I lost the lottery last night. Actually, I never even entered. The drawing was for $270 million (30-year annuity), or $164.3 million cash. The stakes were high, but I still didn’t dare risk life and limb to go buy lottery tickets. Further, I’d have to clear my car off and I was feeling pretty lazy. I hoped it would roll over. Sadly, this was not the case.

But some of us were talking about what we’d do if we won. Not the “I’d buy an awesome house” or lease a 10GigE line. But financial planning stuff. First, we started the debate over whether you take the cash or the annuity. $270 million over 30 years is $9 million a year. Not to knock $9 million, but if I won $270 million, $9 million a year would seem pretty pathetic.  So I pulled out my trusty old financial calculator.

Let’s call the $164.3 million a nice even $150 million. You take $14.3 million off the top to get your indulgences out of the way. At 4% interest (realistic enough for something like a treasury note) over 30 years, you’d make $500,000 interest a month. (Assuming that you took the $500,000 out each month to spend.) That’s $6 million a year, or two-thirds of what you’d be getting if you took the annuity. Except you’ve already paid cash for a house overlooking Hollywood and shared your riches with your friends and family bought a couple cars too. Conversely, if you didn’t take your $500,000 a month out, you’d have just shy of $500 million in the bank at the end of 30 years.

So I’d definitely have taken out the cash.

The other thing I overlooked in the past is the concept of using annuities. I might like to host a scholarship, for example. I’d want $50,000 each year to fund it. Assuming the same 4% interest, you’d sock aside ($50,000 / 0.04), or $1.25 million. And then each year take out the $50,000 accumulated interest.

But, alas, I didn’t win. So no 10GigE to my home (probably not feasible anyway–transit costs are much less than I expected, but the cost of a fiber circuit to your home isn’t accounted for, and I’m not sure you can just call up Verizon and ask for them to light up a 10GigE link to LAIIX for you…)