Discussion about the Week 5 Lump Sum Payout
Order ID 53563633773 Type Essay Writer Level Masters Style APA Sources/References 4 Perfect Number of Pages to Order 5-10 Pages Description/Paper Instructions
For each of the first and second discussions, write a minimum of 150 words in response.
1st Discussion
If I won the lottery and had to pick between receiving $50,000 every year for 30 years or receiving a lump sum payoff of $1 million right away, I would choose the latter option. Despite the fact that the tax benefit and the difference in net payout over 30 years might result in a gain of $487k after taxes over a lump sum payout. However, the benefits of a one-million-dollar payoff outweigh the benefits of a 30-year payout, providing independence and the ability to invest money in the appropriate places to earn gains far greater than the 540K$ before tax or 487K$ after tax over a 30-year period.
It is critical to note that this alternative should only be considered by those that live within their means and do not overspend. If the person does not believe in investing, the best choice is to receive 50,000 dollars over 30 years. When taxed at a rate of 22 percent, this will result in a net payout of 630,000 dollars after 30 years, compared to 1,000,000 dollars taxed at a rate of 37 percent, which will result in a net payout of 1,117,000 dollars. The opportunity to use the money to scale or develop small firms, or even to invest in rental properties, would help to multiply the returns enormously. The basic 6% fixed deposit interest rate with bank security from a large state or national bank in India will generate 1.13 million dollars over 30 years, plus the 630,000 dollar capital, for a total payout of at least 1.7 million dollars. Please keep in mind that if the investment is compounded every few years, similar to how a loan is refinanced to save money on interest rates, the interest gain will be compounded and the pay out will be much bigger.
If we look at how the lump payment is computed, the actual pay out for the lump sum amount is 37 percent for 1 million dollars and 22 percent for 50,000 dollars. It changes depending on a variety of factors such as income ranges, marital status, and so on. For these computations, a CPA should be able to obtain the most accurate figure for a person. If the individual is content with a yearly payoff of $50,000 and does not want to take risks, the regular 50,000$ payout should be the best alternative. Investing, whether calculated or not, is always a risk. As a result, I believe that receiving the 1 million dollar payoff will be more advantageous for me over time than selecting for the 30 year 50,0000 dollar fixed income.
References:
https://blog.taxact.com/lottery-tax-calculator/
https://www.investopedia.com/managing-wealth/winni…
2nd Discussion:
This post will examine numerous scenarios and my thoughts in the event that I win a $1,000,000 lottery and had to choose between receiving $50,000 every year for the next 30 years or obtaining a lump sum payment right away. Before making any selections, we might consider our life priorities as well as our financial needs. We can settle enormous debts and lessen the pressure if we get all of the money at once in lump sum payments. We’ll be able to use what’s left for future investments and other necessities. We can also use the funds to invest in passive assets. However, this may not be the most efficient solution in the long run. If we opt to get paid annually for the next 30 years, we will have a source of income for the majority of our lives. If we have dependents or other responsibilities, this can be useful. Furthermore, this will result in significantly less financial freedom, negating the value of winning the lottery. Even if we win the lotto, we may not be able to cover a few critical needs. Also, due to market depreciation, the value of money may decrease towards the end of the period, implying that the worth of $50,000 today may not be the same as it would be after 30 years. Taking a large sum and transforming it into clever investments, I believe, will bring financial freedom and other powers to life by balancing all of these beliefs and the demands that I must meet.
https://smartasset.com/retirement/lump-sum-vs-annuity-vs-annuity-vs-annuity-vs-annuity-vs-annuity-vs-annuity-vs
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