I think she did. She won a million dollars in a Canadian Scratch off lottery ticket. Lottery winnings aren’t taxed in Canada, and there were two options available - a million dollar lump sum, or $1,000 per week for life with no limit. Currently her annuity is locked it a 5.2%, which isn’t a half bad, low risk return. If she lives to 80 the payout is $3 million. She’s being slammed for passing up “generational wealth”. I think the kid may be aware of peer/family pressure, along with the need for instant gratification that a million dollars can bring. I’ve read that about 30% of lottery winners end up bankrupt, and that’s people winning tens or hundreds of millions. One million could be gone in a year.
But she’s taking a lot of heat. People say invest the million. But it doesn’t sound like she’s quitting her job, and she could invest that $1,000 every week. If she wants a $100,000 car, in less than two years she would have the money to pay cash. If she took a lump sum and bought it then, there is $900,000 left to invest. Then she’d likely want a house, but it would have to be modest…say $600,000. Now there is $300,000 left to invest. Then there is family and friends, there is even less. I think the kid made the smart move. For her and not for the kids she hasn’t had yet. True, if she dies the payments stop. but if she lives beyond 40, and saves some or all of that $1,000 per week, she will also be building generational wealth. Your thoughts (since there is no right or wrong answer)
I probably would not have done that because 5.2% is, today, a mediocre return, and inflation will reduce that by half every decade or so. When she is 40, it may be the equivalent of $250/week today. I don’t think much generational wealth is going to result from this (article after the cited one discusses that).
OTOH, she may have made the right decision for herself. She is 20, likely never had a substantial amount of money at one time, does not want to have to deal with having it or fending off those who seem to find lottery winners and seek their money and may not have wanted the responsibility. If she is happy with her decision, good for her.
I tend to believe that this is what she is thinking. And when you see someone blow thru a hundred million in 5 years, and the world of instant gratification, a million could be gone in a year.
For me personally it’s a no brainer…at 68 I take the million.
Looking at Canadian and Quebec combined income tax rates at that level of income, about 50%, she would likely have netted about $500,000. Her $52,000/year will only cost her 14-19% income tax. Also, I doubt that she has the same risk tolerance for investing as you or I, and the winnings would likely have gone into a bank account.
Good point. If it were me I’d probably put a large down payment on a duplex and live on one half and rent out the other side, piss away $100k (at 20 I wasn’t as financially responsible as I am today) and invest the rest in ETF’s.
And QQQ gives some amazing returns but it’s one of those that you only want to check a couple of times a year as it is very volatile. But yes, the returns have been impressive.
Ah cool thanks. Seems like I have some SPY, up 50% or so. Came with an account I yanked from Edward & Jones because I don’t like having to call up to make a trade.