- This topic has 33 replies, 11 voices, and was last updated 2 years, 1 month ago by .
-
Posts
-
If a frum yid wins the powerball jackpot (I know, one can dream can’t he?) and wants to donate money to mosdos would they accept it or would it be considered tainted money?
I heard Reb Malkiel Kotker speaking once and he said that it’s OK to buy one ticket but buying more than one is a lack of bitachon.
Given that I’m sure BMG would accept a donation.
1. One would only get about half that since the “billion” is based on getting it in 20 year installments.
2. It would be a metsiah (something found), not income, so probably not subject to the usual limits on
giving tsdakah.3. There might be some taxes to pay.
4. One can always use a donor advised trust to send the money to the institutions in the name of “Piloni Almoni”.
There’s the story with the Chofetz Chaim, when there was a very large lotto jackpot his Rebbetzin purchased a ticket. He was upset (I forgot the reason why; I’m sure someone will remember this famous story and fill it in) and said if we win the entire winnings goes to Tzedaka.
It’s actually two different reasons. Years ago jackpots were annuitized over say 20 year with the first payment paid this year and 19 additional equal payments. More recently different state lotteries have allowed users to choose to get the full amount (pre-tax) in 20 equal payments or the present value (also pre-tax) right away.
I can show you the annuitization calculations but it’s kind of boring.
Regardless of the winners choice the winnings are heavily taxed.
Dr. Pepper, is a winner financially better off to choose the lump sum payment or to choose the twenty annual payments?
Assume for this purpose that if lump sum is chosen it won’t be squandered and will be invested correctly.
Technically it’s the same as the net present values are equal to each other.
Dr. Pepper, if the winner is disciplined, is their any advantage to him one way or the other?
If you put winnings to tzedokah – will they still be taxed?
If I have a non-profit school and collect $1 bln in tuition – do I owe taxes?
So, what if I donate a ticket to the non-profit before the drawing or a non-profit buys a ticket?Also, if a business buys a ticket, could winnings be used against losses? or taxed as business income?
asking for a friend.
Assuming interest is always a constant 5% there’s no advantage.
If all the money is put straight into the bank once received the future values are exactly the same.
With the lump sum payment the value of the payment will be 50,000,000 x ((1-(1/1.05^20)))/.05) x 1.05 = 654,266,042.98. After 19 years (when the 20th payment is made) the future value will be 654,266,042.98 x 1.05^19 = 1,653,297,705.14.
With the annuity option the year number, payment number, payment amount, present value at time 0 and value of the payment at time 19 (when the last payment is made) is as follows:
(Hope this copies from Excel nicely)
Time Payment # Payment Present Value at Time 0 Value at Time 19
0 1 50,000,000.00 50,000,000.00 126,347,509.77
1 2 50,000,000.00 47,619,047.62 120,330,961.68
2 3 50,000,000.00 45,351,473.92 114,600,915.89
3 4 50,000,000.00 43,191,879.93 109,143,729.42
4 5 50,000,000.00 41,135,123.74 103,946,408.97
5 6 50,000,000.00 39,176,308.32 98,996,579.97
6 7 50,000,000.00 37,310,769.83 94,282,457.12
7 8 50,000,000.00 35,534,066.51 89,792,816.30
8 9 50,000,000.00 33,841,968.10 85,516,967.91
9 10 50,000,000.00 32,230,445.81 81,444,731.34
10 11 50,000,000.00 30,695,662.68 77,566,410.80
11 12 50,000,000.00 29,233,964.45 73,872,772.19
12 13 50,000,000.00 27,841,870.91 70,355,021.13
13 14 50,000,000.00 26,516,067.53 67,004,782.03
14 15 50,000,000.00 25,253,397.65 63,814,078.13
15 16 50,000,000.00 24,050,854.90 60,775,312.50
16 17 50,000,000.00 22,905,576.10 57,881,250.00
17 18 50,000,000.00 21,814,834.38 55,125,000.00
18 19 50,000,000.00 20,776,032.74 52,500,000.00
19 20 50,000,000.00 19,786,697.85 50,000,000.00
Total 1,000,000,000.00 654,266,042.98 1,653,297,705.14So either way, the future value at year 19 (when the 20th payment is made) with interest is 1,653,297,705.14.
Of course if the winner is a savvy investor that number could be significantly higher.
Is that what you were asking?
The Tzemak Tzedek & the Rebbe Maharash made money from the Russian lottery. It’s ok to buy one ticket every so often.
Dr. Pepper, yes. Thank you.
But one advantage to taking the lump sum, I think, is that it gives the winner the extra flexibility to choose to utilize more of the money earlier (hopefully in a wise manner.)
And even if he wouldn’t use it earlier, their might be a (psychological or actual) benefit to at least having control over all of it immediately, rather than having to wait for an additional 19 annual payments.
After your above analysis, I can’t think of any tangible benefit to requesting the annuity (again assuming proper discipline.)
Alternatively, you could use a portion of the winnings to purchase a social media network catering to the Yeshivish Velt
The above analysis was made using a guaranteed rate of 5% for the entire duration. If the winner wants to try for a higher rate of return he/she could try riskier investments, the lottery commission can’t take that chance.
