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It is very prudent to take the lump sum. Future tax rates are likely to be higher and there's potential for a future government debasing the currency and the w

It is very prudent to take the lump sum. Future tax rates are likely to be higher and there's potential for a future government debasing the currency and the winner seeing the payouts eroded by high inflation. There's also a remote chance the lottery or payment provider fails or is nationalized in some political act. You also can better plan your estate if you control the asset outright.

WorldMaker 8y ago
Yes, there are situations where getting the lump sum is more prudent, but it shouldn't be the default in the average case. It is sometimes possible that you can find a better annuity or investment product to invest the lump sum in yourself and make back the lossage of the asset's interest/share in future lotto profits included in the longer term investment product, but that requires analysis and comparison, with good financial advice to reach that conclusion. But the keyword is "sometimes", everyone has different investment needs, and overall strong, steady passive income is often preferable to lump sums, especially without good financial advice to rely on to manage it. Regular Lotto payments, even fixed ones, are some of the least likely assets to default (historically tend to be quite stable/secure) you can have if your threat model includes future governments debasing currency or high inflation. It's sad how strongly inversely correlated bad economies are to higher lotto activity. (Now, if your threat model includes future governments strongly prohibiting gambling and gambling payouts, that's a different matter.)
- gizmo686 8y ago
  The lottery is still a single asset (even if it is backed by a diversified portfolio). When we are talking about hundreds of millions of dollars, I would be willing to pay a premium to hold that money in a more diverse way. This is the same reason I prefer 401ks to pensions (and our government has not demonstrated an ability to start with a fixed fund and not raid it for unrelated purposes) For your threat model question, I would be much more concerned about the state raiding the lotto fund to pay for, say, their pension obligationd than I am about them retroactivly banning lotto winnings on moral grounds. It is much harder for the state to steal from investments it doesnt control.

WorldMaker 8y ago

Yes, there are situations where getting the lump sum is more prudent, but it shouldn't be the default in the average case. It is sometimes possible that you can find a better annuity or investment product to invest the lump sum in yourself and make back the lossage of the asset's interest/share in future lotto profits included in the longer term investment product, but that requires analysis and comparison, with good financial advice to reach that conclusion. But the keyword is "sometimes", everyone has different investment needs, and overall strong, steady passive income is often preferable to lump sums, especially without good financial advice to rely on to manage it. Regular Lotto payments, even fixed ones, are some of the least likely assets to default (historically tend to be quite stable/secure) you can have if your threat model includes future governments debasing currency or high inflation. It's sad how strongly inversely correlated bad economies are to higher lotto activity. (Now, if your threat model includes future governments strongly prohibiting gambling and gambling payouts, that's a different matter.)

gizmo686 8y ago
The lottery is still a single asset (even if it is backed by a diversified portfolio). When we are talking about hundreds of millions of dollars, I would be willing to pay a premium to hold that money in a more diverse way. This is the same reason I prefer 401ks to pensions (and our government has not demonstrated an ability to start with a fixed fund and not raid it for unrelated purposes) For your threat model question, I would be much more concerned about the state raiding the lotto fund to pay for, say, their pension obligationd than I am about them retroactivly banning lotto winnings on moral grounds. It is much harder for the state to steal from investments it doesnt control.