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Tag: Annuities

  • Unlocking the Annuity Puzzle: Why Canadians avoid what seems to be the perfect retirement vehicle – MoneySense

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    Financial planner Robb Engen recently tackled this puzzle in his Boomer & Echo blog, “Why Canadians avoid one of retirement’s most misunderstood tools.” Engen notes that experts like Finance professor Moshe Milevsky and retired actuary Fred Vettese believe “converting a portion of your savings into guaranteed lifetime income is one of the smartest and most efficient ways to reduce retirement risk.” Vettese has said the math behind an annuity is “pretty compelling,” especially for those without Defined Benefit pensions.

    Milevsky and Alexandra Macqueen coined a great term applicable to annuities when they titled their book about the subject Pensionize Your Nest Egg, which I reviewed in the Financial Post in 2010 under the title ”A cure for pension envy?”

    Engen observes that a life annuity is “the cleanest version of longevity insurance … You hand over a lump sum to an insurer, and they guarantee you monthly income for life. If you live to 100, the insurer pays you. If stock markets collapse, you still get paid. If you’re 87 and never want to look at a portfolio again, the income keeps flowing.”

    In other words, annuities neutralize the two big risks that haunt retirees: longevity risk (the chance of outliving your money) and sequence-of-returns risk, the danger of suffering a stock-market meltdown early in retirement and inflicting irreversible damage on a portfolio. 

    Despite all the seeming positives about annuities, Engen notes that “almost nobody buys one.” He cites a Vettese estimate that only about 5% of those who could buy an annuity actually do so. Engen suggests there is a behavioural hurdle: fear of losing liquidity and control of the underlying assets. He cites research by the National Institute of Ageing’s Bonnie-Jeanne MacDonald on pooled-risk retirement income, where she wrote that such retirees are  “strongly opposed to voluntary annuities, as they want to keep control over their savings.”

    Compare the best RRSP rates in Canada

    A chance to lock in recent portfolio gains?

    Even so, the new Retirement Club created by former Tangerine advisor Dale Roberts earlier this year (see the blog posted on my own site in June) recently featured a guest speaker who extolled the virtues of annuities: Phil Barker of online annuities firm Life Annuities.com Inc. 

    Barker said many clients tell him they’ve done really well in the markets over the last 20 years and now they’d like to lock in some of those gains. They may be looking for fixed-income strategies, and many were delighted with GIC returns when they were a bit higher than they are now (some in the range of 6-7%). But they are less happy with the new rates on GICs now reaching maturity. Meanwhile, annuities have just come off a 20-year high in November 2023 so the time to consider one has never been better, Barker told the Club in August. 

    With annuities, you can lock in a rate for the rest of your life—so if your timing is good, it may make sense to allocate some funds to them.  

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    Related reading: GICs vs. annuities

    Barker said eight life insurance companies offer annuities in Canada: Desjardins, RBC Life Insurance, BMO Life Insurance, Canada Life, Manulife, Sun Life, Equitable Life and Empire Life. All are covered under Assuris, a third-party organization that guarantees 100% of an annuity up to $5,000 per month. So if one of those companies failed, the annuity would be honored by one of the other firms via Assuris. 

    Barker described an annuity as simply a “personal-funded pension.” To set one up you can take registered or non-registered funds and send the capital to an insurance company. In return, they give you an income stream for as long as you live: this is the traditional life annuity. Unlike annuities in the U.S., you cannot add funds to an existing annuity, Barker told the club, nor can you co-mingle funds from for example RRSPs and non-registered funds. 

    However, you can buy a new annuity each time you need to. There is no medical underwriting for annuities, unlike life insurance. Joint annuities for couples are a great value, he said, but the tax slips are sent to the primary annuitant. Nor is income splitting possible under current CRA rules. 

    When annuities shine

    Annuities shine when you are confident about your health and prospects for living a long time. Having $X,000 a month assured income to live on means your other sources of income that fluctuate with stock markets can be weathered, Barker said. “We’re seeing people getting 6.5% to 8.5% a year for the rest of their lives, depending on their age.” 

    As Dale Roberts commented during Barker’s talk, having enough to live on just from the pension bucket (annuities, pensions, CPP/OAS etc.) frees you up to take some risk in other areas, like stocks and equity ETFs.

    Funding by registered vs. non-registered accounts

    Registered funds transfer to an annuity tax-free; that’s because money is not being deregistered, but rather going from one registered environment into another registered environment. It will be fully taxed when it comes out. The monthly income from the annuity is then fully taxable in the year it is received. 

    If you fund with non-registered money, the taxation is considerably different. For one, if your non-registered account has unrealized capital gains you’ll have to realize them and pay tax on them. Other than that, so-called prescribed annuities are relatively tax-efficient. The capital that is used to fund the annuity is not taxed, only the gain is, Barker says. “Therefore, the taxable portion of the annuity income is a very small amount. Prescribed means that the taxation is the same or level for the entire life of the annuity.”

