Investment — Hanging on to all those millions — can be as tough as winning in the first place
If you won the lottery, as eight Nebraska meatpackers did last month, splitting a $365 million jackpot, what investment would be at the top of your wish list?
Without a plan, "the reality is that 70 percent of all lottery winners will squander away their winnings in a few years," said Peter Toll, president of Family Heritage First in West Linn and past president of Oregon's Financial Planning Association.
To get the inside skinny on innovative investment options, we turned to three local investment advisers and financial planners for what they would do with $15 million, the amount each of the Nebraska winners got after taxes.
Scott Anderson, senior vice president and financial consultant for the Lake Oswego office of D.A. Davidson & Co.: "I'd diversify my windfall across asset classes with midcap, small-cap, large-cap and international stocks. Because of my age (47), I'd have an all-stock portfolio, and I'd hire a good trust attorney to help me create an estate plan.
"I had a client that won the lottery in California, $14 million. Within seven years, he was broke and had creditors calling.... After a few million-dollar business mistakes, and living high on the hog, he had nothing to show for it.
"So I'd skip the new house and the new cars, and protect the base of that principal to provide me with an income for the rest of my life. If I didn't spend a dime of it for 10 years and instead invested the $15 million in the S&P 500, then — if the S&P kept pace with the past 10 years, which included one of the worst bear markets in history — it would still grow to nearly $28 million by 2016....
"If I took any out, it would be no more than 4 percent per year. That would give me around $400,000 after tax the first year and more each year after. With dividend reinvestment and compounding interest at the S&P's historical rate, I'd still have $19.5 million after 10 years.
"...If I won $1 million 20 years ago, I would, in hindsight, have bought property in the Pearl District or somewhere along the Vancouver side of the Columbia River or a rental at the beach. Or put $1 million into Northwest stocks like Intel, which now would be $32.4 million, or Microsoft, which now would be $348 million."
Scott Barchus, a CPA and principal for Wealth Advisors in Lake Oswego: "I would probably invest in a few things: international emerging markets, local startups and double-exempt municipal bonds.
"There is tremendous opportunity in Latin America, India, China and other countries in the Far East. What's hot about the emerging-market countries is the human capital and the natural resources....
"I'd also get into the venture capital market for small companies starting up here, especially in the technology and medical fields. There's a tremendous amount of startup companies in the Northwest, all looking for startup capital. They often do that in the form of private placements, but in order to participate you have to be an accredited investor (which requires $1 million in assets)....
"Many startups never make it, but in terms of the upside potential, you could see from 15 percent to in excess of 100 percent....
"Finally, from a tax standpoint, I would include a big chunk of municipal bonds. I think anyone with a windfall like this would have to consider taking on double-exempt bonds to avoid some of the 40 to 45 percent tax rate you'd otherwise have to pay."
Rick Grimshaw of West Linn, first vice president of wealth management/senior portfolio manager for Smith Barney: "If I had a $15 million windfall, the first thing I'd do is eliminate all debt, from the rest of the house payments to credit cards....
"Then I'd invest enough in assets like stocks, bonds and mutual funds to pay for my ongoing expenses and special expenses of other family members: college, elderly parents, down payments on my children's first homes. This way I could choose whether to continue working or not.
"Finally on my wish list, I'd work with an attorney to create a family foundation — and give a lot of it away."
Sound advice to a point; however, the financial planner who would invest in emerging international markets I think has bumped his head. That would be a red flag for me to have someone tell me, a new found wealthy person to put my money in international markets. I wouldn't return his call.
If I had $123,000,000, I may consider putting $10,000,000 in international markets. Today on the cover of the Wall Street Journal is an article about a hedge fund manager who has defrauded doctors, sports stars, etc. All told they have found only $150,000 of what he had Assets Under Management $115,000,000 now they are looking for the creep.
I raised this sad example because, its bad enough to have to watch those who you hire right here in America to handle your money, and for them to be putting your money to work in international markets, I don't think so. International laws about investment are not like our laws. So he could tell you anything while he builds up his fortune on your windfall. Anybody reading this advice should stay the hell away from this guy!
OK...let me try to clear this up in a simple manner. Stocks are risk investment. The market is volatile. Any one who had money in the stock market on 9-10 knows what their portfolio looked like on 9-12. When it comes to stocks there is no gurantee and no safe investment. What goes up can and will come down. Even Blue chips. Yes you can make money in the market but there is risk associated with it and people can and do loose money on stocks.
I am not a professional investor but here'e what I reccomend and in fact what I plan to do when I win:
(NOTE: Much of this plan depends on the size of the win but as a rule I'm talking about a significant win like $20 plus million with PB or MM.)
First with regard to existing debt...I do agree that it should be paid off. All debt. Mortgage, credit cards, car loans, medical bills, student loans...everything! But as to whether you should pay it off immediately with your winnings or develop a plan to pay it off from interest or dividends I'm or 2 thoughts. But whatever you do it should all be paid off within a year.
With regard to investments...minimum risk is the key to me. This can be accomplished through diversity and insurance gurantees. Therefore my plan looks something like this:
Generate income to live on:
The first part of the money goes into the highest rated tax free municipal bonds available. (U.S. Only!) These will probably pay something like 3% tax free. I'd put between 10% to 20% of the total jackpot there. (Once again it depends on how much you win and how much you'll need to maintain your new lifestyle.)
Next...CDARS. These are CD's that are covered by FDIC Insurance and will also pay something like 3% (taxable). I believe you can put something like $20 million in CDARS and still have them insured. Plus they are somewhat liquid. Depending on the size of the win I'd put perhaps 10% to 20% of the total jackpot there.
Then...U.S. government T-Bills and Bonds. This is the safest investment in the world and while not insured by the FDIC...they are backed by the U.S. government and if it fails (which is a distinct possibility) it doesn't matter because your life as you know it will probably be over any way. Somewhere between 30% to 50% (at least) would go there. (Maybe even more.)
I'd also place a bit in foreign government securities as well. But only in highly developed "western" nations. No third world, emerging nation investments at all. About 5% to10% would go here. (i.e. Governmental securities in Great Britain, Japan, etc.)
As I said about 5% to 10% would go into the stock market/mutual funds and the bulk of that would remain in the U.S. No risky investments at all...widows and orphans type stocks spread out to also include Blue Chip, small cap...mid cap and perhaps some growth stocks as well.
I'd also create an MSA (Medical Savings Account) or something similar. Most likely a flat dollar amount rather than a perchantage. This requires having a medical insurance policy with a large deductable and that may be tough to buy since by now I would have quit my job. But I'm sure it could still be done.
Real Estate would be next on the list...perhaps as much as 10% to 20% of the total jackpot would go into actual Real Estate with maybe a smaller perchantage invested in Real Estate stocks.
I'd also buy recious metals and other investments like gold, diamonds, jewelry...things of that nature. I probably wouldn't invest in paintings or cars and I'd stay away from commoditites but I would buy precious metals and the like. Again perhaps 10% to 20% of the total jackpot.
A Life Insurance policy? Maybe? IMHO that depends more on your dependants more than you.
Finally I'd keep some green "train riding" money squirreled away in some safe deposit boxes. A couple of hundred thousand G's here and there might come in handy on a rainy day or if you're kidnapped.
As for the entity...nothing would be in my name. (Well...next to nothing or very little.) I favor an LLC but a trust is also a great option.
And of course a chunk of money would have come right off the top to purchase and furnish a home in a gated community somewhere. And to pay for the lawyers, body guards, investment counselors, money managers, tax advisors etc that you'd have to have to survive.
I'm mostly with Uncle Jim on what I'd do. I expect that being broke is bad even more after you've spent some time being rich, so my first concern would be ensuring that there was virtually no chance of having my income drop below a level that's quite comfortable. That means that with 15 million to invest I'd put at least 5 into something solid but conservative. Like Uncle Jim I'd consider the possibility of government failure, but I'd also consider a major failure of the US economy. The government actually failing would be bad, but so would a few years of major inflation. 10 years from now an annual income of a million bucks could be just enough to get by. Investing in other stable countries offers an increased possibility of relocating and remaining comfortable. With the current trade deficit, an investment overseas may be just as much of an investment in US consumerism as investments within the US, anyway.
After that I'd get a bit more speculative and look for a bigger return, but I'd still put most of it in somewhat conservative areas,and I might put about 10% in areas that could bring substantial returns. There's no doubt that you can easily find yields of 10% and more in stocks of large, and apparently stable corporations. Just ask some of the people who owned stocks from Enron, Worldcom and Tyco. I'd look for something in between the 3 to 5% from very safe stuff like government bonds and CD's from large banks, and the probable long term safety and 10%+ average returns in the stock market. Starting with 15 million it would be difficult to have an annual after-tax income of less than 500k with high safety. I could easily spend a bit more in a typical year, especially since it would be nice to bring a select group of friends on some of the trips I'd be taking, but there's no reason to get greedy. Next to stupidity, greed is probably the biggest cause of losing the good life.
Some of the quotes attributed to supposed financial advisors leave me scratching my head, but I figure that they're often making broad generalizations, and even if they specifically point that out it may not make it into the article. The article says that the advisors were asked "what they would do with $15 million". In the case of the guy who talks about investing in emerging growth area overseas, he also clearly mentioned double-exempt municipal bonds and said he'd put "a big chunk" there. Without knowing what he was really asked and what qualifications he may have placed on his answers there's no way of knowing how good (or bad) his advice was or if those answers would even apply to any given client. If he's still moderately young putting 1/3 into something speculative is a personal choice, not a bad plan. The world is full of success stories about sustained returns of 30, 40, 50% and more, along with the companies that tanked or just went nowhere. The secret is in putting your eggs in a lot of different baskets.
My sister in law is a stock broker with a huge set of brass ones that most of us can only wish we had. She's put thousands at a clip into many things that have gone up five and ten fold within 1 to 3 years. Most have then dropped dramatically in a very short time, and a others have leveled off and remained solid. When a few of your investments have increased by 5 to 10 times in only a few years you can afford to lose every penny in a few other investments. Overall her average has been very good and her clients' trading has rewarded her with commissions as high as 50K in a month. My brother and I are much more conservative in our nature. He hangs on for the ride and I wish it was my wife bringing in that kind of income and investing it that well. Like my SIL, everyone here is a gambler. It's up to each of us to decide how much we'll risk for a possible reward.
Jim and KY make valid points. I would add that my "stash" would be gold. I've mentioned before, a few hundred aacres in Colorado, with some gold stashed would always come in incase the world decided to make a bigger fool of itself then it already has. Gold is gold. Cash is unrealiable in a violatile market.
I agree. As I said I would buy (and stash some) some gold. But why limit it to only gold? Diamonds (and other jewels) have timeless value too and they are a hell of a lot smaller and portable than gold. And easier to dispose of too.
@KY Floyd:
You do have an excellent point about inflation. If there is a flaw in my plan it is that my plan really doesn't account well for inflation. Well at least not as well as I think it should. Again...the limited stock market investments I would make would not be enough to live on and even with dividend re-investment (which I forgot to mention) it would still provide only the smallest hedge against inflation.
