I think you’re right that if a family could annuitize a, say, $3M jackpot over thirty years, it would make more sense to take annual payments. And for the reason you point to. Better to pay a low or middle tax rate on the winnings than mostly 37%.

The spouse and I were discussing a smaller win the other day and I felt it likely that a median income family would do better over the long haul to take the annuity. That assumes the payments would stay in the 12% tax bracket so savings would be significant and there’s less a chance of windfall mismanagement….

M.

Yup, yup. That works if you meet the more than 750 hours and more than 50 percent of your time thresholds.

More info here: Real estate professional

Great idea Wendy. Now one of us just needs to win! 🙂

Thanks Thao. And like you, I thought taking the lump sum sort of a fairly orthodox idea. Thus I was surprised the Tax Advisor articles advised differently. As I noted in blog post, when I calculated the return on investment using the Mega Millions numbers from today, I got a 3.7% tax-free nominal rate. That’s decent. But not that great.

Thanks for sharing Jerry. And I agree that with a really big balance, an asset allocation formula like Buffet suggested makes a lot more sense. If you’ve got $10M or $15M in treasuries… and then your other 90% in an institutional index fund? Seems pretty clean. 🙂