The advantage of taking it earlier is in case the lottery goes bankrupt or the government raises the tax rates later on.
The advantage of going for the annuity is if the interest rates drop to .1% or something and the winner is still getting paid as if it’s 5%.
Dr. Pepper, what would you do, and why, if you were the winner?
First comes the list of things I wouldn’t do.
I wouldn’t-
Quit my job,
Fly any class besides coach,
Add on to my house,
Own a luxury vehicle,
Make a donation anywhere in my own name,
Donate buildings to Yeshivas (I think the campaigns are beautiful and give thousands of people the zechus to be part of it),
Let my kids know.As far as what I would do- mainly look around to see what kind of voids I can fill in the kehila.
Create a Gemach that helps people help themselves (e.g. provide assistance in finishing their education…),Get Shadchanim under control (e.g. create a training course and certification so that people don’t wake up one morning and say “I’m a Shadchan”… Have some sort of discipline process for Shadchanim who don’t follow the rules- up to losing their certification and being banned from suggesting shidduchim.)
Have a fund of say $5,000,000 to co-sign a mortgage application for families struggling to pay tuition and can’t come up with money for a down payment.
Some other projects but I assume you get the idea.
Coffee addict:
1. The “half” is if you choose the lump sum, which is roughly half of the amount paid if you wait 20 years to get it all.
2. In some years, you can donate the entire amount to charity and avoid all taxes, though usually there is roughly a 50% (or your income) cap on how much you can give away. Sometimes the government suspends the cap and you can donate your entire income to charity and thereby avoid paying income tax.
Publish sefarim.
Whoever publishes seforim has the reward of whoever learns from it.
Dr. Pepper, why wouldn’t you add to your house or upgrade your flight seating?
Regarding the annuity versus lump sum, what would be your choice?
I wouldn’t add on to my house since I’m happy with what I have. I wouldn’t fly any class except coach since I think it’s a waste to spend so much money when I’m perfectly comfortable in coach. If I was forced to upgrade I’d try to trade with someone who doesn’t look comfortable in coach.
Given the choice I’d take the lump sum so I can give it to those people or organizations who need it more than I do sooner rather than later.
Dr. Pepper, thank you for sharing your thoughts on this.
how does the lottery economics work? The USA population is 331 million. So you need an average of everyone in the United States buying over one ticket in order to have reached the current jackpot. Not to mention the profit that the Powerball company (=the government, I think) has to make. And this is for one single lottery. How many jackpot winners are there over the course of a year? Many more.
burst your bubble, ofcourse a billion can do many mitzvos , however DONT THINK that a billion can solve any of the big challenges facing klal yisroel today? before you jump let me explain..
did you here of stimulus checks, PPP, child care credit checks, food boxes.. increase in snap.. when you add that up the frum world in the tristate got well OVER A BILLION dollars and we are in the same hole ( ofcourse on an individual basis it was a help) but you get my point .. hope you winThe information should be readily available online but here’s an oversimplified explanation of how I believe the lottery works. The PowerBall (and MegaMillions) is a multi-state game so there are more people playing than a typical lottery.
Let’s say a ticket is $2, for each ticket sold the jackpot increases by $2 but only 65% of the ticket sale needs to go to the jackpot (since it’s annuitized over 20 payments or a lump sum of much less is paid out). 10% or so goes to the retailer, I’m not sure how much is set aside for smaller prizes (although the expected value could be easily calculated) and the rest goes to the gaming commission which distributes the bulk of it to stuff that taxes would otherwise pay for.
Let’s say someone just one the lottery and cleared out the jackpot. Actuaries will estimate that say 10,000,000 million tickets will be sold, therefore they’ll estimate the jackpot at $20,000,000. With roughly 300,000,000 possible outcomes and 10,000,000 tickets sold- the odds of a winner are 1/30.
If no one wins there’s already $20,000,000 in the jackpot. Actuaries will estimate that they can raise the estimated jackpot to $45,000,000 since at that size 12,500,000 tickets will be sold. With each subsequent drawing that no one wins the jackpot goes higher and even more tickets are sold.
The past drawing was for an estimated $1,000,000,000 and no one won. If the next estimated jackpot is $1,200,000,000 that means that 100,000,000 tickets are estimated to be sold and the chances of a winner are 1/3.
The previous drawing was on a Monday and the next one is on a Wednesday. Had the previous drawing been on a Wednesday with the next one on a Motzaei Shabbos the estimate jackpot would have been much higher. Actuaries took into account that the time between the two drawings is two business days and no weekends or legal holidays.
Approximately 1,900,000,000$ for tomorrow’s drawing.
No one won the latest Powerball jackpot. Wednesday’s jackpot is a record 2,300,000,000$
Even I am suspicious of foul play now
Buying more than one ticket is a fundamental lack of emunah. And idiotic (even for a goy.)
And regarding playing when the jackpot is $500 million or whatever, when it is “only” a $10 million jackpot that’s not enough for you? The chance of winning is the same.
chance of winning is the same, but expectation of winning is different, right? Not sure how this works, with accumulation of the prizes, is playing becomes actually profitable on average at some point? or everyone understands it and starts buying thousand of tickets?
- You must be logged in to reply to this topic.