You and I are on the same page earnings wise too. I think it would be very difficult to make an after tax return of $600,000 on an initital investment of $20 million and still have the security and diversity I would require. As a hedge against inflation my plan also includes re-investing a part of the income you generate as living expenses. Let the stocks and bonds mature and grow but as a safe bet against inflation I figure (conservatively) that I would have to re-invest something like a minimum of 20% of my net income and perhaps more realisticly something like 25% to 40%.
I think it's important to remember that you are not just investing for today...you are looking out 10...20...30...or even 50 or more years to cover the span of your life. You need to be able to mix up your investments by having short, intermediate and long term diverse investments so you can react to changing market conditions. What looks good today may not be such a good idea in 10 years. That's one reason CDARS appeal to me. They provide a degree of liquidity and flexibility with an insurance gurantee.
As for the notion of charity. Well, there are some tax beneifts to giving money away to accredited charities. And for that reason I might look for some deductable contributions. But the bottom line with me is...and you call me hard hearted if you like...regardless of whether you give it away to charity or pay it in taxes it's still gone! Any money I may or may not give away would be given anonymously.
Finally, I would be very wary of any start up companies. While I agree that there can be a lot of money made there...a lot of money can be lost there too. The risk is just too much for me. I got a windfall here and I'm not going to blow it on the next great invention.
As I said somewhere else on this forum...if I'm going to blow my money I'm going to Vegas to blow it on booze, games and women. Well most of it anyway. I might blow some of it on some frivolous stuff too.
"If you won the lottery, as eight Nebraska meatpackers did last month, splitting a $365 million jackpot, what investment would be at the top of your wish list?"
Just doodling the rough numbers . . .
$177.3M cash option ÷ by 8 = $22.162M - 25% federal and 5% Nebraska withholding = $15.5M - $2.22M another 10% of $22.162M for the total 35% federal tax obligation = $13.3M
If that amount was invested in a high-yield corporate bond mutual fund yielding around 7%: $13.5M x 7% = $945,000 - $349,650 (estimated 32% federal and 5% Nebraska tax) = $595,350 spendable annual income . . of course that amount would fluctuate with market conditions, but that yield rate would provide a spendable budget in the neighborhood of $50,000 per month.
What could possibly be a better charity than just paying the full federal tax obligation (no deductions) . . those choosing to reside below sea level, and the obese that need stomach stapling operations will be truly grateful. Unless their policy has changed, the Salvation Army considers lottery winnings to be "tainted" and will not accept direct donations. However, that money becomes "cleansed" if received in the form of contractor payments from the federal government.
You can tell they don't deal with the middle class or people that work for a living. Not getting a new house or car really sounds stupid when you have a car pushing 1 million miles and live in an apartment that's smaller than most closets in large homes. I don't think at 15 million you should get a Ferrarri and a waterfront mansion but you could get a new honda and an average home in a safe neighborhood.
The notion that you should give it away in a family foundation is also right out. I wouldn't give it away to strangers irregardless of how much I won. I would focus on giving to my family and friends.
Uncle Jim - There's nothing hard hearted about your assessment of deductions and charitable donations. Deductions are great if they're for money you either needed or wanted to spend anyway, but giving away $1 and saving 35 to 45 cents on your taxes leaves you with 55 to 65 cents less than you started with. That's just simple math and math has no feelings. In figuring how much I would actually get from a substantial win I just assume that as a practical matter I'd pay the maximum rate on all of it. Since I'm in NY, my total tax bill would be about 43%. The lower rates on part of it would mean that I'd really pay about 40k less, but that's relatively meaningless in figuring out my net on a large sum. I'd rather pay less in taxes, but not as a result of having substantial deductions. That doesn't mean I wouldn't like to take advantage of deductions, though. The reasons I would much rather pocket 100 million than 10 million are less about overindulging my own desire than being able to share generously with recipients of my choosing. There are half a dozen people whose company I'd like on my next trip to the South Pacific, and others I'd take on different trips. I can easily think of donating millions just in charitable areas that would benefit my own selfish interests, let alone other worthy causes. The reality is that even if I did pocket 100 million,I still couldn't do everything I might like to do beyond my own indulgences.
As far as inflation goes, it's been fairly low for quite a while, but in planning for security I'd plan for an increase and I'd plan for inflation over a long period of time. <best whiny voice> What if I live to 100? </best whiny voice> People can laugh all they want at this, but if you win the lottery you're going to be living on a fixed income. Rates of return will fluctuate, but nobody will be giving you a raise, My plan is for my life style to improve or at least remain the same with each new year. Even with modest inflation the 300k that would let me indulge most of my reasonable desires may be mere subsistence before I die. With an income of a million bucks a year I'd still put some aside so that my future income would increase.
mangeydog - Try reading it again. The point is that the people who lost money in those companies didn't lose it because they chose to invest in high risk areas. The current Enron trial is about deliberately making the company apparently stable when it wasn't. One other poster said they'd put 100% in the stock market. Depending on their age and what kind of companies they choose that's not necessarily a really bad idea, but any investment in the market means accepting higher risk in the hopes of higher rewards. What's apparent just down the road could turn out to be quite different from what's apparent today. Putting all of a major windfall into even a broad range of stocks would have turned out very poorly if done in the summer of '29 or summer of '87. When the winner recent MM winner comes forward Microsoft will be just one really good operating system away from losing most of their value if it's somebody else who develops it, but today they're apparently a pretty good investment.
dvdiva - The advisor talking about not buying a new house is talking about his own plan for himself, and he's a 47 yo financial advisor. He probably already has a decent house and a dependable car. I'm sure he doesn't have clients who rent their home and drive cars that break down every month, but if he's like other advisors most of his clients are middle class. Some people who are middle class buy boats or other expensive toys, and some invest the money for a comfortable retirement.
If a lottery winner is living someplace that's dangerous they should move as soon as their credit allows, but that still doesn't mean they should run out and buy a house right away. The advisor didn't say they shouldn't buy a car, he said he would skip the new "cars", and it's worth noting that it looks like the statement was related to having had a client who won the lottery and lost it all. A lot of people who get a big windfall do run out and buy far more house than they need and several fancy cars. If the annual income from your investments lets you do that it's one thing, but spending big chunks of the principal without careful consideration is another. The lost income from buying a $1 million house means the house will cost perhaps $35,000 per year before you even start paying the bills. He may have said it dfferently than you, but his point is also that a Ferrari and waterfront home may not be a wise decision.
So I have to hire someone to watch someone, and someone to watch that someone, and someone else to watch that someone? Sounds like a big never ending circle of watching, could also make you go broke very quickly. What is to stop all of them from teaming up and planning your bankruptcy?
I am already quite familiar with accounting, and financial planning, so my needs would not go beyond a lawyer. It also all depends on how much money you need, and whether or not you want to invest it. There is a lot of "depends" involved. If I were to win a small jackpot like the match 6, or lucky for life, no way would I be hiring all of those people.
All I need is a lawyer, and the highest paying CD. $300 million maybe a financial advisor, but I as I said I do not have any complicated plans. No need to be "too busy" investing either, one or two stocks or bonds would be enough. I didn't win the lottery to create even more headaches than I had previously. I also do not plan to make about 4 or 5 other people who already made more money than I did prior to winning any richer. I won, not them.
The article was doing real good - until the end. Give a lot of it away? B.S. !
We may be the same age, Chewie, but brother, are we different! I'd give most of it away! Not all at once, of course. Maybe 10% of the total the first year to charities and $12,000 per person per year to about 20 of my relatives if the jackpot were great enough. After that, gifts and charity donations would come mostly out of annual income with only occasional dips into principal. Reducing principal wouldn't be a problem, as I don't need all that. And I'd leave almost my whole estate to charities upon my death.
Even though I've been retired for 12 years, I'd still put the bulk of the money in the stock market and invest quite aggressively. (That's what I'm doing with my rather modest amount, and my method has served me well for the past 30 years or so. I've been living off my investments since I retired, even though I couldn't even start drawing my meager pension for eight years, nor Social Security for ten years.) Even if the market went down drastically, I'd be fine. My needs aren't great. I already own a waterfront home that in other areas of the country would sell for over one million bucks. (I paid a mere fraction of that years ago, and my mortgage payment wouldn't even cover a shack nowadays.) I may drive a 12 year old vehicle, and would replace that with a new one if I won, but I don't need any luxury car to go to the grocery store or the post office. I've already traveled the world, and have no desire to do more of that. After winning a big jackpot, I'll bet I wouldn't spend more than $50,000 per year after taxes on myself, in addition the costs like financial advisors and body guard that were generated by the win. So I could afford to "pull in my horns" until the market recovered. I've done it before. It's doable.
First thing first, I put 10% to the church, 10% for supporting needy in the family(brothers, parents),20% real estates, 20% deposit to some banks, 25% investments (stocks, bonds), 10% investments(golds, diamonds, art works), 5% for starting up my own business.
We may be the same age, Chewie, but brother, are we different! I'd give most of it away!
Big difference. If people want a share of the lottery win, they can go out and win the lottery - until then, screw every single one of them. People are poeple, they will exist, or die, whether I give them a portion of any lottery win, or give them nothing. No doubt, I see hundred of thousands of people on the freeway, in both directions, every day, ever week. I have no idea what a single one of them looks like, and have no knowledge of their life. I have no inclination to learn about them! I have never been in line for a handout, and never will. I will take care of close family and close friends, and ensure the life-long comfort of those specific people. But give it to any one else? If it wouldn't be tax deductible, and doesn't fall into the hand-full of family or friends I mentioned, they can freeze in the streets - I'll be having too much fun to notice. Cats and dogs, they are at the top of my deduction list! I envision giving free trips to Hawaii for a thousands of animal shelter workers who have proven devotion to animals. Normal leeches, never gonna happen.
My end goal for winning the lottery is endless F-U-N and that entails spending tons of money. Win $100M? Hire a team to secure the future of those small number of friends and family. Then take 30% of the leftovers and S-P-E-N-D it for pure uncensered pleasure. Parties, every where in the world, week after week. Private leased jet flights for friends and close family to every pleasure-dome that I can find. Limo's after limo's. Season tickets to all the major sporting events in the world. Lease a luxury cruise ship for all the ex-Army buddies, still alive, and have it sail around the world for three months. Money was invented for one reason, to use as barter. I would barter it in any matter that might ensured my pleasure. If any one didn't approve of what gave me that pleasure? All of you already know my viewpoint on other peoples opinons - especially strangers!
I'd question anyone deterring the investment in real estate. It rarely drops and if given the right location one can fair well in the real estate market. Its equity not a liability. Buying acrage is the first step. Why? Because at some point a city will expand and when it does, its the local builders who will salivate and bid ridiculous amounts to get the rights to that property. My co-worker is already in this market.Bought farmland (25 acres) at 42k because it was so far out in a rural area. Today he's selling it to developers for 95k per quarter acre! I never knew dirt could cost so much!
Only 10% of my (wishfull thinking) winnings would go to township bonds. A portion would go to some medical groups for finding cures and aiding families who need financial help.
My family would get houses (good equity investment!) and be set up with trust funds.
Unless you lived and had money in the stocks back in the 1990's you have no idea what its like to see your hard working money just vanish! And it happened in a manner that didnt allow a person to bounce back! It was gone. Poof! Never again will I trust an advisor to tell me how to handle my money. I'd trust a few folks here with decent suggestions but the end result is simiple. Its no ones business but your own in what you do with your winnings. (barring any taxes or illegal activities of course).