    The Club has also covered other retirement income products that may resemble annuities in some respects: the Vanguard Retirement Income Fund (VRIF) and the Purpose Longevity Fund, both of which I have small chunks in. Dale adds that the Longevity Fund has the potential to be a “nice complement to annuities,” as it “is designed to increase payments quite nicely in the later years thanks to the mortality credits. Those with very long lives are subsidized by those who pass away much earlier.”

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    Jonathan Chevreau

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  • AmeriLife’s Scott Perry Named 2025 Honoree by the Chinese American Insurance Association

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    Recognition celebrates the company’s expanding support of communities and agents that reflect America’s evolving demographics


    CLEARWATER, Fla., April 7, 2025 (Newswire.com)
    –
    AmeriLife Group, LLC (“AmeriLife”), a national organization that develops, markets, and distributes life and health insurance, annuities, and retirement planning solutions, proudly announced today that its Chairman and CEO, Scott R. Perry, was honored by the Chinese American Insurance Association (CAIA) during its annual Lunar New Year Banquet on April 3 in New York City. The event celebrates the achievements and contributions of individuals and organizations that have significantly impacted the insurance industry and its ability to serve the fast-growing Asian American community.

    “On behalf of AmeriLife and our incredible team across the country, I’m honored to be recognized by the CAIA for our efforts to advance the very best that the insurance industry has to offer and better serve consumers and the agents that support them,” said Perry. “We are committed to providing innovative solutions and education that empower consumers to make informed decisions about their health and financial futures. This recognition is a testament to our team’s continued hard work and dedication.”

    “We are thrilled to honor Scott and AmeriLife for their significant contributions to the insurance industry and their dedication to serving the Asian American community,” said CAIA President Vince Vitiello. “Their industry leadership and innovation have set a high standard for excellence, and we look forward to continuing our partnership to advance the goals of our organization.”

    The CAIA was founded to educate Asian American consumers on the importance of insurance and promote professionalism within the agent communities through continuing education credit opportunities while also acting as a bridge between China and the U.S. on best practices in the insurance space.

    AmeriLife is similarly dedicated to serving increasingly diverse agent and client communities nationwide through its robust distribution network. Since 2020, AmeriLife has expanded its network with more than 90 new partners in cities and regions that reflect America’s evolving demographics, such as Philadelphia-based CAIA member Happy Insurance, which works alongside AmeriLife’s The Senior Resource Group (SRG).

    “It’s a privilege to join our colleagues from Happy at this year’s CAIA event to celebrate the important work this industry group is doing to empower the next generation of agents and agencies,” said Shane Sounders, co-founder and principal of The Senior Resource Group. “We believe that it is critically important to continue reaching out to the Chinese American communities, and we take pride in how our partnership with AmeriLife – under Scott’s leadership – has enabled us to stay ahead of the game and deliver on the growing needs of demographic change.”

    ###

    About AmeriLife

    AmeriLife’s strength is its mission: to provide insurance and retirement solutions to help people live longer, healthier lives. In doing so, AmeriLife has become recognized as a leader in developing, marketing, and distributing life and health insurance, annuities, and retirement planning solutions to enhance the lives of pre-retirees and retirees across the United States. For over 50 years, AmeriLife has partnered with top insurance carriers to provide value and quality to customers through a distribution network of over 300,000 insurance agents, financial professionals, and over 160 marketing organizations and insurance agency locations nationwide. For more information, visit AmeriLife.com and follow AmeriLife on Facebook and LinkedIn.

    Source: AmeriLife

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  • AmeriLife’s “Empowering Voices” Campaign Celebrates National Women’s History Month

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    Campaign honors women leaders, their achievements, and forward-thinking attributes for the next generation of insurance and financial services industry leaders


    CLEARWATER, Fla., March 18, 2025 (Newswire.com)
    –
    AmeriLife Group, LLC (“AmeriLife”), a national organization that develops, markets, and distributes life and health insurance, annuities, and retirement planning solutions, is celebrating National Women’s History Month through the theme of “Empowering Voices” as it recognizes the remarkable women leaders driving innovation and excellence within its industry. This month-long celebration underscores AmeriLife’s unwavering commitment to fostering a unified workforce that values diverse perspectives, contributions, and leadership.

    One of the key initiatives supporting this mission is the Distribution Women’s Leadership Council (DWLC). Now in its third year, the Council is committed to recruiting, retaining, empowering, and advancing women within AmeriLife’s Distribution business. The DWLC maintains a forum for sharing best practices, fostering mentorship, and providing networking opportunities. These efforts are crucial in leveraging market opportunities and achieving its business objectives.

    “We are thrilled to celebrate the incredible women making a significant impact at AmeriLife,” said Mike Vietri, Chief Distribution Officer for Wealth at AmeriLife and executive champion of the DWLC. “Their leadership and dedication are instrumental in shaping our company’s future. The Distribution Women’s Leadership Council plays a vital role in ensuring that we continue to support and empower women at every level of our organization.”

