Why does everyone say that you can make more money with the cash option over the annuity when winning the lottery?

by TheForeverAloneOne

I’ve seen arguments that state allowing the government to invest the money for you for 30 years will return a smaller percentage than if you did it yourself but the counter-argument I’ve seen is that if you let the government do it the starting capital is larger because it isn’t pre-taxed before investment, something that would happen if you did it yourself. Which is the correct answer? Also, if you want to take it to the next level, with the annuity, you get money every year, which you can also invest back into something which would increase your net worth at the end of 30 years. With those taken into consideration, is the cash option still the best option for those who are extremely greedy and want the most they could possibly have after 30 years? If you want to crunch the numbers and do the math, here are the numbers for the next lottery jackpot.

Assuming no state tax:

Cash option (after federal taxes):

$687,724,000

Annuity per year (after federal taxes, per year, listed in order):

1 $18,302,545

2 $19,217,673

3 $20,178,556

4 $21,187,484

5 $22,246,857

6 $23,359,201

7 $24,527,161

8 $25,753,519

9 $27,041,195

10 $28,393,255

11 $29,812,918

12 $31,303,563

13 $32,868,741

14 $34,512,179

15 $36,237,787

16 $38,049,677

17 $39,952,160

18 $41,949,769

19 $44,047,257

20 $46,249,620

21 $48,562,101

22 $50,990,206

23 $53,539,716

24 $56,216,701

25 $59,027,537

26 $61,978,914

27 $65,077,860

28 $68,331,752

29 $71,748,340

30 $75,335,758

Total: $1,216,000,002

So when comparing your final cash option investment after 30 years to the total value of the annuity, you’ll need to factor in how much you’ll have AFTER being taxed again when you “withdraw” from your investment to be a fair comparison to the 1.2 billion dollars.

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