If someone wins the lottery or sweepstakes, why would they choose...?

Why would they choose the larger lump sum over periodic payouts?





For example, in a recent contest, the winner can choose between a lump sum payout of approximately $3.7 million or yearly payouts of $250,000 equaling a total of $7.3 million. Why would anyone choose less money?

If someone wins the lottery or sweepstakes, why would they choose...?
I would chose probably payout depends on the amount of money involved. If it was less than 2 million I'd chose payout all in one sum. If it was more than yearly I could live great on it for the rest of my life.
Reply:There are companies that will buyout a an annual payment plan for an amount higher than the lump sum and lower than the total annual payments. In your above example, the company would pay $6 million to the contest winner. It would benefit both; The company would make $1.3 million (over time) while the contest winner will receive $2.3 million more than the lump sum.





To answer your question: In your example above, it would take about 30 years to receive $7.3 million and about 15 years to receive $3.7 million. If a person is 50+ years old, I don't think they'd want to wait long to receive/enjoy their money. A younger person may choose the annual payments. A friend told me they'd choose the annual payments to they don't spend it all at once.





Another aspect: The value (or purchasing power) of cash decreases with time. Basically, you can purchase more with $3.7 million in 2008 than you can with $3.7 million in 2023. With this in mind, you can invest part of that $3.7 million in 2008 and have far more than the $7.3 million in 2038.





I hope this gives you some insight.
Reply:i think that if they do payouts and something was to happen to them,the money couldnt go to anyone not even their family,so they would be losing out.