What are those $1 million dollar game prizes really worth, in money in your pocket terms?

Miscellaneous and Personal Stuff I Must Share
21

Why would the loan have to be on the property?

Thus wouldn’t be a 30 year mortgage loan, backed by the house.. It would be a simple, short-term business loan, backed by the person’s credit rating. A loan for maybe one or two years, with a balloon payment of a million dollars in the final month. There is basically no risk to the bank; they know that the lottery winner has a net worth of $5 million*., and will be able to pay.

*(even thoough the asset is temporarily only listed in the column labelled “accounts receivable”. )

22

Yes, some lotteries say, for example, that they will give the winner $50,000 a year for life. But in others, it’s $100 million paid out over twenty years. I believe if you die before the twenty years are over, your estate is expected to pay estate taxes on the total remaining, even though it’s not coming all at once. You might want to plan something, perhaps an insurance policy, to cover that event.

23

I don’t think that’s a safe assumption - according to this DOJ press release, Richard Hatch was paid just over $1 million for Survivor in 2001. There are different types of game shows which are being compared to different sorts of other TV shows - and how a daytime/early evening game show pays isn’t necessarily the way a prime time show pays, especially since the alternatives (sitcoms or dramas) are much more expensive. At the end , The Big Bang Theory was paying about $6 million per episode just to the five stars. Compared to that , a million dollar lump sum prize per season looks pretty cheap.

24

I’ve never heard of that; what lottery does that? What if I take the lump sum & then die the next day; I’ve already received all of my payout, or what if I setup an entity, a trust to be the winner; even if I die, the trust still lives on & should be able to continue to collect payouts. Any good financial advisor should be able to find a way around that which is why one should always consult one before accepting a large prize, & in some cases before even signing the ticket.

25

A different aspect of the OP’s question, above. I used an inflation calculator to ask how much my salary per annum when I was 26 ($12,000, with no benefits) would be now. $12,000 at that time was 50% of the median US household income. The answer was that $12,000 at that time “has the same ‘purchasing power’ or ‘buying power’ as $36,154.71 in 2026.” I realize that some costs (like housing and higher ed) have increased disproportionally. OTOH, $12,000 paid all my bills, including my solo apartment and considerable student loans, at the time. A take-home win of even $100,000 2026 dollars would have been the equivalent of over $250,000 at that time, or over 21 years at my annual salary rate. Assuming I had kept working, that would have covered a house (at average national rates), a new car, and a house for a parent or medical bills or an investment.

$50,000-$80,000 2026 is more than the equivalent of what I earned at that time, and had I made that much, at the lower end I’d have had a nice excess, which would have gone to my student loans. At the high end, at more than double my then-salary, I’d have felt very fortunate.

I imagine in the OP’s scenario, I’d be thrilled with the 20-year payout amount at any age. It is more than I live on now. (I do own a house and have a spouse with a retirement income, and don’t have student loans, but I live somewhere more popular and the cost of living where I am now is higher than mine was in 1986 dollars).

26

Yeah. For most people, their wages cover their taxes, their necessities, and some of their wants. But a bunch less of the wants than they wish it did.

If they were to suddenly receive an ongoing annual windfall (or pay raise) comparable to their existing wage, that amount, net of its own applicable taxes, can go entirely to wants. With the result that suddenly they have lots of free cashflow for lots of fun. By the living standards they were used to just before the windfall began.

The problem with every pay raise or windfall nearly anyone receives, certainly including me, is that real quickly the “necessities” expand to 80%, 100%, or worse yet 120%, of the incremental increase. Leaving the new list of wants underfunded as always.

27

Thanks for doing all that math! Somehow, thinking “I can spend an extra $4 grand per year” does not carry the same Wow! feeling as “I’m a millionaire!”, does it?

I’m thinking another factor in the lifestyle inflation lines is what expectations OTHER people will now have for you. Everything from, your coworker expects you’ll pay for their cup of coffee with you up to your Nearest and Dearest assuming you will be the bank to solve all their problems. I mean, why won’t you fund my toddler’s daycare bill?? What are you, cheap? Don’t you think it’s only reasonable that you establish a college fund to help all your nieces/nephews/grands/etc? We need help with the mortgage or they’re going to foreclose on us! Just this once, we promise! and on and on.