    The DWLC has been instrumental in developing programs that provide Distribution with the skills and resources they need to succeed.

    • From leadership training to networking events such as its monthly “Sips & Strategies” gatherings and annual conference, the Council is dedicated to creating an environment where individuals can thrive and reach their full potential.

    • Sponsoring attendance at community events such as the Valspar Executive Women’s Day, the ANNIKA Women’s Leadership Summit, and the SharpHeels Career & Leadership Summit is a key extension of its mission, providing invaluable networking opportunities and connections with other professionals beyond the office.

    “We are committed to building a workforce that reflects the diverse communities we serve,” said Kelly Atkinson, AmeriLife’s Senior Vice President, Distribution Operations & Chief of Staff, Wealth Distribution, and founding member of the DWLC. “By empowering women and recognizing their contributions, we are strengthening our company and positively impacting the industry.”

    The Power of Mentorship

    Mentorship is not just a pillar but a driving force at the DWLC, essential for fostering growth, development, and success. Each member is committed to embracing this vital role within their respective positions.

    “As women in finance, we can use our experiences and influence to inspire the next generation and ensure they have access to clear, easy-to-understand education,” said Rayna Reyes, Principal of American Federal.

    “Women leaders today can make a significant impact by mentoring young women and, more importantly, shaping policies to create inclusive work environments,” said Angela Palo, Chief Operating Officer of Pinnacle Financial Services, Inc.

    Ana Hernandez, Managing Director of Grupo Latinamericano de Seguras, agrees, saying, “Women leaders can leverage their influence and experiences to inspire the next generation and ensure equitable and empowering education for young women by actively mentoring and sponsoring young females, ultimately creating a visible pathway for future female leaders.” 

    Stephanie Kirk, Chief Executive Officer of Secure Benefits, Inc., added, “Young women need mentors. Someone willing to teach them by inclusion, not just instruction. My philosophy is the best education is to learn by doing.  Being a woman of influence gives me an excellent opportunity to roll up my sleeves and work hard alongside someone trying to get to where I am.   The next generation of women coming behind me will reach even greater heights because I’m giving them a shoulder to stand on!”  

    Learn more about the Distribution Women’s Leadership Council and its lead-by-example philosophy.

    About AmeriLife

    AmeriLife’s strength is its mission: to provide insurance and retirement solutions to help people live longer, healthier lives. AmeriLife develops, markets, and distributes life and health insurance, annuities, and retirement planning solutions to enhance the lives of pre-retirees and retirees across the United States. For over 50 years, AmeriLife has partnered with top insurance carriers to provide value and quality to customers through a national distribution network of over 300,000 agents, financial professionals, and more than 160 marketing organizations and insurance agencies. For more information, visit AmeriLife.com, and follow AmeriLife on Facebook and LinkedIn.

    Contact Information

    Jeff Maldonado
    Media Contact
    media@amerilife.com

    Alex Hyer
    Corporate Development
    corporatedevelopment@amerilife.com

    Source: AmeriLife

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  • What to do with a small pension in Canada – MoneySense

    What to do with a small pension in Canada – MoneySense

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    Many Canadian employers see DB plans, where retirees receive a guaranteed payout every month (sometimes indexed to inflation), as too expensive. And while the average time spent working for the same employer has actually risen over the last five decades, according to Statistics Canada data, spending a lifetime at one job—and collecting decades of pensionable earnings in the process—is a rarity these days. 

    “My dad worked for a bank for 35 years. That was the only job he ever had,” says Kenneth Doll, a fee-only Certified Financial Planner based in Calgary. “Those days are gone.” 

    Many Canadians must make do on partial pension coverage: either a small pension based on a decade or so of service, a defined (DC) contribution plan—where employers don’t provide backup funding if a plan underperforms—or a group registered retirement savings plan (RRSP), possibly with matching funding from their employer. Some Canadians don’t have a pension at all. “There is a massive decrease over the past 30 years in the number of defined-benefit pensions,” says Adam Chapman, financial planner and founder of YESmoney in London, Ont. 

    These pensions won’t pay all the bills like a traditional defined-benefit plan. So, what can people with insufficient pension coverage do? Ultimately, the answer lies in balancing the small (or not so small) guaranteed income from a pension and pushing the limits of other income streams. 

    How to plan your retirement now

    Every Canadian’s circumstances are different, and financial planners avoid speaking in generalities. But the earlier you start planning for retirement, the better. This applies whether you have nothing except the Canada Pension Plan (CPP) and Old Age Security (OAS), a DB plan indexed to inflation and guaranteed for life, or something in between. 

    First of all, sit down and figure out how much you plan to spend on life in retirement. Joseph Curry, a financial planner and president of Matthews Associates in Peterborough, Ont., says that when clients come to him, he maps out these details—as well as their expected income from CPP and OAS. All other income sources, including any pension income, are thrown in there, too. 

