Totally Random, I Know

Denis bought a lottery ticket the other day and this afternoon I checked the number (no, we didn’t win). At the same time, I read a story about how New Jersey has decided to bring revenue into the state by taxing all lottery winnings over $10,000. The new tax went into effect on July 1, 2009, and is almost 11% (the highest in the country). What’s making people in NJ upset is that they didn’t make it effective July 1, 2009, but January 1, 2009. That means all the people in NJ that have won over $10,000 since the beginning of the year now owe 11% in taxes. I understand NJ’s need for the money, but c’mon – I think that’s kind of rude to do. Especially since the poor taxpayers in NJ already get the shaft when it comes to property taxes.

Anyway, that’s not the point of the post. The point is that I just had the thought in passing that if we were to win the lottery at some point, I know that it’s financially better to take the lump sum and live off the interest, but given today’s economy, I can’t help but think that the better thing to do to would be to take the 30-year annuity. I’m 40 years old. Let’s say I win the $25M Powerball tomorrow night. My take-home after all SC taxes would be over $300,000 this year if I took the annuity. Not a bad chunk of change if you ask me. I think I’d much rather have the security of knowing I’d get a check each year (increased and adjusted for inflation) until I’m 70 years old (that last check would be almost $950,000). And the money I’d get each year would be less likely lost in the long-term due to a bad economy.

Just a completely random thought I had today while looking up the Wednesday night numbers to see if we had won.

My Signature

7 comments

  1. The annuity payments are NOT indexed for inflation, which is why most folks take the cash option. You can then invest the cash into something that will enable you to take out pretty much the annuity every year, and if you do it right, even get ahead of inflation (assuming our present leadership doesn’t spend us into becoming a bannana republic with 10,000% inflation, that is).

  2. The annuity payments DO increase every year. “The Powerball annuity jackpot is awarded according to an increasing rate schedule, which increases the amount of the annuity payment every year.” According to the chart I’m looking at, the payments increase by 4% each year.

  3. Not sure where you funny folks get your numbers from, but I just checked. In 2000, Clinton’s last year, the surplus amounted to $236 billion. In Bush’s last year, the White House predicted a $482 billion deficit for the 2009 budget year. Can you really say with a straight face that our current leadership is irresponsible? Please. Let’s pray Obama can right the ship and grow your nest egg a little from the golden Bush years. LOL

  4. Bush started the ball rolling by signing the first bailout. But Obama has spent more money in the first 6 months of his term than Bush did in his last.

  5. Yikes, 11% in taxes? That would really take a big chunk away from one’s winnings. Is there a way for the people to contest at least the covered date? It is kind of unfair to impose the taxes on winnings that were won earlier than the date the taxes went into effect.
    You’ll be pretty much set for senior life if you do win the lottery 🙂 At least you know your future is secured, and you’ll get something yearly.

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