Powerball math: annuity is better?

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walletless
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Re: Powerball math: annuity is better?

Post by walletless » Thu Jan 14, 2016 1:00 pm

alex_686 wrote:
nisiprius wrote:
westie wrote:If you're over 40, you're making a bet on your mortality if you take the annuity.
I don't think it's a life annuity (that is, one that stops with the death of the annuitant.) The word "annuity" is really confusing because it basically means any stream of annual payments. I think the Powerball annuity continues for 30 years no matter what. So you're only making a bet on your mortality in terms of your personal enjoyment of the money.

Nisprius, first, +1 on the Excel work. I think you nailed the issue perfectly.

Second, the article refers to the payments as a "certainty annuity" - it pays for exactly 30 years and stops, even if you die the next day. So once again you have hit it on the noise.

FYI, I am playing the lotto because it is the rational thing to do. I would be very sad if the office pool won and I was the only one that showed up for work. A small insurance payment to avoid regret.

I look at it this way: If you don't buy the ticket, you have 0% chance of win. If you buy, you have 50% chance of winning (either you are lucky, or you are not) :-)

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Re: Powerball math: annuity is better?

Post by Alex Frakt » Thu Jan 14, 2016 3:50 pm

walletless wrote:I look at it this way: If you don't buy the ticket, you have 0% chance of win. If you buy, you have 50% chance of winning (either you are lucky, or you are not) :-)

Want to play poker? I need to recoup my $2.

Dulocracy
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Re: Powerball math: annuity is better?

Post by Dulocracy » Fri Jan 15, 2016 11:20 am

Actually, I just thought of something else to add to the math: The actuarial probability of death. At least in my state, annuity proceeds from lottery winnings end at death and are not transferable or inherited. They end. I am presuming the same is true with the multi-state PowerBall. If so, lump sum looks even more attractive.
I'm not a financial professional. Post is info only & not legal advice. No attorney-client relationship exists with reader. Scrutinize my ideas as if you spoke with a guy at a bar. I may be wrong.

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Frugal Al
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Re: Powerball math: annuity is better?

Post by Frugal Al » Fri Jan 15, 2016 11:24 am

Powerball has 30 annual payments, first payment immediate, which do NOT end at death.

letsgobobby
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Re: Powerball math: annuity is better?

Post by letsgobobby » Fri Jan 15, 2016 10:13 pm

Frugal Al wrote:Powerball has 30 annual payments, first payment immediate, which do NOT end at death.

Correct. That would definitely make it a no brainer.

Leeraar
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Re: Powerball math: annuity is better?

Post by Leeraar » Sat Jan 16, 2016 1:16 am

scotthal wrote:Comic thought: Schrödinger's ticket - it could be a winner - I haven't checked the number, & nobody has (as yet) claimed the prize...


Heisenberg's ticket: He knows he won, but he does not know where the ticket is.

L.
You can get what you want, or you can just get old. (Billy Joel, "Vienna")

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VictoriaF
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Re: Powerball math: annuity is better?

Post by VictoriaF » Sat Jan 16, 2016 9:13 am

Leeraar wrote:
scotthal wrote:Comic thought: Schrödinger's ticket - it could be a winner - I haven't checked the number, & nobody has (as yet) claimed the prize...


Heisenberg's ticket: He knows he won, but he does not know where the ticket is.

L.


Rube Goldberg's ticket: A convoluted way to spend down $1.5B.

Victoria
WINNER of the 2015 Boglehead Contest. | Every joke has a bit of a joke. ... The rest is the truth. (Marat F)

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