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.<\/p>\n
But some of us were talking about what we’d do if we won. Not the “I’d buy an awesome house<\/a>” or lease<\/a> a 10GigE<\/a> 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.\u00a0 So I pulled out my trusty old financial calculator.<\/p>\n 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<\/em> 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 So I’d definitely<\/em> have taken out the cash.<\/p>\n 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.<\/p>\n 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<\/a> for you…)<\/p>","protected":false},"excerpt":{"rendered":" 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 … Continue reading shared your riches with your friends and family<\/strike> bought a couple cars too. Conversely, if you didn’t<\/em> take your $500,000 a month out, you’d have just shy of $500 million in the bank at the end of 30 years.<\/p>\n