I’ve seen magazine type articles that flat out suggest the first thing people need to do when they win these huge prizes is figure out how to set up some legal structure that collects the money anonymously and allows you to not suddenly become a target of inflated expectations…or sometimes even suggest “vanishing.”

28

As noted the unlikelihood of getting that large of a loan as speculation by a bank quickly enough to work. Especially for a-not-yet-in-your-full-possession house with their notoriously variable value. This is how these raffles usually work:

The raffle company (and these are private, for profit companies that take a healthy cut of whatever is raised for the charity in question) searches for very expensive homes for sale that aren’t selling. They’ve sat on market for the dreaded 90+ days and have dropped prices, but nobody is buying. Very expensive homes can occasionally be difficult to move because, well, they’re very expensive and need the right buyer to come along. Especially in places like California and Florida these days with their current insurance complications.

The raffle company goes to the home owner and says - “Hey, let’s sign a contract wherein you take your home off the market temporarily and we will agree to buy it at the agreed upon price if the raffle goes through. But in the likely event it does not (because taxes) you get free, glossy advertising for your home that will be seen by many tens of thousands and we’ll play up the value of your property.” Maybe there is also a fee offered to the home owner while it is under contract. Homes are of course just worth what someone is willing to pay for them.

Any savvy banker is going to know that a.) that house value is very nominal because there is no guarantee it will actually sell for that and b.) there is no guarantee it will sell anytime soon. Even if you did a fire sale and sold your “$5 million” home for $3.5 million there is just no guarantee someone will snap it up in a timely fashion (though I imagine you will be able to claw back some taxes from the Feds if you produce the paperwork saying the realized price was far below the nominal prize value).

Short of maybe the Lucchese family, probably no one will extend that large of an only semi-secured loan to you.

29

Which would cause me to wonder how long it would be before they sent the hitmen after me.

30

One of the (fairly conservative) rules of thumb for retirement planning is that you can withdraw 4% of a well-invested portfolio every year forever, baring a civilization-ending cataclysm. Whether in the form of interest, dividends, or, if needed, a bit of principal. If well-invested it’ll grow about as fast as you pull it out, or faster. Amounting to a perpetual, if not huge, money fountain in your back yard.

Off the $270K post-tax windfall, that suggests you can withdraw about 0.04 * 270K = $10.8K/year. And you’ll need to pay income taxes on some of that money out of that money.

The real killer though is that the actual take-home windfall, after direct taxes on it, is only ballpark 1/4th of the headline number.

Another major reason folks go broke is buying stuff that has ongoing maintenance and insurance costs. “If I buy a big house for cash & have no mortgage, I’ll live for free in luxury”. Wrong.

A big luxo house has tens of thousands of dollars of maintenance costs per year. And ten-plus thousand of property tax. And ten thousand of insurance costs. Per year every year. So much for free.

Fancy cars are the same way. A friend of mine in the car biz took in a late model Rolls Royce as payment for an outstanding debt somebody owed him. So he got the Roller free and clear; no loan. He really liked the car. He did not like the $2K per month cost to insure it. He sold it after a couple months. Even free Rolls Royces are expensive to own.

A legal trust structure is a great idea no matter where you live once your assets are non-trivial. Whether you got those assets through hard work, good investing, inheritance, or a lucky lottery win.

As a separate matter …
Many state lotteries prohibit the prize from being collected anonymously. You must give your real name and they must publicize it. It’s a so-called “sunshine” thing to help convince the public that the lottery is not a crooked game won only by crooked insiders.

Other states allow winners to hide behind trusts or attorneys or whatever and remain anonymous.

31

And what is it going to cost you to furnish a big luxurious house? Furniture appropriate to the house is expensive as well.

32

The flip side of that is, though, that we can’t write off our gambling losses on our income taxes. I’ve seen high rollers in US casinos actually getting receipts from the pit boss certifying a big loss.

33

Hardly necessary.