What the financial adviser said in the OP sounds grat for the most part, but I've got to wonder if the financial adviser him or herslef made a score like a lottery jackpot how much of their own advice they'd follow?
"What happened to that financial adviser that was telling lottery winners what to do?"
"Oh, they hit some lottery, quit, and went to Vegas".
Unless you lived and had money in the stocks back in the 1990's you have no idea what its like to see your hard working money just vanish! And it happened in a manner that didnt allow a person to bounce back! It was gone. Poof! Never again will I trust an advisor to tell me how to handle my money.
Ah, maybe that is why I made out so well. I didn't have a financial advisor. LOL! I made all my own decisions without one. I don't know that I'd dare to try that with more than a couple of million, though, and even that might be stretching it.
What I still cannot figure out tax wise about the lottery is, what if one chooses to only live off the principal and had no interest bearing accounts, would they still have to pay a tax on their winnings every year? I heard that you only had to pay once (35%) and never have to deal with the IRS after that?
That should be the case, because after once it is no longer income coming in. I could easily live off the principal and still never use it all for a jackpot of about 3 million or more. Say I wanted to live a luxurious lifestyle, where I am from $5,000 a month would buy that, even much less. I consider $5,000 a month the maximum I would ever spend, but more realistically it would never be more than $2,000-$3,000 probably.
Even at $5,000 a month that would be $60,000 a year. $3,000,000 for 50 years. So if you won like $20 million, or even a ridiculous $300 million, why would you even need to bother with interest if you had no family to pass it on to? Would you still be taxed yearly? I would rather live off the principal if it meant never having deal with the IRS again. They get too much money as it is.
Say I wanted to live a luxurious lifestyle, where I am from $5,000 a month would buy that, even much less.
Luxury is $5K a month - $60K a year? I'd pay my chauffer more then that, and provide his car! Man, Pennsylvania gasline tax would eat a large portion of that!
Sirbrad- Your correct that the first year of collecting (if you chose cash option) the tax is at 38% for the government plus any state or local (if they have it in the state of play). After that the money is yours to do as you so please. The catch is, anytime that money makes a profit - such as from interest or trades, you get nailed for making money! Go figure that riddle out! The govt taxes you for gains, interest and selling items. The way around it is simple, hide your money in a nuns habit. Or in this case a whole abbey full of nuns! Its against the law for the govt to search and seize a religious place :) (just kidding!).
Most folks dont carry your level of living the simple life. Unfortunately greed is a powerful force. I truly think that if you ever did win a huge jackpot you really would live as you stated in your post. You'd live well enough to get by and stay humble enough to not be bothered with the hype or wants of such material status quo items of the wealthy. (re-yachts,summer home,vacations abroad,collector cars).
There is a purpose for someone who won the jackpot. God doesnt give that away without a purpose. The way I look at it, if you win it, you need to give it back at least 10% (TITHE). HE has already given then you give it back at least 10%. It's alway that way. REMEMBER 10% for God ... you can use the 90% wisely.
There is a purpose for someone who won the jackpot. God doesnt give that away without a purpose. The way I look at it, if you win it, you need to give it back at least 10% (TITHE). HE has already given then you give it back at least 10%. It's alway that way. REMEMBER 10% for God ... you can use the 90% wisely.
God isn't going to have a damn thing to do with it, thus he doesn't get a percentage; why should any human be obligated to provide funds to a superior being? If he wants a share, let him go out and sprinkle his magic sperm dust on his own ticket. If his magic sperm dust can get a virgin pregnant, and he can write a best selling comic book about it, then he can create his own lottery winnings. He can also take care of all the needy that he created during his famous temper tantrums. No wonder no one wants computerized drawings, God needs balls to function!
Leave it to you Chewie to set the record straight. You're forthright. One never has to guess with where you stand on matters. Its true that TITHING is a Church ploy and not a GOD issue. Churchs are a business that are" not for profit" so in keeping with that idea, no need for them to profit off of a hard earned paycheck or a well earned jackpot. Be a person a beleiver of a faith or not, it has no bearing on who wins the jackpot.
There is a purpose for someone who won the jackpot. God doesnt give that away without a purpose. The way I look at it, if you win it, you need to give it back at least 10% (TITHE). HE has already given then you give it back at least 10%. It's alway that way. REMEMBER 10% for God ... you can use the 90% wisely.
If there's a god and she cares one whit about who wins, how come Jack Whittaker got about $113 million (after taxes) and Mother Teresa didn't win anything? If there's a god and he wants to give me a lottery jackpot there's no reason to even buy a ticket. When the winning ticket, with my signature already on the back, blows in the window of my car while I'm cruising down the Thruway at 75 I'll figure god deserves a share. Since I can't trust a church to tell me which god deserves it I'll have to wait for the right god to speak to me directly. I'm sure I'll be told all sorts of important things, including the number of the account I should transfer the funds to. I'm certainly not going to give it to some middle man like Pat Robertson or Jim Bakker so they can hire an assassin to kill Hugo Chávez or a secretary to have sex with.
Uncle Jim - There's nothing hard hearted about your assessment of deductions and charitable donations. Deductions are great if they're for money you either needed or wanted to spend anyway, but giving away $1 and saving 35 to 45 cents on your taxes leaves you with 55 to 65 cents less than you started with. That's just simple math and math has no feelings. In figuring how much I would actually get from a substantial win I just assume that as a practical matter I'd pay the maximum rate on all of it. Since I'm in NY, my total tax bill would be about 43%. The lower rates on part of it would mean that I'd really pay about 40k less, but that's relatively meaningless in figuring out my net on a large sum. I'd rather pay less in taxes, but not as a result of having substantial deductions. That doesn't mean I wouldn't like to take advantage of deductions, though. The reasons I would much rather pocket 100 million than 10 million are less about overindulging my own desire than being able to share generously with recipients of my choosing. There are half a dozen people whose company I'd like on my next trip to the South Pacific, and others I'd take on different trips. I can easily think of donating millions just in charitable areas that would benefit my own selfish interests, let alone other worthy causes. The reality is that even if I did pocket 100 million,I still couldn't do everything I might like to do beyond my own indulgences.
As far as inflation goes, it's been fairly low for quite a while, but in planning for security I'd plan for an increase and I'd plan for inflation over a long period of time. What if I live to 100? People can laugh all they want at this, but if you win the lottery you're going to be living on a fixed income. Rates of return will fluctuate, but nobody will be giving you a raise, My plan is for my life style to improve or at least remain the same with each new year. Even with modest inflation the 300k that would let me indulge most of my reasonable desires may be mere subsistence before I die. With an income of a million bucks a year I'd still put some aside so that my future income would increase.
mangeydog - Try reading it again. The point is that the people who lost money in those companies didn't lose it because they chose to invest in high risk areas. The current Enron trial is about deliberately making the company apparently stable when it wasn't. One other poster said they'd put 100% in the stock market. Depending on their age and what kind of companies they choose that's not necessarily a really bad idea, but any investment in the market means accepting higher risk in the hopes of higher rewards. What's apparent just down the road could turn out to be quite different from what's apparent today. Putting all of a major windfall into even a broad range of stocks would have turned out very poorly if done in the summer of '29 or summer of '87. When the winner recent MM winner comes forward Microsoft will be just one really good operating system away from losing most of their value if it's somebody else who develops it, but today they're apparently a pretty good investment.
dvdiva - The advisor talking about not buying a new house is talking about his own plan for himself, and he's a 47 yo financial advisor. He probably already has a decent house and a dependable car. I'm sure he doesn't have clients who rent their home and drive cars that break down every month, but if he's like other advisors most of his clients are middle class. Some people who are middle class buy boats or other expensive toys, and some invest the money for a comfortable retirement.
If a lottery winner is living someplace that's dangerous they should move as soon as their credit allows, but that still doesn't mean they should run out and buy a house right away. The advisor didn't say they shouldn't buy a car, he said he would skip the new "cars", and it's worth noting that it looks like the statement was related to having had a client who won the lottery and lost it all. A lot of people who get a big windfall do run out and buy far more house than they need and several fancy cars. If the annual income from your investments lets you do that it's one thing, but spending big chunks of the principal without careful consideration is another. The lost income from buying a $1 million house means the house will cost perhaps $35,000 per year before you even start paying the bills. He may have said it dfferently than you, but his point is also that a Ferrari and waterfront home may not be a wise decision.
>When the winner recent MM winner comes forward Microsoft will be just
>one really good operating system away from losing most of their value
>if it's somebody else who develops it, but today they're apparently a
>pretty good investment.
If you look to invest in Micro$oft look at a graph of their stock value.... FLAT for 2 years... Most of their income comes from 2 areas... Operating systems and Office suites... And the replacement are already there www.distrowatch.com for the operating system, Free! and www.openoffice.org for the office suite also Free!
(I have been free of Micro$oft now for 6 years)
As to the money, especially if I have above $3 or $4 million, I would definately give a bunch of it away... Not because of investment, but because it's right to do...
Then some great remote country Wyoming or South Dakota land (state tax free), a new car (mine has 130,000 miles on it), then some investments for me and the kids.... But no gold dinnerware, no million $ anything... A nice small house, (an indoor swimming pool as my big luxury) and I'm set! Kick back and stare at the night skies! After 35 years of working life I've had enough! I've had a whole 4 days off of work this year. Jan 1 & 2 because the plant was closed, Jan 25 for the birth of my granddaughter and Mar 5 beacuse I wanted a day off!
What the financial adviser said in the OP sounds grat for the most part, but I've got to wonder if the financial adviser him or herslef made a score like a lottery jackpot how much of their own advice they'd follow?
"What happened to that financial adviser that was telling lottery winners what to do?"
"Oh, they hit some lottery, quit, and went to Vegas".
"AMEN!" A few years ago a doctor I was seeing for natural healing overdosed on cocaine. It was in the local newspaper. So much for practice what you preach!
What I still cannot figure out tax wise about the lottery is, what if one chooses to only live off the principal and had no interest bearing accounts, would they still have to pay a tax on their winnings every year? I heard that you only had to pay once (35%) and never have to deal with the IRS after that?
That should be the case, because after once it is no longer income coming in. I could easily live off the principal and still never use it all for a jackpot of about 3 million or more. Say I wanted to live a luxurious lifestyle, where I am from $5,000 a month would buy that, even much less. I consider $5,000 a month the maximum I would ever spend, but more realistically it would never be more than $2,000-$3,000 probably.
Even at $5,000 a month that would be $60,000 a year. $3,000,000 for 50 years. So if you won like $20 million, or even a ridiculous $300 million, why would you even need to bother with interest if you had no family to pass it on to? Would you still be taxed yearly? I would rather live off the principal if it meant never having deal with the IRS again. They get too much money as it is.
Are you joking? Many of my interests are in things that don't cost much more than gas money to drive someplace, so I could be pretty happy on 2 or 300k per year. If I could make 100 to 150k without even getting out of bed I might even retire now and be a bit conservative about my spending. Given a more generous income I'd be more than happy to spend 50k on travel, though I don't see myself staying in any outrageously expensive resorts. If you continued to get by on less than 100k when you could easily afford to spend 2,3 or 5 times that much, I'd be very impressed and I'd wonder why you bother throwing your money away on lottery tickets.
