- quote -

I don't dispute the wisdom of continuing financial
advisement in the instance of a large life changing
windfall. I just think that worrying about a Roth
contribution in that instance is a little bit down the totem
pole of financial concerns. This of course also assumes
that the winner would even qualify to make such a
contribution and that investment income alone on the
remaining winnings wouldn't preclude it.

--
David M. Woods, EA
Boston, MA 02109

Postings here are general information only and not to be
relied upon as advice.

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Dave Woods, EA wrote:

- quote -

That kind of care-free attitude exactly explains why roughly
75% of lottery winners end up in bankruptcy within 10 years
of winning.

I have heard that someone did a study of about 50 winners,
and found 40 of them bankrupt, 3 of them dead due to
disputes over money, 2 suicides, and the other 5 had other
problems. Supposedly, this was published in a book. This
info is at least third hand if not outright hearsay, but if
true, .....

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- quote -

But the spread also has an effect on other things, such as
Roth IRA eligibility, too high an AGI for itemized
deductions to be worth it, etc., .... The lump sum will
affect those things ONLY in the year of payment, and if
invested in state/muni bonds, then not even the interest
will affect the future years.

There are always tradeoffs.

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"D. Stussy" <kd6lvw[at]bde-arc.ampr.org> wrote:
- quote -

Your TMV calculation is about right. Now consider the case
of a super lottery winner of say a $230 million jackpot.
You're offered $230 over 20 years or roughly $90 million
upfront. Not only do you need an ROI of 5% on the entire
lump sum, it also assumes you never eat into the principal
which sort of negates the purpose of winning and getting the
money. Having the 20 year annuity IMO provides a much
better device for long term financial security, because the
reality is, getting that lump sum you WILL likely spend it
down pretty quickly.

--
David M. Woods, EA
Boston, MA 02109

Postings here are general information only and not to be
relied upon as advice.

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Dick Adams <rdadams[at]smart.net> wrote:

- quote -

Public Law 104-95 restricts the states ability to tax
out-of-state pensions. It has nothing to do with lottery
winnings. Lottery winnings take as their source the state
making the payment.

Specifically, Public Law 104-95 amended Section 114(a) of
Chapter 4 of Title 4 of the United States Code, to provide
in pertinent part that:

No State may impose an income tax on any retirement income
of an individual who is not a resident or domiciliary of
such State (as determined under the laws of such State).

Para. (b) goes on to define the term "retirement income."

Alan
http://taxtopics.net

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"Dick Adams" <rdadams[at]smart.net> wrote:

- quote -

No. Annuitized lottery payments are still lottery payments
and remain gambling winnings sourced to the state where the
lottery was won.

- quote -

And a foolish decision I might add. The required ROR of the
lump sum if invested immediately is extremely high if you
try to match the dollar amount of the annuity payments over
twenty years.

--
David M. Woods, EA
Boston, MA 02109

Postings here are general information only and not to be
relied upon as advice.

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Withing the last few years, Willie and the Supremes decided
that pensions are to be taxed in the State of residence of
the recipient. (I do not have the cite).

However, some States tax the annuity lottery payments to
out-of-State residents. Are such payments in any way
related to the decision noted above?

This is a purely academic question because it seems that
almost everyone takes the cash and not the annuity.

Dick

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