So if you did win the lotto..

**Thevail** · 03-30-2009, 02:20 PM

Which is the better frugal financial strategy...yearly payout or lump sum payout?

I've always wondered.

Because with the yearly payouts you would be really financially secure basically for the rest of your life.

But, with the lump sum you'd have more control of the money.

Not sure what the tax situation is with all that though.

**Ceashels** · 03-30-2009, 02:29 PM

Last year, I would have said yearly payouts as you know who is a bit of a nerdy free spender. Now a days we have much more restraint with our income and monies and I'm thinking we would have better control of making it work for us.

I guess it depends on how much discipline a person has to begin with.

**guest002** · 03-30-2009, 02:41 PM

Lump sum!

**monkeywrangler71** · 03-30-2009, 02:46 PM

Depends on the amounts, but chances are you could invest the lump sum payment in a guaranteed investment which would give you an average annual income better than the yearly payouts and they last forever. Plus you also have to consider what happens if you die - do the yearly payments stop? Take the lump sum and invest it yourself, live off the income and you know your family is always taken care of.

**Spirit Deer** · 03-30-2009, 03:27 PM

With a lump sum, taxes eat up at least 1/3 right off the top. Investing it might make more sense.

I think we'd like the security of a guarenteed annual or monthly payment.

OTOH, taking a lump sum and being able to pay off the house and all debts would be great and would be the equivalent of decent return by saving us the interest we're currently paying on the mortgage.

Why do you have to ask hard questions?

It'll never happen to us anyway, so we don't have to worry about it. We've never bought any kind of lottery ticket in our lives, and our casino expenditures consist of $6, $4 of which the casinos had given us, no doubt in hopes of getting us hooked on throwing our money away.

**2ndGenGranola** · 03-30-2009, 03:34 PM

I would run to my tax lady and get her to run the numbers. She is just way smarter than I am when it comes to that kind of stuff.

Whether we choose lump sum or regular payments I would do my best to secure it (could I even hide it???) or my spend happy DH would have it all spent on stupid stuff before the ink on the check is dry.

**Thevail** · 03-30-2009, 03:41 PM

Originally Posted by Spirit Deer

Why do you have to ask hard questions?

LOL! Some people knit..some people paint..I like to think!
And I love making other people think too..bwahhaaha.

I mean, obviously the lump sum payout would work best for anyone over 60 almost all the time since there are 30 payments. And no one really wants to bet that they're going to live to be 90. I think everyone probably hopes to and many people do, but that's still an awfully long-shot scenario.

Meanwhile, if you were 18 when you won..it seems that the yearly payouts would be much better. You'd stop recieving payments at 48, but by then you'd already have had a ton of time to get an education, buy a house, raise your kids, invest for retirement, and even invest just to have an income until retirement age etc. etc.

But what about age 40??

You'll probably live to be 70 easy, especially if you can afford good healthcare.

And you're probably also smart enough to handle your own money wisely too. (at least if you hang out on FV)

But you probably owe far more than the amount that the yearly payment is (mortgage alone), so the lump sum could save you a lot of interest.

I wonder what the tax rate is on the money per year (assuming you already make 50K) vs. whatever crazy taxes they take out of the lump sum per year just because you have that money?

**kellieetter** · 03-30-2009, 03:50 PM

I would say it depends on the amount you won and how many years it would take to pay you the full amount if you did it montly. It might be better to get on large sum!

**Spirit Deer** · 03-30-2009, 06:14 PM

I mis-typed above. The tax rate on a lump sum I'm pretty sure is a lot higher than 1/3 because then you're bumped up into an astronomical tax bracket with probably not as many deductions as you could arrange if you had gotten the money more gradually.

I'm also not sure we'd take the lump sum, either. The only debt we have is our mortgage and it might make more sense to just pay that off by making extra payments each year when the lottery check came.

**monkeywrangler71** · 03-30-2009, 06:22 PM

If you win it here there is no tax, so I'm still taking the lump sum.

**Linus** · 03-30-2009, 06:29 PM

Lump sum. I'd pay off all of my debts, all of my g/f debts, set some aside for retirement and college funds for kids, setup a 12 month EF, buy a house with a little land, pay of my aunts and uncles houses, give my grandmother a world trip and then give the rest away to those that need it so their houses aren't foreclosed. And then continue living frugally with what I get with my present job.

**spyzvixxen** · 04-01-2009, 09:30 PM

I'd rather have the yearly payment, even though we're throwing out the compound interest benefit. Vic tends to spend money before we have it. It would allow us to practice restraint.

**lvngwell** · 04-01-2009, 09:41 PM

Oh lump sum definately.

If you take lump sum you are still getting more money than you will ever spend in your life. The way I see it you are asking the question - way too much to ever spend "A" or way too much to ever spend "B." I chooose .... um ... uh ... way too much to ever spend!!!

EITHER way my family would be set for life - out of debt - children and grandchildren taken care of. What more can you ask for? Being a person of modest needs and modest wants (except for a big house which either would well afford!) I would be happier with either - and as we all know here at FV - more is not always best but enough is enough!

**phoeny_moonstar** · 04-02-2009, 01:59 AM

I would take the yearly benefits. I think that with my age I could afford to wait it out for the next 30 years. I mean i'd only be 50ish and by then I would hopefully be financially set.

JMHO