As far as taxes and investments, income tax is only assessed against income. If your income is zero you owe zero income tax, regardless of how much money you have. That won't guarantee that you won't owe taxes on the principal, though. There are some places that assess an asset tax, and asset taxes apply to just about everything you own, from cars and boats to your bank accounts, stocks and bonds. Actually, almost every place already has an asset tax, but in most places it's limited to real property. A national asset tax is also one of the ideas that has been proposed as a reform of the current income tax system. The simple version is that if you netted 10 million from the lottery and kept it instead of squandering it, every year you'd have to fork over a percentage.
As for living off of the uninvested principal, why would you do that if you've got any sense? Taxes may not take any of the principal every year, but inflation will. For every million you have inflation of 2.7% (about the average for the last 6 years) will take $27,000, and in 25 years your remaining principal would be worth only half of its present value. Doing it just so you didn't have to give a share to the IRS would be downright stupid since even if the IRS took 75% you'd still have more money because you invested the principal. If you want to make things really simple, just invest it all in government bonds. The interest rate won't be fantastic, but it will be hundred of times what your mattress pays. You wouldn't be able to avoid taxes completely, but you could certainly simplify them. Write down your gross income, subtract your personal exemption, and pay the taxes owed on the remainder. Or you could pay an accountant to do it. The expense shouldn't be much of a hardship if you've won the lottery.
I'd question anyone deterring the investment in real estate. It rarely drops and if given the right location one can fair well in the real estate market. Its equity not a liability. Buying acrage is the first step. Why? Because at some point a city will expand and when it does, its the local builders who will salivate and bid ridiculous amounts to get the rights to that property. My co-worker is already in this market.Bought farmland (25 acres) at 42k because it was so far out in a rural area. Today he's selling it to developers for 95k per quarter acre! I never knew dirt could cost so much!
Only 10% of my (wishfull thinking) winnings would go to township bonds. A portion would go to some medical groups for finding cures and aiding families who need financial help.
My family would get houses (good equity investment!) and be set up with trust funds.
Unless you lived and had money in the stocks back in the 1990's you have no idea what its like to see your hard working money just vanish! And it happened in a manner that didnt allow a person to bounce back! It was gone. Poof! Never again will I trust an advisor to tell me how to handle my money. I'd trust a few folks here with decent suggestions but the end result is simiple. Its no ones business but your own in what you do with your winnings. (barring any taxes or illegal activities of course).
Real estate values rarely drop? You should ask Donald Trump how he nearly lost it all after becoming a billionaire. Ask anybody in the Hudson Valley who sold their home in the first few years after IBM laid off thousands of employees. The same story has happened in many other places, and many economists believe the recent housing bubble is likely to burst on a far larger scale. Real estate may represent equity, but it isn't especially liquid and it carries liability, both in taxes and any other upkeep, and in the litigious sense, since an injured party may sue you as the property owner.
That's not to say that real estate is a bad investment, but like every other investment you aren't likely to do well if you don't buy the right things at the right time. You also need to decide what mix of income and appreciation you want. Real estate isn't a convenient way to generate income unless you want to be a lottery winner who works as a landlord. Personally I'd rather be a lottery winner who's retired, so any real estate investments I'd make would be for long term appreciation.
Buying low and selling high is a great idea, but the highs and lows are only easy to see in hindsight. Historically, both real estate and stocks have been good investments as long as you're in for the long term, but if you need money when the price is low or you buy the wrong thing your investment may turn out poorly. It's easy to buy relatively small quantities of a lot of different stocks to reduce your risk, but it's not very practical to buy lots of inexpensive pieces of property. You can invest in REIT's, but that basically puts you back in the stock market.
I'm curious about your reference to losing money in the 90's and not being able to bounce back. There are certainly plenty of people who lost nearly everything, but that has pretty much always required putting all of your eggs in the wrong basket. As the article mentions, anybody who had their money in Microsoft and Intel through the 90's did very well. Depending on how long your coworker has owned the property he may have done much better than those who invested in Microsoft, but somewhere there are also a lot of people whose property has barely kept pace with inflation, and a few whose property has become a superfund site since they invested in it.
Say I wanted to live a luxurious lifestyle, where I am from $5,000 a month would buy that, even much less.
Luxury is $5K a month - $60K a year? I'd pay my chauffer more then that, and provide his car! Man, Pennsylvania gasline tax would eat a large portion of that!
Like I said I don't need a lot, and that would be more than enough for me. Plus I walk a lot. As luxurious as I would ever need in this area.
Another very astute observation GameGrl. But you are right again, being I came from practically nothing, and grew up with the bare minimum, I learned quickly to value what I already did have in life and to never take anything for granted like most do. Everything I have now I earned through my own hard work, intelligence, and wisdom derived from years of hardship and simply just trying to get by. That is why you will never hear me complaining about winning a lucky for life jackpot
Everyone talks about greed, and lavish spending and seem to disregard what they already have, or the other successes they achieved in life. For me a jackpot win is not going to be a ticket, or an open invitation to opulent abuse, but simply to provide all the necessities in life and those few things that I always wanted that I never could have. But still very modest in nature.
No 20 cars, 10 houses, butlers, maids, and team of leeches for me.
I want the money to actually last. Ironically all these financial planners, advisors, lawyers, etc, are usually the ones going around saying how badly we need them after a jackpot win, because they all want a piece of the big pie. You can also bet they want in for the long haul too. I am not one who likes to be surrounding by groups of people, I prefer to do things my own way.
This is what has gotten me to where I am today, and out of the corporate world for the most part, and self-employed. Being able to actually earn money from something you love doing in life is unparalleled by anything but a jackpot win. The only difference is that you would have a lot more security, and it would then be a CHOICE as to whether you wanted to do what you loved for income. It would be a lot easier to blow all that money then to actually utilize it wisely. As hard as it is to win a jackpot, no way would I do anything to jeopardize it afterwards.
Around here $5,000 a month, and unlimited free time will buy you a great lifestyle. Heck even a lot less. I would be happy just to have a home paid off, and no debts whatsoever. I would use the money to boost, and increase my intelligence and overall lifestyle, not diminish it with irresponsibility.
Say I wanted to live a luxurious lifestyle, where I am from $5,000 a month would buy that, even much less.
Luxury is $5K a month - $60K a year? I'd pay my chauffer more then that, and provide his car! Man, Pennsylvania gasline tax would eat a large portion of that!
Like I said I don't need a lot, and that would be more than enough for me. Plus I walk a lot. As luxurious as I would ever need in this area.
CBS just issued a study (YEAH I know CBS!) stating that for a person in their 30's in 2006, they will need a minimum of $200,000 dollars during retirement for O-N-L-Y medical expenses; double that if you live past 80. Had a heart attack lately? Had bypass surgery, or just every day surgery, lately? I had the whole gambit a few years back. In New Jersey, the medical costs were half a million dollars. In my life time I have had the benefit of the Government or a good medical insurance. Into the fuuture, that will will not be there. Try a lomg life, not a 20-year old life, on $60K a year. You're not visualizing the financial future, you're looking at yesterdays expenses.
When you're dealing with muli-millions, and have the money for the same type of experts who write the laws, it doesn't matter whether it is 35%, 38%, or 40%. Ted "The Swimmer" Kennedy and John "Stab A Veteran In The Back" Kerry aren'tpayingthosepercentages, and no other rich person will either. Unless you are dumber then dirt and couldn't find your butt with both hands. Get money, have money - keep money!
Well as I said, it will all be determined by the size of the jackpot I win. I would most likely have plenty of money sitting in the wings for inflation, and I was not talking about that. I would still only continue living as modest as possible. If $60,000 becomes $200,000 a year, which I highy doubt where I live now, then I would have it anyway regardless. Especially since I lived off of $60,000 MAXIMUM a year for as long as I could.
I would most likely invest, as I know that the loss to taxes would still not be as much money as you would make from the interest, I was simply bringing up a point and just trying to see just how long the arm of the IRS really is. Personally though I would not want millions to be left to someone else unless I decided to have more family. So I would not have any problem spending the principal of $300 million or a lot less, and never earning a dime of interest.
I could spend $10,000 a DAY and still only spend 3.6 million a year! By the time inflation gets that high, the sun will have burned out.
Well as I said, it will all be determined by the size of the jackpot I win. I would most likely have plenty of money sitting in the wings for inflation, and I was not talking about that. I would still only continue living as modest as possible. If $60,000 becomes $200,000 a year, which I highy doubt where I live now, then I would have it anyway regardless. Especially since I lived off of $60,000 MAXIMUM a year for as long as I could.
I would most likely invest, as I know that the loss to taxes would still not be as much money as you would make from the interest, I was simply bringing up a point and just trying to see just how long the arm of the IRS really is. Personally though I would not want millions to be left to someone else unless I decided to have more family. So I would not have any problem spending the principal of $300 million or a lot less, and never earning a dime of interest.
I could spend $10,000 a DAY and still only spend 3.6 million a year! By the time inflation gets that high, the sun will have burned out.
Why waste time investing it, you only need $60K a year MAXIMUM; maximum inferring N-E-V-E-R to be exceeded. $60,000 times one hundred years, since you'll not be getting sick, comes to roughly $6,000,000. Throw the rest it out a building window. Even safer, set it on fire in a giant dumpster. Why be bothered with the problem. No tax problem, no inflation problem, no interest problem. No bull dung talk! Keeping any other amount, would go against everything you have said. I'm willing to stand by my position of spend, spend, spend; enough, is never enough. Are you willing to stand by your position you will N-E-V-E-R have a need to exceed a MAXIMUM of $5K a month?
On average yes, at least for many years. Not saying that I would not ever have to spend more than that, but never more than that every month. Not anytime soon. Although I do plan for the future, I am more concerned about living NOW.
You are much older than I am, so of course you want to spend spend spend. If I was in your position then I would probably do close to the same. You are right, I have no intentions of getting sick. I am an avid fitness buff, and nutritional expert and do not engage in the bad habits that seem to plague mankind every day.
Most people have no one to blame but themselves for their ailments, as it was their bad habits during their "invincible youth" that lead to their poor health in their golden years. Give or take a few 'natural cause' diseases. The lottery is like everything else, a 'personal decision' based upon 'personal circumstances'...not one universal law.
On average yes, at least for many years. Not saying that I would not ever have to spend more than that, but never more than that every month. Not anytime soon. Although I do plan for the future, I am more concerned about living NOW.
You are much older than I am, so of course you want to spend spend spend. If I was in your position then I would probably do close to the same. You are right, I have no intentions of getting sick. I am an avid fitness buff, and nutritional expert and do not engage in the bad habits that seem to plague mankind every day.
Most people have no one to blame but themselves for their ailments, as it was their bad habits during their "invincible youth" that lead to their poor health in their golden years. Give or take a few 'natural cause' diseases. The lottery is like everything else, a 'personal decision' based upon 'personal circumstances'...not one universal law.
Ahh, so now the modification of the absolute begins. It always does with the perfect
Ever heard of asbestos? Perfectly physical people were in the wrong place at the wrong time. Ever heard of a multilated body due to a drunk driver? Ever heard of Bruce Lee?
