Let’s say, just for funsies, that your favorite relative in the entire world, your old Auntie Eugenia, went to her favorite seven-come-eleven outlet and shelled out twenty smackeroos on a scratch-off ticket, then handed it to you in an envelope on Christmas Day. That’s your present.
“Thanks, Auntie,” you think to yourself, “I could have bought a Starbucks Grande Mocha Choka Latte Ya Ya drink with that cash and had money left over for a tip, or I could have shanked it on down to the bodega for a lil somethin’ from One Eyed Jimmy, if you know what I mean.” But, Auntie believes in state-sponsored gambling, and she’s not so good with the mobility these days, she’s not going to wander around the mall looking for something for you, now is she? She was there, the lottery man was so nice to her, and so this is what you’re handed.
Let’s say you scratch off all the spaces and match up the symbols and you are the grand prize winnah! The prize is three million dollars. Of course, since this is state-sponsored gambling, it’s not as easy as just backing up the old Pinto Blowabout to the state treasury and driving off with a trunk full of cash. Oh, no. Here’s where the question of the day comes in.
Your options are: Receive one million, eight hundred thousand dollars in cash right now, or receive one hundred fifty thousand dollars annuitized over twenty years. Do you take the money and run? Or do you take a smaller amount now, and have a guaranteed income for the next twenty years? Remember that you will have to pay federal and state taxes on your winnings, no matter which option you decide. So what’s it gonna be?