    “We have clients who would spend as little as, you know, $2,000 a month, all-inclusive,” Curry says. “And we have clients who would be spending in excess of $200,000 a year in retirement.” 

    One trick that works well is to max out any RRSP contribution room, then take the tax savings and throw them into a tax-free savings account (TFSA) for future retirement income. This can be tricky for Canadians with existing pensions, because their own and their employer’s pension contributions are deducted from their RRSP contribution room. For robust defined-benefit plans like the Ontario government’s Public Sector Pension Plan, it can remove thousands of dollars worth of contribution room a year. 

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    Brennan Doherty

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  • How to consolidate your registered accounts for retirement income in Canada – MoneySense

    How to consolidate your registered accounts for retirement income in Canada – MoneySense

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    There is a spousal attribution rule with spousal RRSPs that applies if you take withdrawals within three years of your spouse contributing. This may result in the withdrawals being taxed back to the contributor.

    When you combine an RRSP and a spousal RRSP, whether you like it or not, the new account must be a spousal RRSP. As a result, you would typically transfer an RRSP into the existing spousal RRSP. 

    There are no tax differences between an RRSP and a spousal RRSP for withdrawals, other than the aforementioned attribution rules. 

    Even if you separate or divorce, your spousal RRSP cannot be converted to a personal RRSP. 

    As a result, Steve, your wife could combine her RRSP and her spousal RRSP by converting them both to a spousal RRIF. I would be inclined to do this. 

    Combining LIRAs with other registered accounts

    Locked-in RRSPs have different withdrawal and consolidation rules than regular and spousal RRSPs. The locking-in provisions of your wife’s locked-in retirement account (LIRA) are meant to prevent large withdrawals. These funds would have come from a pension plan she previously belonged to. Pension money is treated differently from personal retirement savings, such that locked-in accounts have maximum withdrawals as well as minimum withdrawals. 

    In some provinces, an account holder may be able to unlock their locked-in account if the balance is below a certain threshold. This may apply for your wife, Steve, as you mentioned the account is small. Some provinces also allow a one-time unlocking of a portion of the account when you convert a LIRA to a life income fund (LIF), which is essentially a RRIF equivalent for a LIRA. 

    As a result, Steve, your wife may be able to get some or all of her LIRA account transferred to the same RRIF as her RRSP and spousal RRSP. If not, she will have to settle for having a RRIF and a LIF. 

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    Jason Heath, CFP

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  • Annuity vs. GIC: What makes sense for retiring? – MoneySense

    Annuity vs. GIC: What makes sense for retiring? – MoneySense

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    As you know, of course, annuities and GICs are not the same thing. An annuity provides a guaranteed income for life, or a set time period, and it can be purchased from insurance companies, agents and brokers. And a GIC is primarily a savings vehicle, which can be bought from banks, trust companies, credit unions and investment firms.

    In most cases, purchasing an annuity means exchanging your capital—a lump sum of money—for a lifetime payment that is similar to a pension. It’s a fixed, guaranteed income for life, with no more worries about interest rates, stock market crashes, running out of money, etc.

    On the other hand, purchasing an annuity means making a long-term commitment to an unknown future. And you will no longer have access to your original capital.

    Consider this example: If you want to buy a new car, you can’t go to the insurance company and ask for a little extra money. It’s not your money anymore.

    I’m guessing you’re thinking about GICs as an alternative because you’re aware of the longer-term risks associated with an annuity, and you may want to maintain control and flexibility over your money.

    A GIC can give you a guaranteed income over the length of the term and control of your capital; however, there is no guarantee on future interest rates or a lifetime income. You may also find it difficult to draw a monthly income from a GIC portfolio. This will prompt you to create a GIC ladder with different maturity dates so there is cash available when needed. The laddered approach may have an overall return that is less than the five-year return you are using to compare to an annuity.

    Think about the different ways you—and the world for that matter—may change in the next 25 years. Look at interest rates, inflation, your lifestyle and spending habits, and so on. Inflation is likely the biggest risk you’ll face when purchasing a life annuity.

    If you purchase a $100,000 annuity, what other financial resources do you now have? What will be coming to you in the future? What can you use to deal with any changes in your life? It’s important for you to know the answers to these questions.

