Dear Powerball Winner: Take Our Advice and Take the Annuity

[ProfessorGAC]

6. Boy, Do I Disagree

The assumptions made as to how the money could be broadly diversified are the basis of most the argument and the rate of return suggested is WAY too low.

Also, if a large portion were distributed into multiple funds, those would pay dividends which are taxed at a FAR lower rate than regular income and one is not required to take every dollar in dividend from a fund. So, if you had $300 million in funds making just 6% aggregate, and you took 10% of that, you would be getting $1.8 million a year taxed at the dividend rate and the remainder would still be going up at 5.4%.

I suppose if someone 25 wins the prize, this might make perfect sense as a long term guarantee. But, anybody over 45 would be foolish to not pay someone a million (tax deductible) to distribute and diversify the winnings and the math will work out pretty favorably over the life span.