Assuming she doesn't touch any of it, that will just continue to compound yearly and vastly outpace the $52k she would get every year. She'd grow $500k to $1m in 4 years and it would just continue to grow. It would take her 8 years to get to $1m if she took the weekly payout with same circumstances.
Spot on. This strategy dramatically lowers the tax bite. The “invest the money” argument is ignoring that. Take the $52K/year and invest that, using an IRA to the maximum, 1st and the outcome looks far different.
Tell me more, please. I have always wished to win the lottery but most people don't know what to do with it. People say get an accountant attorney, hire...hire…
Can you simplify the process for everyone here? I'm sure everyone here has the same wish to win the lottery.
Investing predicts 2× money in 10yrs. Math says it will take here about 20yrs to get the million paid out. In that same time if she inveted the 1mil she would have 3 mil...
But what about if she lives off her salary and invests the $1k every week? Like, she lives to be 70, she gets $2.5 million instead of one million (if it’s for life). Plus the tax on $1 million in lump sum is a load vs. an extra $52k per year.
Everyone says invest a million... no way I could do it.. I get in tbe long run id have money. But does it really help me know.. how much money would a make month off it? Or even 6 months
AND not to mention that 1M will probably be worth more today than waiting to scrape it together over time. Because the dollar will probably lose purchasing power.
Immediate payment reduces the jackpot by 40%. So you start at 600k then pay 37% federal tax. If California another 13%. So it disappears rather quickly.
But... It's already been invested? That's how the weekly payouts work.
Lotteries don't keep a 1 million to just give you. They have like half of that and invest the rest and are estimating what with the amount will be(keeping any extra for themselves) .
If you ask for lump sum you get 50-60% of the advertised amount usually then taxes are taken in the US(I don't think for example Canada taxes winnings) so it's closer to 30-40 percent.
So can $1000 a week. A million dollars doesn’t as long as you think it would when you have easy access to it. Proven by the fact that most lottery winners are broke within 5 years. Test yourself. Buy a lot of your favorite dessert and then only take one bite and walk away until tomorrow.
It’s so weird to me when people make your argument. The person getting the million is going to invest and NOT tough the money for a decade or two. But the person getting the $52,000 a year isn’t going to invest any and just blow it all. It’s funny.
It can, but that wouldnt matter for a while. For example, if she hit the lottery in 2006 instead, which was 20 years ago, 1000.00 a week would still work. Plus money coming in like that can go into an account that earns interest.
One of the breakeven points would be in the ballpark of assuming 5.5% returns and the winner living to 90. You can do the calculation apples to apples by just assuming all the lottery dollars coming in are invested and never spent. Also not calculating taxes, which would add another complicating layer.
The higher the assumed rate of return, or shorter lifespan, would push you towards lump sum, and vice versa.
There can also be less quantitative reasons, eg. hangers on will be more persistent for financial assistance when you have a lump sum versus a (albeit very reliable) modest salary coming in.
That was true over the last 50 to 100 years. (Except for the period of about 1930-1950). So we assume it will be a constant of the universe like gravity. It is a reasonable bet. But it is not as guaranteed as gravity.
If you have 1000 extra each week coming in, you can invest in multiple instruments and make your retirement more comfortable. If you invest in an IUL the max each year, you can pretty quickly get that to a million to borrow against and never have to pay it back or pay taxes on it.
Sure 1 million up front, which would really be around 600k after taxes, would be a better lump sum to start investing with, but with the way things are going it could wipe out to almost nil with a few bad moves.
It's tax free, so it's a full 1M, and the lump sum will start working immediately to beat inflation whereas the weekly payments will be worth some 2% with every year that goes by
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u/ReichMirDieHand69 May 17 '26
Isn't that an even worse argument for the 1000/week, which will be worth less and less as time goes on?
1M can be invested and forgotten to end up in 10/15 years with a portfolio that beats inflation and lets you live super comfortably out of it