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    Allan Norman, MSc, CFP, CIM

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  • Single, no pension? Here’s how to plan for retirement in Canada – MoneySense

    Single, no pension? Here’s how to plan for retirement in Canada – MoneySense

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    • Canada Pension Plan (CPP) deferral: CPP deferral is worth considering for any healthy senior in their 60s. If you live well into your 80s, you may collect more pension income than if you start CPP early, even after accounting for the time value of money and the ability to invest the earlier payments or draw down less of your investments. CPP deferral can protect against the risk of living too long, especially for a single retiree, and particularly for women, who tend to live longer than men. CPP can be deferred as late as age 70. The benefit increases by 8.4% per year after age 65, plus an annual inflation adjustment.
    • Old Age Security (OAS) deferral: Like CPP, deferring OAS can be beneficial for seniors who live well into their 80s. One exception is low-income seniors who might qualify for the Guaranteed Income Supplement (GIS) between 65 and 70. Single seniors aged 65 and older, whose income is less than about $22,000, may qualify. OAS can be deferred as late as age 70. The benefit increases by 7.2% per year after age 65, plus an annual inflation adjustment.
    • Annuities: Almost everyone wants a pension, yet almost no one is willing to buy one. You can buy an annuity from a life insurance company using non-registered or registered (ie. RRSP) savings. (What is a non-registered account? How does it work?) Based primarily on your age and resulting life expectancy, an insurer will pay you an immediate or deferred monthly amount for life—even if you live until 110. If interest rates are higher when you buy an annuity, the monthly payment amount may be slightly higher as well. If you don’t have a pension and you want the security of a monthly payment, an annuity can be worth considering. Especially if you’re in good health and are a conservative investor.

    Survivor benefits in Canada

    Most DB pension benefits are payable only to surviving spouses. Some pensions have survivor benefits for children or a guaranteed number of months of payments to an estate.

    A CPP survivor pension can be paid to the spouse or common-law partner of a deceased contributor. Single retirees are somewhat disadvantaged since their children will usually not qualify for a benefit if they die.

    Children’s benefits are only payable if a surviving child is under 18, or if they are attending full-time post-secondary education and are between 18 and 25.

    Advice, accountability and cognitive decline

    One of the challenges everyone faces as they age is making sound financial decisions. Our experience and knowledge may increase as we age but our ability to process complex decisions tends to begin declining before we retire.

    Single seniors don’t have a partner to bounce ideas off, so many may find themselves stressed about retirement and financial planning. And not everyone feels comfortable talking about money with their children and friends, and not everyone has a financial advisor, either. (Use the MoneySense Find a Qualified Advisor Tool to find an advisor near you.)

    Partners, adult children and friends can provide accountability, as well with spending and other financial decisions and keep each other in check.

    A single retiree can certainly be successful, but the challenges they face are different from that of couples.

    For these reasons, being conservative, deferring pensions, considering annuities, seeking financial advice, and proactively planning are all strategies to consider when planning for retirement as a one-person household—especially if you have no pension plan.

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    Jason Heath, CFP

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  • ‘De-banking’ is fueling private credit growth: Apollo CEO Marc Rowan

    ‘De-banking’ is fueling private credit growth: Apollo CEO Marc Rowan

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    Marc Rowan, CEO of Apollo Global Management explains why private credit is benefiting from tighter banking regulation, and shares his expectation for a pick up in private equity deals.

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  • You just won the Powerball jackpot — what should you do next?

    You just won the Powerball jackpot — what should you do next?

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    One lucky person picked the winning $1.73 billion Powerball number in California. It is a life-changing amount of money for the lucky winner or winners — but not necessarily in a good way. 

    Robert Pagliarini, author of “The Sudden Wealth Solution,” has been guiding lottery winners for decades. And he has seen plenty of people run through their winnings faster than you can say “jackpot!” Or, friends and family (and certainly office lottery pool players) can see their winnings tied up in legal battles for years, as the parties argue over who gets how much. About 70% of lottery winners lose or spend all the money in five years or less, after all. 

    “Money — especially when you’re talking about this level of money — absolutely upends people’s lives,” Pagliarini, the president of Pacifica Wealth Advisors, told MarketWatch. “You should be excited, but you should also be prepared, for sure.” 

    These are his five tips for what to do if you win the lottery or get another windfall.

    Document that the winning ticket is YOURS

    Sign your name on the winning ticket, take a picture of yourself holding the winning ticket — in fact, take a video of yourself holding the signed, winning ticket, for good measure. 

    “The first step is really all about securing the ticket … because whoever has it is the owner,” says Pagliarini. “There’s no record of you having purchased that ticket with those numbers. So having that ticket is everything.” 

    Related: Hoping to win Mega Millions? This woman hit a $112 million Mega Millions jackpot.

    You have to document that this ticket is yours, which is why Pagliarini says legal experts recommend signing it. “I would absolutely sign it myself,” he adds. 

    And then put that ticket in a safe place, like a home safe or lockbox.

    Don’t tell anyone yet!

    You may want to sing the good news from the rooftops that your financial troubles are over. Problem is, everyone else’s troubles aren’t — and Pagliarini warns that, for your own personal safety and peace of mind, it’s better not to let the world know you’ve just become a billionaire overnight — if you can help it. Unfortunately, most states make you disclose that you’ve won.

    “We’re used to seeing people with the big check on TV, which looks pretty cool — but now everybody in the entire world knows that you’re worth $1 billion. And that’s not really the kind of publicity that you want,” says Pagliarini. “You’re going to be hit up for lots of money requests as people come out of the woodwork. And that adds such a huge amount of stress when you’re in a situation that is already stressful.” 

