There was a recent study out showing that almost 80% of people who win the jackpot in a lottery will decide for the upfront, rather than the staggered payments. We wanted to take a look at the reasons behind this phenomenon and use a recent example of a jackpot winner to see which method is really worth it.
A local man won a seven-figure sum in a recent Lottario draw and how he intends to celebrate is a dream of many lottery players, online and offline, all over the world, but is it worth it?
The lucky lottario winner was Michael Vojin from West Lorne who jackpotted a recent Lottario draw and claimed over $1.5 million dollars in winnings! Michael decided to go for the upfront payment option, as many lottery winners do.
The options Michael faced are those same options that all lottery winners face after they have hit it big, take the money up front or go for the annuitized payments. As with the majority of lottery winners Michael plucked for the money up front, let’s see why this method is so popular.
In Michael’s example the lump sum was $1.5 million, if he would have opted for the payments staggered over time he would be receiving roughly $6,250 a month for the next 20 years. 6250 x 12 x 20 = 1,500,000 – so these methods might initially seem as if they are equal but in reality, they are not.
Lottario Money Today > Lottario Money Tomorrow
In economics, you learn early on that cash today is worth more than cash in future. This is a reality of money, inflation and the way our current economic structure is built. There is no getting around this fact. In fact, it is the basis of almost all financial actions such as loans and interest. The flip side of this economic reality is that once you have the money it starts to work for you and not against you.
By putting the 1,500,000 in a standard bank account you would start receiving interest payments monthly. When the amount of cash in your bank account is as big as the figure Michael won, even small percentage points of interest can result in nice monthly paydays. After his Lottario win Michael could be expecting an interest payment of around $30,000 a year – Just for having his money sit somewhere!
This is real earnings as Michael would not have to do anything in order to earn his money, which is also tax free as an interest payment making it 100% profit for our lucky lotto winner.
Taking the payments over time would mean that it would take Michael 20 years to receive the same amount of money. Every year, year month, almost every week the $ in your pocket is worth less. In 20 years’ time when Michael will receive his final payment, the $6,250 he would receive would buy him a lot less than the initial payment of $6,250.
Lottery Winners Fear
There is a psychological and evolutionary based reasoning behind taking the payments over the time. Despite its unpopularity amongst past winners, there is some sense in taking the lottery winnings over time.
The main reason is protection. You cannot blow all your money away in the first year (as many lottery jackpot winners have) if you receive payments over time. It is an illustration of the character of a winner who decides to take the payments over time.
Many economic psychologists actually believe that staggered payments are beneficial as whole. It creates a new mindset for the winner – you do not have millions to burn, rather, you have a steady income for the rest of your life. This, to many lottery players, be it Lottario or any other State lottery, is true freedom and comes without the risk of losing it all.
The Lottario lottery is one of the biggest lotteries in the America’s and has gained real popularity online thanks to its fun games, big jackpots and regular draws.