Plan for the worst, prepare for the worst. Enjoy the best, don't settle. It is how I got to my age. I didn't walk through the bush in 'Nam thinking I was in perfect physical shape, which I was - 10 miles in full combat gear, running, was normal every morning exercise. Carry around five hundred rounds of ammunitions on your back, twenty-four/seven for weeks, and tell me again what kind of shape you are in. I made it because I preplanned my life weeks in advanced. I prepared and thought of every possible action, and practiced options upon optioins until they became like breathing. I became a Ranger, then joined Special Forces. Not to be a hero. Because I knew they had the best training on this planet on how to survive. Billions of man hours went into thinking of ways to train me to live - in combat, and on the New Jersey Turnpike. Take advantage of the best there is in life; especially when the training is not only free, you're being paid for it! I always remembered the golden rule" DON'T DIE! Break that rule, and all other rules are meaningless. I am where I am because of that rule. Heart attacks, by pass surgery, bullet wounds, shot out of the sky, I never violated that rule.
Right now I have the perfect retirement planned - for me. Fishing. My own, fully paid for, home. ZERO debt. A truck with no payments. Three retirements checks. Friends I would trust with my life - friends I have trusted with my life. Ten months and counting, maybe fourteen; depending on the weather.
But that is not my goal. If it was, I would quit this lottery silliness, and buy health bars with the money. I plan to win a multi-million dollars and have more fun than I can plan for. I have spend ten years planning on spending money in every way known to man. Every year, I find another way to spend more. Next year, I will find yet another thing to spend money on. Fishing is for not having unlimited wealth. Uncensored fun is for having unlimited wealth. I am have been around the world, literally, several times. I have looked at so many beautiful women I lost count. With a jackpot, I intend to do it all over again. If Iget tired of looking at beautiful women, then I will move to some hick town and settle for looking at the teeny-popper at the 7-11 store.
Sage advice, but I wonder wow much of it will be heeded ?
Sound advice to a point; however, the financial planner who would invest in emerging international markets I think has bumped his head. That would be a red flag for me to have someone tell me, a new found wealthy person to put my money in international markets. I wouldn't return his call.
If I had $123,000,000, I may consider putting $10,000,000 in international markets. Today on the cover of the Wall Street Journal is an article about a hedge fund manager who has defrauded doctors, sports stars, etc. All told they have found only $150,000 of what he had Assets Under Management $115,000,000 now they are looking for the creep.
I raised this sad example because, its bad enough to have to watch those who you hire right here in America to handle your money, and for them to be putting your money to work in international markets, I don't think so. International laws about investment are not like our laws. So he could tell you anything while he builds up his fortune on your windfall. Anybody reading this advice should stay the hell away from this guy!
I agree with delS. And to take it one step further anyone who put more than 5% to 10% in the stock market has rocks in their head.
Jim
I must have rocks in my head. I would put 100% in the stock market. I would keep the principal and live off the dividends.
OK...let me try to clear this up in a simple manner. Stocks are risk investment. The market is volatile. Any one who had money in the stock market on 9-10 knows what their portfolio looked like on 9-12. When it comes to stocks there is no gurantee and no safe investment. What goes up can and will come down. Even Blue chips. Yes you can make money in the market but there is risk associated with it and people can and do loose money on stocks.
I am not a professional investor but here'e what I reccomend and in fact what I plan to do when I win:
(NOTE: Much of this plan depends on the size of the win but as a rule I'm talking about a significant win like $20 plus million with PB or MM.)
First with regard to existing debt...I do agree that it should be paid off. All debt. Mortgage, credit cards, car loans, medical bills, student loans...everything! But as to whether you should pay it off immediately with your winnings or develop a plan to pay it off from interest or dividends I'm or 2 thoughts. But whatever you do it should all be paid off within a year.
With regard to investments...minimum risk is the key to me. This can be accomplished through diversity and insurance gurantees. Therefore my plan looks something like this:
Generate income to live on:
The first part of the money goes into the highest rated tax free municipal bonds available. (U.S. Only!) These will probably pay something like 3% tax free. I'd put between 10% to 20% of the total jackpot there. (Once again it depends on how much you win and how much you'll need to maintain your new lifestyle.)
Next...CDARS. These are CD's that are covered by FDIC Insurance and will also pay something like 3% (taxable). I believe you can put something like $20 million in CDARS and still have them insured. Plus they are somewhat liquid. Depending on the size of the win I'd put perhaps 10% to 20% of the total jackpot there.
Then...U.S. government T-Bills and Bonds. This is the safest investment in the world and while not insured by the FDIC...they are backed by the U.S. government and if it fails (which is a distinct possibility) it doesn't matter because your life as you know it will probably be over any way. Somewhere between 30% to 50% (at least) would go there. (Maybe even more.)
I'd also place a bit in foreign government securities as well. But only in highly developed "western" nations. No third world, emerging nation investments at all. About 5% to10% would go here. (i.e. Governmental securities in Great Britain, Japan, etc.)
As I said about 5% to 10% would go into the stock market/mutual funds and the bulk of that would remain in the U.S. No risky investments at all...widows and orphans type stocks spread out to also include Blue Chip, small cap...mid cap and perhaps some growth stocks as well.
I'd also create an MSA (Medical Savings Account) or something similar. Most likely a flat dollar amount rather than a perchantage. This requires having a medical insurance policy with a large deductable and that may be tough to buy since by now I would have quit my job. But I'm sure it could still be done.
Real Estate would be next on the list...perhaps as much as 10% to 20% of the total jackpot would go into actual Real Estate with maybe a smaller perchantage invested in Real Estate stocks.
I'd also buy recious metals and other investments like gold, diamonds, jewelry...things of that nature. I probably wouldn't invest in paintings or cars and I'd stay away from commoditites but I would buy precious metals and the like. Again perhaps 10% to 20% of the total jackpot.
A Life Insurance policy? Maybe? IMHO that depends more on your dependants more than you.
Finally I'd keep some green "train riding" money squirreled away in some safe deposit boxes. A couple of hundred thousand G's here and there might come in handy on a rainy day or if you're kidnapped.
As for the entity...nothing would be in my name. (Well...next to nothing or very little.) I favor an LLC but a trust is also a great option.
And of course a chunk of money would have come right off the top to purchase and furnish a home in a gated community somewhere. And to pay for the lawyers, body guards, investment counselors, money managers, tax advisors etc that you'd have to have to survive.
Jim
Or put $1 million into Northwest stocks like Intel, which now would be $32.4 million, or Microsoft, which now would be $348 million."
Wow Microsoft here I come. I could live off the interest from a million dollars for 20 years easily to begin, and that would only be more incentive.
I'm mostly with Uncle Jim on what I'd do. I expect that being broke is bad even more after you've spent some time being rich, so my first concern would be ensuring that there was virtually no chance of having my income drop below a level that's quite comfortable. That means that with 15 million to invest I'd put at least 5 into something solid but conservative. Like Uncle Jim I'd consider the possibility of government failure, but I'd also consider a major failure of the US economy. The government actually failing would be bad, but so would a few years of major inflation. 10 years from now an annual income of a million bucks could be just enough to get by. Investing in other stable countries offers an increased possibility of relocating and remaining comfortable. With the current trade deficit, an investment overseas may be just as much of an investment in US consumerism as investments within the US, anyway.
After that I'd get a bit more speculative and look for a bigger return, but I'd still put most of it in somewhat conservative areas,and I might put about 10% in areas that could bring substantial returns. There's no doubt that you can easily find yields of 10% and more in stocks of large, and apparently stable corporations. Just ask some of the people who owned stocks from Enron, Worldcom and Tyco. I'd look for something in between the 3 to 5% from very safe stuff like government bonds and CD's from large banks, and the probable long term safety and 10%+ average returns in the stock market. Starting with 15 million it would be difficult to have an annual after-tax income of less than 500k with high safety. I could easily spend a bit more in a typical year, especially since it would be nice to bring a select group of friends on some of the trips I'd be taking, but there's no reason to get greedy. Next to stupidity, greed is probably the biggest cause of losing the good life.
Some of the quotes attributed to supposed financial advisors leave me scratching my head, but I figure that they're often making broad generalizations, and even if they specifically point that out it may not make it into the article. The article says that the advisors were asked "what they would do with $15 million". In the case of the guy who talks about investing in emerging growth area overseas, he also clearly mentioned double-exempt municipal bonds and said he'd put "a big chunk" there. Without knowing what he was really asked and what qualifications he may have placed on his answers there's no way of knowing how good (or bad) his advice was or if those answers would even apply to any given client. If he's still moderately young putting 1/3 into something speculative is a personal choice, not a bad plan. The world is full of success stories about sustained returns of 30, 40, 50% and more, along with the companies that tanked or just went nowhere. The secret is in putting your eggs in a lot of different baskets.
My sister in law is a stock broker with a huge set of brass ones that most of us can only wish we had. She's put thousands at a clip into many things that have gone up five and ten fold within 1 to 3 years. Most have then dropped dramatically in a very short time, and a others have leveled off and remained solid. When a few of your investments have increased by 5 to 10 times in only a few years you can afford to lose every penny in a few other investments. Overall her average has been very good and her clients' trading has rewarded her with commissions as high as 50K in a month. My brother and I are much more conservative in our nature. He hangs on for the ride and I wish it was my wife bringing in that kind of income and investing it that well. Like my SIL, everyone here is a gambler. It's up to each of us to decide how much we'll risk for a possible reward.
The article was doing real good - until the end. Give a lot of it away? B.S. !
Jim and KY make valid points. I would add that my "stash" would be gold. I've mentioned before, a few hundred aacres in Colorado, with some gold stashed would always come in incase the world decided to make a bigger fool of itself then it already has. Gold is gold. Cash is unrealiable in a violatile market.
@Chewie:
I agree. As I said I would buy (and stash some) some gold. But why limit it to only gold? Diamonds (and other jewels) have timeless value too and they are a hell of a lot smaller and portable than gold. And easier to dispose of too.
@KY Floyd:
You do have an excellent point about inflation. If there is a flaw in my plan it is that my plan really doesn't account well for inflation. Well at least not as well as I think it should. Again...the limited stock market investments I would make would not be enough to live on and even with dividend re-investment (which I forgot to mention) it would still provide only the smallest hedge against inflation.
You and I are on the same page earnings wise too. I think it would be very difficult to make an after tax return of $600,000 on an initital investment of $20 million and still have the security and diversity I would require. As a hedge against inflation my plan also includes re-investing a part of the income you generate as living expenses. Let the stocks and bonds mature and grow but as a safe bet against inflation I figure (conservatively) that I would have to re-invest something like a minimum of 20% of my net income and perhaps more realisticly something like 25% to 40%.
I think it's important to remember that you are not just investing for today...you are looking out 10...20...30...or even 50 or more years to cover the span of your life. You need to be able to mix up your investments by having short, intermediate and long term diverse investments so you can react to changing market conditions. What looks good today may not be such a good idea in 10 years. That's one reason CDARS appeal to me. They provide a degree of liquidity and flexibility with an insurance gurantee.
As for the notion of charity. Well, there are some tax beneifts to giving money away to accredited charities. And for that reason I might look for some deductable contributions. But the bottom line with me is...and you call me hard hearted if you like...regardless of whether you give it away to charity or pay it in taxes it's still gone! Any money I may or may not give away would be given anonymously.
Finally, I would be very wary of any start up companies. While I agree that there can be a lot of money made there...a lot of money can be lost there too. The risk is just too much for me. I got a windfall here and I'm not going to blow it on the next great invention.