    You generally have 180 days to collect the winnings, and you’re going to have to make some big, life-changing decisions during that time. Staying anonymous, if you can, will give you the space to make those decisions with a clear head. 

    Unfortunately, as noted, most states compel lottery winners to come forward publicly. If you have to reveal yourself and do press interviews, protect your personal information. Some past Powerball winners didn’t answer questions about any meaningful or personal significance associated with the winning numbers that they played, for example, or they refused to share details about their children. One couple simply moved out of their house and refused to speak with the media at all while they settled their affairs.

    “My rule is basically, you tell one family member, and then you immediately try to get professional help,” Pagliarini adds. Which leads us to…. 

    Get a lawyer and a financial adviser

    Bring in the professional help as soon as you can. An attorney can help you decide the best time to claim your lottery prize, and offer more advice on keeping your ticket safe. They can also help navigate your rights and protect your best interests with regards to how much you need to present yourself publicly. And they can also help you manage your safety. 

    Meanwhile, a financial adviser can assess your financial situation and help you decide whether it makes sense to take a lump sum of cash, or to collect your winnings over annual payments. A financial adviser can also help you manage your money so that you can check things off your bucket list without overspending.

    “You know you’ve won, and then typically you have about 180 days to collect the winnings,” says Pagliarini. “So you’ve got to do some serious planning.” You need all the help you can get.  

    Do you take the lump-sum payment or the annuity payment?

    Pagliarini considers staying anonymous as the first big decision a lottery winner makes. The second most important question, however, is how they collect their winnings. Do you want to take a lump sum, or do you want to take the annuity (aka, a payout over time)?

    “This is really the biggest financial decision you’ll ever make in your entire life,” he says. (Granted, it’s one that most of us will never have to make, since the odds of winning the lottery, let alone a jackpot of this size, are infinitesimal.)  

    He notes that most people take the lump-sum payment, and in some circumstances this can be a better decision. But keep in mind that if you win a $1 billion Powerball jackpot, for example, you are not getting $1 billion.

    “They send you about 60-ish percent of whatever the lump sum is,” Pagliarini notes. So for a $1 billion prize, for example, “you would get around $600 million instead of $1 billion,” he said. And after state taxes, depending on where you live, and federal taxes, that jackpot may be closer to $300 million in the end. Whereas, the annuity is given as 30 payments over 29 years, which will come closer to hitting the advertised $1 billion jackpot than lump-sum takers would get. So being patient can pay off in the long run, especially with a bigger prize like this.

    As far as taxes are concerned, Pagliarini still leans toward annuity — especially for a smaller jackpot, like if it was $1 million. That’s because you would get a lump-sum payment of about $600,000, which would put you in the highest federal and state income tax bracket (for single filers anyway) that year — versus taking an extra $30,000 a year for 30 years. “That annuity payment is probably not going to catapult you into the highest tax bracket,” he says. But for a $1 billion-plus jackpot like this, you’re going to be in the highest tax bracket whichever payout you choose, he says.

    But there’s another reason to consider going the annuity route, Pagliarini says — it can save you from yourself. 

    “The biggest advantage of the lump-sum payout is that you get most of the money up front, and then you can do whatever you want with it,” he says, such as pay off debt, invest it, buy a house, etc. “But that actually happens to be the biggest disadvantage of the lump sum,” he continues. And that’s because, if you overspend your winnings and run out of cash with your lump sum, then you are out of luck. But the annuity payments are almost like a do-over each year, he says, because you can learn from your mistakes and spend the next annual windfall more wisely. “I’ve advised most people honestly to take the annuity,” he says. “It just allows you to really make mistakes, but have them not be a total derailment.” 

    If you still can’t make up your mind, he also has a free online quiz to help you decide whether you should take a lump sum or an annuity payment. 

    Keep it simple when deciding where to put your new money.

    So you’ve secured your ticket, tried to keep it quiet, hired some professional help, and decided how you are going to collect your winnings. Then what do you do with all of this cash? 

    Every financial situation is different, of course, which is where a financial adviser can help you sort out the nuances to make this lottery win a real dream come true for you. But in general, Pagliarini recommends keeping things simple — even considering that this $1 billion jackpot (even whittled down after taxes) would allow you to do basically whatever you wanted to do. 

    “If I were meeting with you, we would sit down and make some serious decisions, and prioritize what you want to do,” he says, “such as paying off debt, and discussing what is on your wish list. Do you want to buy a new house or a second house, or buy your family houses?” He suggests pricing out your wish list together with your adviser to see whether you could afford to do everything you want.

    But you still want money left over to live on. “We want to make sure the money left over is generating enough income so that they could survive on that for as long as they wanted — and particularly in this case, I’m sure generations would be able to survive on this amount of money,” he says. “I would invest in index funds. I wouldn’t get esoteric with limited partnerships and venture capital. Just go for a diversified portfolio, because as soon as you start deviating from ‘simple’ you can really increase your chances of just losing it all.” 

