…but taking the annuity over the lump sum is even more stupidererer.
DENVER â€“ Colorado’s first Powerball winners claimed their prize on Wednesday.
Two families went in together to buy the winning ticket for the October 10th drawing. They will now share the $20 million prize.
The winners are from Germany, but are originally from Poland and came to Denver in 2002. They chose the annuity option which spreads the jackpot over 29 years. They picked up their first check Wednesday for $365,602.
Through a translator the winners said they plan to “stay cool,” travel and maybe buy a house someday.
I ran some quick numbers in an Excel spreadsheet, estimating that money received could be compounded at 8% annually, and that $200,000 a year would be withdrawn for supporting a better lifestyle. After 29 years, you’d have something like $10 million more by taking the lump sum rather than the annuity (assuming I didn’t screw up some numbers, always possible).
Hell, assuming that after splitting the money and paying taxes, you have $5.5 million leftover, that would be throwing off $440,000 a year if you earned an 8% return. Just by sitting on the money, you get more per year than from the annuity.
I guess they don’t teach math very well in Germany and Poland.
However, the State of Colorado thanks you, as that bad decision can pay for a lot of open space and public parks upkeep.