Jack,
I know they always say to take the 50% now, but so many of these winners end up broke. There are other new factors too such as the possible collapse of the dollar, the banks, Oregon, and the United States.
Still it would worry me greatly if my first official act after winning would be to give half of it away.
I've seen the math and I know the advantages of doing it like this guy if you invest wisely.
But I think I would screw it up as so many people have before me.
I would make do with 400 grand a year for 25 years rather than take the 5 million now. How about the factor of how fast the years go by as you get older?
Notice how this guy's already talking about a 500 thousand dollar house.
After taxes, that 5 million is down to what? 3 plus and now he's going to spend one unit of 500 grand leaving him with 5 left.
But what gets me is the tone when people discuss what they'd do. It's amazing how brilliant most broke people sound when they're talking about how to manage money. They always talk as if they'd be financial wizards - like they couldn't screw it up. I have to wonder - if they're so good with money - why aren't they rich already?

With interest rates as lousy as they are right now, the 25-year payout is a better deal than it used to be.

I've crunched some numbers that I think are right, and they show this pretty conclusively. Let's say you win a "jackpot" of $10.2 million, which is what it was this week. Your combined state and federal tax rate on that is going to be something like 40-45%. The lottery folks may withhold only 33% from the check, but the hit come April 15 is going to be higher than that. Let's say it's 40%.

Here are your two options:

Option 1. They pay you $5.1 million in cash pre-tax, which after tax is $3.06 million. If you put that into an investment and don't touch it for 25 years, here's what will be there at the end of year 25, depending on what after-tax rate of return you get on your investments:

At 3%: $6.41 million
At 5%: $10.36 million
At 6.25%: $13.93 million
At 10%: $33.15 million

Option 2. They pay you $408,000 a year for 25 years, which after taxes is $244,800. If you take those payments and put them into investments, here is what you'll have at the end of year 25 at the same after-tax rates of return:

At 3%: $8.93 million
At 5%: $11.68 million
At 6.25%: $13.91 million
At 10%: $24.08 million

From this, you can see that to make the cash option better, you'd have to make more than 6% a year after tax on your investments. That's not impossible to do, but it's not as easy as it used to be.

By these calculations, you'll do better with the up-front cash payout only if you can make more than 6.2374% a year on it, after tax.

Of course, this ciphering ignores the fact that most lottery winners don't act rationally. "A $300 speeding ticket? No problem." That ain't Phil Knight talking -- that's Qyntel Woods.

Thanks for crunching the numbers. My more fringe analysis came down to what would happen if the dollar fails and is replaced by a new currency such as the Amero? If you took the payments, would you still get paid anything or would the accompanying meltdown sort of mean you were out of luck? Crazy as that sounds, the 25-year payment plan is a bet on our future stability that is getting harder to justify.
Could you imagine kicking yourself in a few years, because you didn't take the 50% payment, buy gold and flee to an island in the South Pacific?
I still say the 25-year payments are safer for someone like me.
The trouble with becoming an instant millionaire is that relative poverty is actually a form of self-control.
I've met several people worth 100s of millions including Bob Pamplin and they're always described as eccentric. But I maintain we're all eccentric - most of us just don't have a way to express it.
So one thing this new Mega-bucks winner is going to find out is whether or not he has any interests that only surface now. I mean things he might not even know about.
I read Pamplin has a collection of Chinese art. Things like that.
The person who most closely mirrors what I'd probably do is Paul Allen. If I had billions I would definitely spend serious money buying Jimi Hendrix guitars and Eric Clapton's as Paul Allen has.
I'd love to own one of George Harrison's guitars.
As a mere millionaire, I would buy tens of thousands worth of normal vintage guitars, no doubt about that. I like being around them. The house would look like a music store.
So while I'm not materialistic, if I had the money, that would leap out and cost a fortune.
As far as buying a sports team, I wouldn't do that I don't think. But if I did, I'd definitely pick a few games a year where I played. Get some friends together and take on the Lakers. I could see that. We'd lose of course, but I would love to trash talk Kobe for a couple of hours.

The buy-gold-and-run thing sounds better every day. May I be so lucky as to have to make that decision.

I'd probably take the $3 million up front. Pay off the mortgage, have one round of some serious fun, and take the rest of the $2.5 million and throw it into a bunch of pretty safe investments. Even if they cranked out 3% after tax, that's $75,000 a year forever, and the $3 million's still there for your kids, or whoever.

If you want to really go nuts, hit the Powerball when the jackpot's good. Then you can tack a zero onto the end of all the above numbers. I'd pee my pants with that one.

Jack, there's one other thing to factor into the take it all now or take some of it later and that's your age when you win. If you were 65 and your family typically did not make it past 80 it would be better to enjoy what you can now and forget about later when you probably are not going to be able to enjoy it that much anyway.

Here's a newly made bag of money for the tax the rich crowd. I wonder how he's going to vote on the tax measures now.

No on 66&67, Jay and Donna.

If these winners spend an average of $1000 a day the entire sum will be gone in 3 1/2 years if the net $3.5 million.
The $500k house is a good start on that road. They better get a single wide as back up housing.

You've got to love these two contradictory statements:

"We are not going to go too extravagant and just blow the money," King said.

and

"We probably could have got out of the ticket, but we can pay a little $300 ticket."

Great start, folks!

A couple of things from an economist:

First when the Megabucks Lottery jackpot is over $9 million, the after tax expected return per dollar wagered is actually greater than a dollar. The game has a positive return.

Second: The world is not imploding. Buying gold is an ill advised thing to do with your money. Reminds me of the housing bubble a few years ago. I tell people this and like back in 2006 they think I am crazy. The long run average cost of mining and producing gold is around $400 an ounce. Commodity prices in the long run gravitate to their long run average cost. There is no shortage of places to mine it and once produced gold is not consumed in the same way many other commodities are.

Good on them, I wish them the best.

Qyntel Woods?

Nah, this guy fashions himself Tiger Woods. Look at that hat and follow the story.

"The world is not imploding" ... no, it's not. The human race is cooking.

"... they're so good with money - why aren't they rich already?"
Didja ever notice that rich people of your acquaintance never buy lottery tickets. Another thing: I've never heard 'successful' people talk about what they saw on TV lately ... for that matter, ones I've been around don't watch TV.

- - -

But explain something to me. Winner Woods is reported to be 34-yrs-old and his oldest child is 20 ? ? ?

He wanted it [the new $500k house] big enough to have some of his nine and his wife's 13 immediate family members be able to come for visits and “share the joy” with them.

Anyone else see another potential problem here?

In a related story, the supply of tweak has mysteriously dried up in Roseburg.