    He notes that because lottery winnings don’t feel “earned,” the prize may not feel like “real” money — which is one of the reasons so many lottery winners don’t manage their newfound wealth well. Again, about 70% of lottery winners lose or spend all that money in five years or less. “If the money doesn’t feel earned or real, you’re going to make decisions with that money that are probably not going to be in your best interest,” he adds. “You’re giving it away more freely, spending more freely, or freely investing in things a lot riskier than you would have done if you had to sweat and earn that money.” 

    So keep it simple. “Don’t think just because you have x-millions of dollars now that you really have to get ‘sophisticated,’” he adds.

    And some bonus advice for office pools

    This is more of an extra, hindsight tip for before you and your co-workers start throwing in a buck apiece for a long-shot bid at a jackpot like this. Pagliarini warns that office pools can get “tricky,” so it’s good to sign a contract setting some ground rules before you all pool together. 

    “There’s been a lot of litigation around office pools, because maybe somebody forgets to play one week, and that’s the week everyone wins. Or someone thought they played this week, but on this particular week they didn’t,” he says. “So loosey-goosey situations can end up in court to battle it out.”

    A much simpler solution to avoid this is to have an office pool contract that spells out who is in this pool, how much they are contributing, and it also determines in advance whether the group will take the lump-sum payment or the annuity payment. 

    “Because the last thing that you want is to win $1 billion or $100 million dollars, and then to be tied up in court for four years,” says Pagliarini. “That’s no fun.”

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  • $1.8 million to retire? Are you kidding?

    $1.8 million to retire? Are you kidding?

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    This time it’s in the latest Charles Schwab Retirement Survey. Among 1,000 people surveyed, the average respondent figured he or she needed to save $1.8 million to retire. (That figure is up from $1.7 million in the same survey a year earlier.)

    Touchingly, 86% also told Schwab they were either “somewhat” or “very” likely to achieve their goals.

    Er, no.

    If the numbers show anything, it’s that most people don’t understand math, don’t understand finance and are wildly out of touch with reality.

    Some simple calculations will show that these figures are all wrong.

    First, let’s start with the bad news. There is no way 86% of people should be “very” or “somewhat” confident that they are going to hit that $1.8 million target, or anything like it. Let alone that 37% think they are “very” likely to hit it.

    Median retirement-account balance at the moment? Try $27,000 and change, says 401(k) giant Vanguard.

    Even that’s overstating the picture. The Federal Reserve’s most recent triennial Survey of Consumer Finances says the median American household has $26,000 in total financial assets, including savings accounts, life insurance, 401(k) plan and the like. Among those aged 45 to 54, the figure is $37,000, and among those 55 to 64 it’s $47,000. How anyone thinks they are getting from there to $1.8 million by retirement age is a mystery. Magic carpets? Magic beans?

    Granted, the survey is from 2019, but the intervening pandemic period won’t have changed the picture that much — in either direction.

    It’s not clear from the survey whether those polled included the value of the equity in their homes. Throw that in, and the median household’s total net worth rises to $122,000. Among those aged 45 to 54 it rises to $169,000, and among those 55 to 64 to $213,000. COVID policies helped drive up average U.S. home prices by about 30%, so those figures will have risen since 2019.

    But again we are not nearing $1.8 million.

    Not even close.

    The good news, though, is that you don’t actually need this amount or anything like it to retire.

    Naturally if someone hasn’t figured life out by the time they retire, and they still think that buying yet more stuff is the route to happiness, no amount is going to be enough.

    How much we’d like and how much we need are very different things.

    A $1.8 million balance would buy a 65-year-old couple an immediate annuity paying a guaranteed lifetime income of $9,500 a month, or just over $110,000 a year.

    The average Social Security benefit on top of that for a retired couple is just under $3,000 a month, or $36,000 a year. So in total you’d be on about $146,000 a year. What are these people planning to do in retirement?

    Even with a 3% annual rise, to account for inflation risk, that annuity will pay out $83,000 a year, and that’s for a couple, not just for one person. The money continues until both of you have gone.

    How much do we really need? Well, while acknowledging that each person and each person’s situation is going to be different, let’s do some simple math.

    Actual seniors are living on median annual incomes of around $45,000 to $50,000, says the Federal Reserve. And most of them say they are either reasonably satisfied with retirement or actually happy. So, at least, they tell Gallup and the Employee Benefit Research Institute.

    Meanwhile, a new survey from Schroders finds that the average person thinks a comfortable retirement can be had on around $5,000 a month, or $60,000 a year.

    The average Social Security benefit for a retired couple is $36,000 a year. To bring that income up to $50,000 you’d need an annuity paying $14,000 a year.

    Current cost in the annuities market: $225,000.

    To bring that up to $60,000 the annuity would cost $385,000.

    For $350,000 you can get an income of $18,000 with a 3% annual increase to deal with inflation.