As I said somewhere else on this forum...if I'm going to blow my money I'm going to Vegas to blow it on booze, games and women. Well most of it anyway. I might blow some of it on some frivolous stuff too.
Jim
"large and apparently stable corporations" "like Enron, Worldcom and Tyco"?!?!?! WTF?
"If you won the lottery, as eight Nebraska meatpackers did last month, splitting a $365 million jackpot, what investment would be at the top of your wish list?"
Just doodling the rough numbers . . .
$177.3M cash option ÷ by 8 = $22.162M
- 25% federal and 5% Nebraska withholding = $15.5M
- $2.22M another 10% of $22.162M for the total 35% federal tax obligation = $13.3M
If that amount was invested in a high-yield corporate bond mutual fund yielding around 7%:
$13.5M x 7% = $945,000
- $349,650 (estimated 32% federal and 5% Nebraska tax) = $595,350 spendable annual income . . of course that amount would fluctuate with market conditions, but that yield rate would provide a spendable budget in the neighborhood of $50,000 per month.
What could possibly be a better charity than just paying the full federal tax obligation (no deductions) . . those choosing to reside below sea level, and the obese that need stomach stapling operations will be truly grateful. Unless their policy has changed, the Salvation Army considers lottery winnings to be "tainted" and will not accept direct donations. However, that money becomes "cleansed" if received in the form of contractor payments from the federal government.
You can tell they don't deal with the middle class or people that work for a living. Not getting a new house or car really sounds stupid when you have a car pushing 1 million miles and live in an apartment that's smaller than most closets in large homes. I don't think at 15 million you should get a Ferrarri and a waterfront mansion but you could get a new honda and an average home in a safe neighborhood.
The notion that you should give it away in a family foundation is also right out. I wouldn't give it away to strangers irregardless of how much I won. I would focus on giving to my family and friends.
If you get a financial advisor You better hire someone to lwatch the financial and someone to watch the person watching the first person.
Make it easy on yourself. Give all the money to the Gov,t and let them decide what you need. They already do that anyhow.>LOL<
Uncle Jim - There's nothing hard hearted about your assessment of deductions and charitable donations. Deductions are great if they're for money you either needed or wanted to spend anyway, but giving away $1 and saving 35 to 45 cents on your taxes leaves you with 55 to 65 cents less than you started with. That's just simple math and math has no feelings. In figuring how much I would actually get from a substantial win I just assume that as a practical matter I'd pay the maximum rate on all of it. Since I'm in NY, my total tax bill would be about 43%. The lower rates on part of it would mean that I'd really pay about 40k less, but that's relatively meaningless in figuring out my net on a large sum. I'd rather pay less in taxes, but not as a result of having substantial deductions. That doesn't mean I wouldn't like to take advantage of deductions, though. The reasons I would much rather pocket 100 million than 10 million are less about overindulging my own desire than being able to share generously with recipients of my choosing. There are half a dozen people whose company I'd like on my next trip to the South Pacific, and others I'd take on different trips. I can easily think of donating millions just in charitable areas that would benefit my own selfish interests, let alone other worthy causes. The reality is that even if I did pocket 100 million,I still couldn't do everything I might like to do beyond my own indulgences.
As far as inflation goes, it's been fairly low for quite a while, but in planning for security I'd plan for an increase and I'd plan for inflation over a long period of time. <best whiny voice> What if I live to 100? </best whiny voice> People can laugh all they want at this, but if you win the lottery you're going to be living on a fixed income. Rates of return will fluctuate, but nobody will be giving you a raise, My plan is for my life style to improve or at least remain the same with each new year. Even with modest inflation the 300k that would let me indulge most of my reasonable desires may be mere subsistence before I die. With an income of a million bucks a year I'd still put some aside so that my future income would increase.
mangeydog - Try reading it again. The point is that the people who lost money in those companies didn't lose it because they chose to invest in high risk areas. The current Enron trial is about deliberately making the company apparently stable when it wasn't. One other poster said they'd put 100% in the stock market. Depending on their age and what kind of companies they choose that's not necessarily a really bad idea, but any investment in the market means accepting higher risk in the hopes of higher rewards. What's apparent just down the road could turn out to be quite different from what's apparent today. Putting all of a major windfall into even a broad range of stocks would have turned out very poorly if done in the summer of '29 or summer of '87. When the winner recent MM winner comes forward Microsoft will be just one really good operating system away from losing most of their value if it's somebody else who develops it, but today they're apparently a pretty good investment.
dvdiva - The advisor talking about not buying a new house is talking about his own plan for himself, and he's a 47 yo financial advisor. He probably already has a decent house and a dependable car. I'm sure he doesn't have clients who rent their home and drive cars that break down every month, but if he's like other advisors most of his clients are middle class. Some people who are middle class buy boats or other expensive toys, and some invest the money for a comfortable retirement.
If a lottery winner is living someplace that's dangerous they should move as soon as their credit allows, but that still doesn't mean they should run out and buy a house right away. The advisor didn't say they shouldn't buy a car, he said he would skip the new "cars", and it's worth noting that it looks like the statement was related to having had a client who won the lottery and lost it all. A lot of people who get a big windfall do run out and buy far more house than they need and several fancy cars. If the annual income from your investments lets you do that it's one thing, but spending big chunks of the principal without careful consideration is another. The lost income from buying a $1 million house means the house will cost perhaps $35,000 per year before you even start paying the bills. He may have said it dfferently than you, but his point is also that a Ferrari and waterfront home may not be a wise decision.
So I have to hire someone to watch someone, and someone to watch that someone, and someone else to watch that someone? Sounds like a big never ending circle of watching, could also make you go broke very quickly. What is to stop all of them from teaming up and planning your bankruptcy?
I am already quite familiar with accounting, and financial planning, so my needs would not go beyond a lawyer. It also all depends on how much money you need, and whether or not you want to invest it. There is a lot of "depends" involved. If I were to win a small jackpot like the match 6, or lucky for life, no way would I be hiring all of those people.
All I need is a lawyer, and the highest paying CD. $300 million maybe a financial advisor, but I as I said I do not have any complicated plans. No need to be "too busy" investing either, one or two stocks or bonds would be enough. I didn't win the lottery to create even more headaches than I had previously. I also do not plan to make about 4 or 5 other people who already made more money than I did prior to winning any richer. I won, not them.
The article was doing real good - until the end. Give a lot of it away? B.S. !
We may be the same age, Chewie, but brother, are we different! I'd give most of it away! Not all at once, of course. Maybe 10% of the total the first year to charities and $12,000 per person per year to about 20 of my relatives if the jackpot were great enough. After that, gifts and charity donations would come mostly out of annual income with only occasional dips into principal. Reducing principal wouldn't be a problem, as I don't need all that. And I'd leave almost my whole estate to charities upon my death.
Even though I've been retired for 12 years, I'd still put the bulk of the money in the stock market and invest quite aggressively. (That's what I'm doing with my rather modest amount, and my method has served me well for the past 30 years or so. I've been living off my investments since I retired, even though I couldn't even start drawing my meager pension for eight years, nor Social Security for ten years.) Even if the market went down drastically, I'd be fine. My needs aren't great. I already own a waterfront home that in other areas of the country would sell for over one million bucks. (I paid a mere fraction of that years ago, and my mortgage payment wouldn't even cover a shack nowadays.) I may drive a 12 year old vehicle, and would replace that with a new one if I won, but I don't need any luxury car to go to the grocery store or the post office. I've already traveled the world, and have no desire to do more of that. After winning a big jackpot, I'll bet I wouldn't spend more than $50,000 per year after taxes on myself, in addition the costs like financial advisors and body guard that were generated by the win. So I could afford to "pull in my horns" until the market recovered. I've done it before. It's doable.
First thing first, I put 10% to the church, 10% for supporting needy in the family(brothers, parents),20% real estates, 20% deposit to some banks, 25% investments (stocks, bonds), 10% investments(golds, diamonds, art works), 5% for starting up my own business.
We may be the same age, Chewie, but brother, are we different! I'd give most of it away!
Big difference. If people want a share of the lottery win, they can go out and win the lottery - until then, screw every single one of them. People are poeple, they will exist, or die, whether I give them a portion of any lottery win, or give them nothing. No doubt, I see hundred of thousands of people on the freeway, in both directions, every day, ever week. I have no idea what a single one of them looks like, and have no knowledge of their life. I have no inclination to learn about them! I have never been in line for a handout, and never will. I will take care of close family and close friends, and ensure the life-long comfort of those specific people. But give it to any one else? If it wouldn't be tax deductible, and doesn't fall into the hand-full of family or friends I mentioned, they can freeze in the streets - I'll be having too much fun to notice. Cats and dogs, they are at the top of my deduction list! I envision giving free trips to Hawaii for a thousands of animal shelter workers who have proven devotion to animals. Normal leeches, never gonna happen.
My end goal for winning the lottery is endless F-U-N and that entails spending tons of money. Win $100M? Hire a team to secure the future of those small number of friends and family. Then take 30% of the leftovers and S-P-E-N-D it for pure uncensered pleasure. Parties, every where in the world, week after week. Private leased jet flights for friends and close family to every pleasure-dome that I can find. Limo's after limo's. Season tickets to all the major sporting events in the world. Lease a luxury cruise ship for all the ex-Army buddies, still alive, and have it sail around the world for three months. Money was invented for one reason, to use as barter. I would barter it in any matter that might ensured my pleasure. If any one didn't approve of what gave me that pleasure? All of you already know my viewpoint on other peoples opinons - especially strangers!
I'd question anyone deterring the investment in real estate. It rarely drops and if given the right location one can fair well in the real estate market. Its equity not a liability. Buying acrage is the first step. Why? Because at some point a city will expand and when it does, its the local builders who will salivate and bid ridiculous amounts to get the rights to that property. My co-worker is already in this market.Bought farmland (25 acres) at 42k because it was so far out in a rural area. Today he's selling it to developers for 95k per quarter acre! I never knew dirt could cost so much!
Only 10% of my (wishfull thinking) winnings would go to township bonds. A portion would go to some medical groups for finding cures and aiding families who need financial help.
My family would get houses (good equity investment!) and be set up with trust funds.
Unless you lived and had money in the stocks back in the 1990's you have no idea what its like to see your hard working money just vanish! And it happened in a manner that didnt allow a person to bounce back! It was gone. Poof! Never again will I trust an advisor to tell me how to handle my money. I'd trust a few folks here with decent suggestions but the end result is simiple. Its no ones business but your own in what you do with your winnings. (barring any taxes or illegal activities of course).
What the financial adviser said in the OP sounds grat for the most part, but I've got to wonder if the financial adviser him or herslef made a score like a lottery jackpot how much of their own advice they'd follow?
"What happened to that financial adviser that was telling lottery winners what to do?"
"Oh, they hit some lottery, quit, and went to Vegas".
TheGameGrl said:
Unless you lived and had money in the stocks back in the 1990's you have no idea what its like to see your hard working money just vanish! And it happened in a manner that didnt allow a person to bounce back! It was gone. Poof! Never again will I trust an advisor to tell me how to handle my money.
Ah, maybe that is why I made out so well. I didn't have a financial advisor. LOL! I made all my own decisions without one. I don't know that I'd dare to try that with more than a couple of million, though, and even that might be stretching it.
