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Martin, Engineer
Category: General
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Experience:  i'm 41 and i never stopped studying and experimenting
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You win $1,000,000 in the state lottery. You have a choice

Resolved Question:

You win $1,000,000 in the state lottery. You have a choice to take $50,000 a year for 20 years or $560,000 now. You may assume some additional factors if you wish. Which choice would you take and why? What other factors need to be considered in addition to the time value of money?
Submitted: 5 years ago.
Category: General
Expert:  Martin replied 5 years ago.
Hello, welcome to Just Answer.

Without event counting too much, you get more with the 50K/year as without even interest you get $1,000,000 while the right here right now deal give you $83,2130 after 20 years at 2% interest.

That said i would still personally choose the $560,000. 20 years is long, you could die along the way and the state may abolish the lottery and change the term of the prize. Inflation will eat a big part of it. You can invest or do thing with the $560,000 that can bring you lot more money than waiting the whole 20 year (like on a real estate deal).

The biggest factor may be in the interest and how tax are calculated where you live. If the prize is free of tax $560,000 make sense, if you have to pay income tax on it, it might be advantageous to just get it in 50K part.

Another factor is how secure you want to be. In country where ransom fraud is common, getting the money in chunk may be more secure.
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