Based on statistics, it’s fairly likely that the winner will change their lifestyle in unhealthy ways, take up riskier activities like skiing, scuba diving, etc., begin going out for drinks & fancy meals, buy a fast car, and so forth. Plus there’s always the possibility of spending some of those winnings on (illegal) drugs.

So the lottery can just sit back and wait for the suddenly rich winner to do themself in.

34

I’d still like to see a cite that an actual government run lottery keeps as yet unpaid annuity payments upon the death of the annuitant.

I could certainly imagine some YouTube schmuck (MrBeast?) or game show creating an annuitized prize with a feature like that.

But not a lottery. It’s too sleazy for something the government is trying hard to burnish the reputation as “good clean fun” (Florida’s slogan), not Evil Gambling! that upsets the bluenoses. Anything that hints of a gotcha in the payout is totally antithetical to that goal.

35

I think people are mixing up two different things. There are lotteries where there is a jackpot with a specified prize that the winner can take in a lump sum or as an annuity where the estate/heirs get paid if the winner dies before the 20 years is up. There’s also a very different sort of lottery that doesn’t specify the top prize. Because the prize is described as " a million dollars a year for life" , it seems like they only pay until the winner dies - but in fact, it pays for a minimum of 20 years. But can pay for much longer.

36

No tax on winnings in the UK either. Get a nice accumulator up on the gee-gees, and the winnings are all yours. A successful evening in the casino – ditto. Also, of course, lottery wins.

Of course they will be there with a hand out when you invest it and earn some dividends or interest.

37

After analyzing the data, the researchers concluded that winning the lottery improved the winners’ sense of overall life satisfaction. And the more they won, the more significant the positive effect…Like the German study, the researchers concluded that lottery winners experienced “sustained increases in overall life satisfaction.” They found that these effects persisted for over a decade and showed no evidence of dissipating over time.

Further, the researchers found no evidence that the winners blew their newfound wealth on extravagant purchases. Instead, they tended to spend their winnings slowly over many years. Most didn’t quit their jobs, but they did tend to work less. The lottery winners had more and higher-quality leisure time after winning the lottery, and this improved leisure time contributed to their enhanced sense of well-being.

These two studies confirm what common sense would suggest: winning the lottery is usually pretty great. Stories of lottery winners whose lives were ruined by their windfall aren’t representative of the experiences of most winners.

Have you come up with a cite for this?

38

If the true take home of a $1 million prize is in the $250-$600k range, that is till a lot of money to spread around on lots of things. How much it changes someone’s life is going to really depend on how much they have to start with.

The biggest thing that much money is going to do is be able to break the aphorism of “it’s expensive to be poor.” There are lots of examples of ways that amount of money can bring someone out of living paycheck to paycheck and barely scraping buy and into a place where they can save and advance in their career.

A money sink of a car can be replaced with a reliable new one with a warranty.

High interest debt can be cleared, and low interest debt can always be paid on time, avoiding penalties and fees.

A 20% down payment on a house or condo can break the rental trap[1]. Now what was paid in rent is building equity.

That amount of money is probably not going to be life changing for a middle or upper-middle class family. 1 in 5 Americans are already millionaires[2], so an extra $300k dropping into their brokerage account is sure nice, and maybe turns into an extra million for retirement, or funds a $20k vacation every year for a decade or two.

  1. I know in many places buying is not cheaper than renting, but in lots of places buying is much cheaper in the long run, and builds generational wealth. ↩︎

  2. including home equity ↩︎

39

The reason that the rich were so rich, Vimes reasoned, was because they managed to spend less money.

Take boots, for example. He earned thirty-eight dollars a month plus allowances. A really good pair of leather boots cost fifty dollars. But an affordable pair of boots, which were sort of OK for a season or two and then leaked like hell when the cardboard gave out, cost about ten dollars. Those were the kind of boots Vimes always bought, and wore until the soles were so thin that he could tell where he was in Ankh-Morpork on a foggy night by the feel of the cobbles.

But the thing was that good boots lasted for years and years. A man who could afford fifty dollars had a pair of boots that’d still be keeping his feet dry in ten years’ time, while the poor man who could only afford cheap boots would have spent a hundred dollars on boots in the same time and would still have wet feet.

Men at Arms