Say I wanted to live a luxurious lifestyle, where I am from $5,000 a month would buy that, even much less.
Luxury is $5K a month - $60K a year? I'd pay my chauffer more then that, and provide his car! Man, Pennsylvania gasline tax would eat a large portion of that!
Sirbrad- Your correct that the first year of collecting (if you chose cash option) the tax is at 38% for the government plus any state or local (if they have it in the state of play). After that the money is yours to do as you so please. The catch is, anytime that money makes a profit - such as from interest or trades, you get nailed for making money! Go figure that riddle out! The govt taxes you for gains, interest and selling items. The way around it is simple, hide your money in a nuns habit. Or in this case a whole abbey full of nuns! Its against the law for the govt to search and seize a religious place :) (just kidding!).
Most folks dont carry your level of living the simple life. Unfortunately greed is a powerful force. I truly think that if you ever did win a huge jackpot you really would live as you stated in your post. You'd live well enough to get by and stay humble enough to not be bothered with the hype or wants of such material status quo items of the wealthy. (re-yachts,summer home,vacations abroad,collector cars).
There is a purpose for someone who won the jackpot. God doesnt give that away without a purpose. The way I look at it, if you win it, you need to give it back at least 10% (TITHE). HE has already given then you give it back at least 10%. It's alway that way. REMEMBER 10% for God ... you can use the 90% wisely.
There is a purpose for someone who won the jackpot. God doesnt give that away without a purpose. The way I look at it, if you win it, you need to give it back at least 10% (TITHE). HE has already given then you give it back at least 10%. It's alway that way. REMEMBER 10% for God ... you can use the 90% wisely.
God isn't going to have a damn thing to do with it, thus he doesn't get a percentage; why should any human be obligated to provide funds to a superior being? If he wants a share, let him go out and sprinkle his magic sperm dust on his own ticket. If his magic sperm dust can get a virgin pregnant, and he can write a best selling comic book about it, then he can create his own lottery winnings. He can also take care of all the needy that he created during his famous temper tantrums. No wonder no one wants computerized drawings, God needs balls to function!
Leave it to you Chewie to set the record straight. You're forthright. One never has to guess with where you stand on matters. Its true that TITHING is a Church ploy and not a GOD issue. Churchs are a business that are" not for profit" so in keeping with that idea, no need for them to profit off of a hard earned paycheck or a well earned jackpot. Be a person a beleiver of a faith or not, it has no bearing on who wins the jackpot.
There is a purpose for someone who won the jackpot. God doesnt give that away without a purpose. The way I look at it, if you win it, you need to give it back at least 10% (TITHE). HE has already given then you give it back at least 10%. It's alway that way. REMEMBER 10% for God ... you can use the 90% wisely.
If there's a god and she cares one whit about who wins, how come Jack Whittaker got about $113 million (after taxes) and Mother Teresa didn't win anything? If there's a god and he wants to give me a lottery jackpot there's no reason to even buy a ticket. When the winning ticket, with my signature already on the back, blows in the window of my car while I'm cruising down the Thruway at 75 I'll figure god deserves a share. Since I can't trust a church to tell me which god deserves it I'll have to wait for the right god to speak to me directly. I'm sure I'll be told all sorts of important things, including the number of the account I should transfer the funds to. I'm certainly not going to give it to some middle man like Pat Robertson or Jim Bakker so they can hire an assassin to kill Hugo Chávez or a secretary to have sex with.
Uncle Jim - There's nothing hard hearted about your assessment of deductions and charitable donations. Deductions are great if they're for money you either needed or wanted to spend anyway, but giving away $1 and saving 35 to 45 cents on your taxes leaves you with 55 to 65 cents less than you started with. That's just simple math and math has no feelings. In figuring how much I would actually get from a substantial win I just assume that as a practical matter I'd pay the maximum rate on all of it. Since I'm in NY, my total tax bill would be about 43%. The lower rates on part of it would mean that I'd really pay about 40k less, but that's relatively meaningless in figuring out my net on a large sum. I'd rather pay less in taxes, but not as a result of having substantial deductions. That doesn't mean I wouldn't like to take advantage of deductions, though. The reasons I would much rather pocket 100 million than 10 million are less about overindulging my own desire than being able to share generously with recipients of my choosing. There are half a dozen people whose company I'd like on my next trip to the South Pacific, and others I'd take on different trips. I can easily think of donating millions just in charitable areas that would benefit my own selfish interests, let alone other worthy causes. The reality is that even if I did pocket 100 million,I still couldn't do everything I might like to do beyond my own indulgences.
As far as inflation goes, it's been fairly low for quite a while, but in planning for security I'd plan for an increase and I'd plan for inflation over a long period of time. What if I live to 100? People can laugh all they want at this, but if you win the lottery you're going to be living on a fixed income. Rates of return will fluctuate, but nobody will be giving you a raise, My plan is for my life style to improve or at least remain the same with each new year. Even with modest inflation the 300k that would let me indulge most of my reasonable desires may be mere subsistence before I die. With an income of a million bucks a year I'd still put some aside so that my future income would increase.
mangeydog - Try reading it again. The point is that the people who lost money in those companies didn't lose it because they chose to invest in high risk areas. The current Enron trial is about deliberately making the company apparently stable when it wasn't. One other poster said they'd put 100% in the stock market. Depending on their age and what kind of companies they choose that's not necessarily a really bad idea, but any investment in the market means accepting higher risk in the hopes of higher rewards. What's apparent just down the road could turn out to be quite different from what's apparent today. Putting all of a major windfall into even a broad range of stocks would have turned out very poorly if done in the summer of '29 or summer of '87. When the winner recent MM winner comes forward Microsoft will be just one really good operating system away from losing most of their value if it's somebody else who develops it, but today they're apparently a pretty good investment.
dvdiva - The advisor talking about not buying a new house is talking about his own plan for himself, and he's a 47 yo financial advisor. He probably already has a decent house and a dependable car. I'm sure he doesn't have clients who rent their home and drive cars that break down every month, but if he's like other advisors most of his clients are middle class. Some people who are middle class buy boats or other expensive toys, and some invest the money for a comfortable retirement.
If a lottery winner is living someplace that's dangerous they should move as soon as their credit allows, but that still doesn't mean they should run out and buy a house right away. The advisor didn't say they shouldn't buy a car, he said he would skip the new "cars", and it's worth noting that it looks like the statement was related to having had a client who won the lottery and lost it all. A lot of people who get a big windfall do run out and buy far more house than they need and several fancy cars. If the annual income from your investments lets you do that it's one thing, but spending big chunks of the principal without careful consideration is another. The lost income from buying a $1 million house means the house will cost perhaps $35,000 per year before you even start paying the bills. He may have said it dfferently than you, but his point is also that a Ferrari and waterfront home may not be a wise decision.
>When the winner recent MM winner comes forward Microsoft will be just
>one really good operating system away from losing most of their value
>if it's somebody else who develops it, but today they're apparently a
>pretty good investment.
If you look to invest in Micro$oft look at a graph of their stock value.... FLAT for 2 years... Most of their income comes from 2 areas... Operating systems and Office suites... And the replacement are already there www.distrowatch.com for the operating system, Free! and www.openoffice.org for the office suite also Free!
(I have been free of Micro$oft now for 6 years)
As to the money, especially if I have above $3 or $4 million, I would definately give a bunch of it away... Not because of investment, but because it's right to do...
Then some great remote country Wyoming or South Dakota land (state tax free), a new car (mine has 130,000 miles on it), then some investments for me and the kids.... But no gold dinnerware, no million $ anything... A nice small house, (an indoor swimming pool as my big luxury) and I'm set! Kick back and stare at the night skies! After 35 years of working life I've had enough! I've had a whole 4 days off of work this year. Jan 1 & 2 because the plant was closed, Jan 25 for the birth of my granddaughter and Mar 5 beacuse I wanted a day off!
MarkP
What the financial adviser said in the OP sounds grat for the most part, but I've got to wonder if the financial adviser him or herslef made a score like a lottery jackpot how much of their own advice they'd follow?
"What happened to that financial adviser that was telling lottery winners what to do?"
"Oh, they hit some lottery, quit, and went to Vegas".
"AMEN!" A few years ago a doctor I was seeing for natural healing overdosed on cocaine. It was in the local newspaper. So much for practice what you preach!
"the tax is at 38% for the government"
Just curious how you are calculating 38% . . the 2006 Federal Tax Rate Schedules indicate the highest rate is around 35%.
http://www.irs.gov/formspubs/article/0,,id=150856,00.html
"the tax is at 38% for the government"
Just curious how you are calculating 38% . . the 2006 Federal Tax Rate Schedules indicate the highest rate is around 35%.
http://www.irs.gov/formspubs/article/0,,id=150856,00.html
and just what does the government do with all this money they tax on the powerball and mega millions???
"and just what does the government do with all this money they tax on the powerball and mega millions???"
I think they're spending it on a national study on lottery addiction!
Are you joking? Many of my interests are in things that don't cost much more than gas money to drive someplace, so I could be pretty happy on 2 or 300k per year. If I could make 100 to 150k without even getting out of bed I might even retire now and be a bit conservative about my spending. Given a more generous income I'd be more than happy to spend 50k on travel, though I don't see myself staying in any outrageously expensive resorts. If you continued to get by on less than 100k when you could easily afford to spend 2,3 or 5 times that much, I'd be very impressed and I'd wonder why you bother throwing your money away on lottery tickets.
As far as taxes and investments, income tax is only assessed against income. If your income is zero you owe zero income tax, regardless of how much money you have. That won't guarantee that you won't owe taxes on the principal, though. There are some places that assess an asset tax, and asset taxes apply to just about everything you own, from cars and boats to your bank accounts, stocks and bonds. Actually, almost every place already has an asset tax, but in most places it's limited to real property. A national asset tax is also one of the ideas that has been proposed as a reform of the current income tax system. The simple version is that if you netted 10 million from the lottery and kept it instead of squandering it, every year you'd have to fork over a percentage.
As for living off of the uninvested principal, why would you do that if you've got any sense? Taxes may not take any of the principal every year, but inflation will. For every million you have inflation of 2.7% (about the average for the last 6 years) will take $27,000, and in 25 years your remaining principal would be worth only half of its present value. Doing it just so you didn't have to give a share to the IRS would be downright stupid since even if the IRS took 75% you'd still have more money because you invested the principal. If you want to make things really simple, just invest it all in government bonds. The interest rate won't be fantastic, but it will be hundred of times what your mattress pays. You wouldn't be able to avoid taxes completely, but you could certainly simplify them. Write down your gross income, subtract your personal exemption, and pay the taxes owed on the remainder. Or you could pay an accountant to do it. The expense shouldn't be much of a hardship if you've won the lottery.
I'd question anyone deterring the investment in real estate. It rarely drops and if given the right location one can fair well in the real estate market. Its equity not a liability. Buying acrage is the first step. Why? Because at some point a city will expand and when it does, its the local builders who will salivate and bid ridiculous amounts to get the rights to that property. My co-worker is already in this market.Bought farmland (25 acres) at 42k because it was so far out in a rural area. Today he's selling it to developers for 95k per quarter acre! I never knew dirt could cost so much!
Only 10% of my (wishfull thinking) winnings would go to township bonds. A portion would go to some medical groups for finding cures and aiding families who need financial help.
My family would get houses (good equity investment!) and be set up with trust funds.
Unless you lived and had money in the stocks back in the 1990's you have no idea what its like to see your hard working money just vanish! And it happened in a manner that didnt allow a person to bounce back! It was gone. Poof! Never again will I trust an advisor to tell me how to handle my money. I'd trust a few folks here with decent suggestions but the end result is simiple. Its no ones business but your own in what you do with your winnings. (barring any taxes or illegal activities of course).
Real estate values rarely drop? You should ask Donald Trump how he nearly lost it all after becoming a billionaire. Ask anybody in the Hudson Valley who sold their home in the first few years after IBM laid off thousands of employees. The same story has happened in many other places, and many economists believe the recent housing bubble is likely to burst on a far larger scale. Real estate may represent equity, but it isn't especially liquid and it carries liability, both in taxes and any other upkeep, and in the litigious sense, since an injured party may sue you as the property owner.
That's not to say that real estate is a bad investment, but like every other investment you aren't likely to do well if you don't buy the right things at the right time. You also need to decide what mix of income and appreciation you want. Real estate isn't a convenient way to generate income unless you want to be a lottery winner who works as a landlord. Personally I'd rather be a lottery winner who's retired, so any real estate investments I'd make would be for long term appreciation.
Buying low and selling high is a great idea, but the highs and lows are only easy to see in hindsight. Historically, both real estate and stocks have been good investments as long as you're in for the long term, but if you need money when the price is low or you buy the wrong thing your investment may turn out poorly. It's easy to buy relatively small quantities of a lot of different stocks to reduce your risk, but it's not very practical to buy lots of inexpensive pieces of property. You can invest in REIT's, but that basically puts you back in the stock market.
I'm curious about your reference to losing money in the 90's and not being able to bounce back. There are certainly plenty of people who lost nearly everything, but that has pretty much always required putting all of your eggs in the wrong basket. As the article mentions, anybody who had their money in Microsoft and Intel through the 90's did very well. Depending on how long your coworker has owned the property he may have done much better than those who invested in Microsoft, but somewhere there are also a lot of people whose property has barely kept pace with inflation, and a few whose property has become a superfund site since they invested in it.
Say I wanted to live a luxurious lifestyle, where I am from $5,000 a month would buy that, even much less.
Luxury is $5K a month - $60K a year? I'd pay my chauffer more then that, and provide his car! Man, Pennsylvania gasline tax would eat a large portion of that!
Like I said I don't need a lot, and that would be more than enough for me. Plus I walk a lot.
As luxurious as I would ever need in this area.
Another very astute observation GameGrl. But you are right again, being I came from practically nothing, and grew up with the bare minimum, I learned quickly to value what I already did have in life and to never take anything for granted like most do. Everything I have now I earned through my own hard work, intelligence, and wisdom derived from years of hardship and simply just trying to get by. That is why you will never hear me complaining about winning a lucky for life jackpot
Everyone talks about greed, and lavish spending and seem to disregard what they already have, or the other successes they achieved in life. For me a jackpot win is not going to be a ticket, or an open invitation to opulent abuse, but simply to provide all the necessities in life and those few things that I always wanted that I never could have. But still very modest in nature.
No 20 cars, 10 houses, butlers, maids, and team of leeches for me.
I want the money to actually last. Ironically all these financial planners, advisors, lawyers, etc, are usually the ones going around saying how badly we need them after a jackpot win, because they all want a piece of the big pie. You can also bet they want in for the long haul too. I am not one who likes to be surrounding by groups of people, I prefer to do things my own way.
This is what has gotten me to where I am today, and out of the corporate world for the most part, and self-employed. Being able to actually earn money from something you love doing in life is unparalleled by anything but a jackpot win. The only difference is that you would have a lot more security, and it would then be a CHOICE as to whether you wanted to do what you loved for income. It would be a lot easier to blow all that money then to actually utilize it wisely. As hard as it is to win a jackpot, no way would I do anything to jeopardize it afterwards.
Around here $5,000 a month, and unlimited free time will buy you a great lifestyle. Heck even a lot less. I would be happy just to have a home paid off, and no debts whatsoever. I would use the money to boost, and increase my intelligence and overall lifestyle, not diminish it with irresponsibility.
Say I wanted to live a luxurious lifestyle, where I am from $5,000 a month would buy that, even much less.
Luxury is $5K a month - $60K a year? I'd pay my chauffer more then that, and provide his car! Man, Pennsylvania gasline tax would eat a large portion of that!
Like I said I don't need a lot, and that would be more than enough for me. Plus I walk a lot.
As luxurious as I would ever need in this area.
CBS just issued a study (YEAH I know CBS!) stating that for a person in their 30's in 2006, they will need a minimum of $200,000 dollars during retirement for O-N-L-Y medical expenses; double that if you live past 80. Had a heart attack lately? Had bypass surgery, or just every day surgery, lately? I had the whole gambit a few years back. In New Jersey, the medical costs were half a million dollars. In my life time I have had the benefit of the Government or a good medical insurance. Into the fuuture, that will will not be there. Try a lomg life, not a 20-year old life, on $60K a year. You're not visualizing the financial future, you're looking at yesterdays expenses.
"the tax is at 38% for the government"
Just curious how you are calculating 38% . . the 2006 Federal Tax Rate Schedules indicate the highest rate is around 35%.
http://www.irs.gov/formspubs/article/0,,id=150856,00.html
When you're dealing with muli-millions, and have the money for the same type of experts who write the laws, it doesn't matter whether it is 35%, 38%, or 40%. Ted "The Swimmer" Kennedy and John "Stab A Veteran In The Back" Kerry aren't paying those percentages, and no other rich person will either. Unless you are dumber then dirt and couldn't find your butt with both hands. Get money, have money - keep money!
Well as I said, it will all be determined by the size of the jackpot I win. I would most likely have plenty of money sitting in the wings for inflation, and I was not talking about that. I would still only continue living as modest as possible. If $60,000 becomes $200,000 a year, which I highy doubt where I live now, then I would have it anyway regardless. Especially since I lived off of $60,000 MAXIMUM a year for as long as I could.
I would most likely invest, as I know that the loss to taxes would still not be as much money as you would make from the interest, I was simply bringing up a point and just trying to see just how long the arm of the IRS really is. Personally though I would not want millions to be left to someone else unless I decided to have more family. So I would not have any problem spending the principal of $300 million or a lot less, and never earning a dime of interest.
I could spend $10,000 a DAY and still only spend 3.6 million a year! By the time inflation gets that high, the sun will have burned out.
Well as I said, it will all be determined by the size of the jackpot I win. I would most likely have plenty of money sitting in the wings for inflation, and I was not talking about that. I would still only continue living as modest as possible. If $60,000 becomes $200,000 a year, which I highy doubt where I live now, then I would have it anyway regardless. Especially since I lived off of $60,000 MAXIMUM a year for as long as I could.
I would most likely invest, as I know that the loss to taxes would still not be as much money as you would make from the interest, I was simply bringing up a point and just trying to see just how long the arm of the IRS really is. Personally though I would not want millions to be left to someone else unless I decided to have more family. So I would not have any problem spending the principal of $300 million or a lot less, and never earning a dime of interest.
I could spend $10,000 a DAY and still only spend 3.6 million a year! By the time inflation gets that high, the sun will have burned out.
Why waste time investing it, you only need $60K a year MAXIMUM; maximum inferring N-E-V-E-R to be exceeded. $60,000 times one hundred years, since you'll not be getting sick, comes to roughly $6,000,000. Throw the rest it out a building window. Even safer, set it on fire in a giant dumpster. Why be bothered with the problem. No tax problem, no inflation problem, no interest problem. No bull dung talk! Keeping any other amount, would go against everything you have said. I'm willing to stand by my position of spend, spend, spend; enough, is never enough. Are you willing to stand by your position you will N-E-V-E-R have a need to exceed a MAXIMUM of $5K a month?
On average yes, at least for many years. Not saying that I would not ever have to spend more than that, but never more than that every month. Not anytime soon. Although I do plan for the future, I am more concerned about living NOW.
You are much older than I am, so of course you want to spend spend spend. If I was in your position then I would probably do close to the same. You are right, I have no intentions of getting sick. I am an avid fitness buff, and nutritional expert and do not engage in the bad habits that seem to plague mankind every day.
Most people have no one to blame but themselves for their ailments, as it was their bad habits during their "invincible youth" that lead to their poor health in their golden years. Give or take a few 'natural cause' diseases. The lottery is like everything else, a 'personal decision' based upon 'personal circumstances'...not one universal law.
On average yes, at least for many years. Not saying that I would not ever have to spend more than that, but never more than that every month. Not anytime soon. Although I do plan for the future, I am more concerned about living NOW.
You are much older than I am, so of course you want to spend spend spend. If I was in your position then I would probably do close to the same. You are right, I have no intentions of getting sick. I am an avid fitness buff, and nutritional expert and do not engage in the bad habits that seem to plague mankind every day.
Most people have no one to blame but themselves for their ailments, as it was their bad habits during their "invincible youth" that lead to their poor health in their golden years. Give or take a few 'natural cause' diseases. The lottery is like everything else, a 'personal decision' based upon 'personal circumstances'...not one universal law.
Ahh, so now the modification of the absolute begins. It always does with the perfect
Ever heard of asbestos? Perfectly physical people were in the wrong place at the wrong time. Ever heard of a multilated body due to a drunk driver? Ever heard of Bruce Lee?
Plan for the worst, prepare for the worst. Enjoy the best, don't settle. It is how I got to my age. I didn't walk through the bush in 'Nam thinking I was in perfect physical shape, which I was - 10 miles in full combat gear, running, was normal every morning exercise. Carry around five hundred rounds of ammunitions on your back, twenty-four/seven for weeks, and tell me again what kind of shape you are in. I made it because I preplanned my life weeks in advanced. I prepared and thought of every possible action, and practiced options upon optioins until they became like breathing. I became a Ranger, then joined Special Forces. Not to be a hero. Because I knew they had the best training on this planet on how to survive. Billions of man hours went into thinking of ways to train me to live - in combat, and on the New Jersey Turnpike. Take advantage of the best there is in life; especially when the training is not only free, you're being paid for it! I always remembered the golden rule" DON'T DIE! Break that rule, and all other rules are meaningless. I am where I am because of that rule. Heart attacks, by pass surgery, bullet wounds, shot out of the sky, I never violated that rule.
Right now I have the perfect retirement planned - for me. Fishing. My own, fully paid for, home. ZERO debt. A truck with no payments. Three retirements checks. Friends I would trust with my life - friends I have trusted with my life. Ten months and counting, maybe fourteen; depending on the weather.
But that is not my goal. If it was, I would quit this lottery silliness, and buy health bars with the money. I plan to win a multi-million dollars and have more fun than I can plan for. I have spend ten years planning on spending money in every way known to man. Every year, I find another way to spend more. Next year, I will find yet another thing to spend money on. Fishing is for not having unlimited wealth. Uncensored fun is for having unlimited wealth. I am have been around the world, literally, several times. I have looked at so many beautiful women I lost count. With a jackpot, I intend to do it all over again. If Iget tired of looking at beautiful women, then I will move to some hick town and settle for looking at the teeny-popper at the 7-11 store.