    For $800,000 you can double your Social Security income, bringing in another $36,000 a year — with a 3% annual increase to deal with inflation.

    The cost of housing is a major component for retirees. No, someone doesn’t have to move to Iowa to be able to retire in comfort. But they can move the dial by cashing in their home in an expensive neighborhood — especially the kind of location they may have moved to for a high-paying job or the best schools — and moving somewhere cheaper. Away from coastal California or the “Acela” corridor in the Northeast, a lot of U.S. homes are really cheap.

    Retirement savings generally are grossly inadequate, and many people face genuine hardship in their senior years. And, of course, pretty much everyone could use more money. On the other hand, you can retire in comfort with a lot less than $1.8 million.

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  • You just won the Mega Millions jackpot — what should you do next?

    You just won the Mega Millions jackpot — what should you do next?

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    Robert Pagliarini, author of “The Sudden Wealth Solution,” has been guiding lottery winners for decades. And he has seen plenty of people run through their winnings faster than you can say “jackpot!” Or, friends and family (and certainly office lottery pool players) can see their winnings tied up in legal battles for years, as the parties argue over who gets how much. About 70% of lottery winners lose or spend all the money in five years or less, after all. 

    “Money — especially when you’re talking about this level of money — absolutely upends people’s lives,” Pagliarini, the president of Pacifica Wealth Advisors, told MarketWatch. “You should be excited, but you should also be prepared, for sure.” 

    These are his five tips for what to do if you win the lottery or get another windfall.

    Document that the winning ticket is YOURS

    Sign your name on the winning ticket, take a picture of yourself holding the winning ticket — in fact, take a video of yourself holding the signed, winning ticket, for good measure. 

    “The first step is really all about securing the ticket … because whoever has it is the owner,” says Pagliarini. “There’s no record of you having purchased that ticket with those numbers. So having that ticket is everything.” 

    Related: Hoping to win Mega Millions? This woman hit a $112 million Mega Millions jackpot.

    You have to document that this ticket is yours, which is why Pagliarini says legal experts recommend signing it. “I would absolutely sign it myself,” he adds. 

    And then put that ticket in a safe place, like a home safe or lockbox.

    Don’t tell anyone yet!

    You may want to sing the good news from the rooftops that your financial troubles are over. Problem is, everyone else’s troubles aren’t — and Pagliarini warns that, for your own personal safety and peace of mind, it’s better not to let the world know you’ve just become a billionaire overnight — if you can help it. Unfortunately, most states make you disclose that you’ve won.

    “We’re used to seeing people with the big check on TV, which looks pretty cool — but now everybody in the entire world knows that you’re worth $1 billion. And that’s not really the kind of publicity that you want,” says Pagliarini. “You’re going to be hit up for lots of money requests as people come out of the woodwork. And that adds such a huge amount of stress when you’re in a situation that is already stressful.” 

    You generally have 180 days to collect the winnings, and you’re going to have to make some big, life-changing decisions during that time. Staying anonymous, if you can, will give you the space to make those decisions with a clear head. 

    Unfortunately, as noted, most states compel lottery winners to come forward publicly. If you have to reveal yourself and do press interviews, protect your personal information. Some past Powerball winners didn’t answer questions about any meaningful or personal significance associated with the winning numbers that they played, for example, or they refused to share details about their children. One couple simply moved out of their house and refused to speak with the media at all while they settled their affairs.

    “My rule is basically, you tell one family member, and then you immediately try to get professional help,” Pagliarini adds. Which leads us to…. 

    Get a lawyer and a financial adviser

    Bring in the professional help as soon as you can. An attorney can help you decide the best time to claim your lottery prize, and offer more advice on keeping your ticket safe. They can also help navigate your rights and protect your best interests with regards to how much you need to present yourself publicly. And they can also help you manage your safety. 

    Meanwhile, a financial adviser can assess your financial situation and help you decide whether it makes sense to take a lump sum of cash, or to collect your winnings over annual payments. A financial adviser can also help you manage your money so that you can check things off your bucket list without overspending.

    “You know you’ve won, and then typically you have about 180 days to collect the winnings,” says Pagliarini. “So you’ve got to do some serious planning.” You need all the help you can get.  

    Do you take the lump-sum payment or the annuity payment?

    Pagliarini considers staying anonymous as the first big decision a lottery winner makes. The second most important question, however, is how they collect their winnings. Do you want to take a lump sum, or do you want to take the annuity (aka, a payout over time)?

    “This is really the biggest financial decision you’ll ever make in your entire life,” he says. (Granted, it’s one that most of us will never have to make, since the odds of winning the lottery, let alone a jackpot of this size, are infinitesimal.)  

    He notes that most people take the lump-sum payment, and in some circumstances this can be a better decision. But keep in mind that if you win a $1 billion Powerball jackpot, for example, you are not getting $1 billion.

    “They send you about 60-ish percent of whatever the lump sum is,” Pagliarini notes. So for a $1 billion prize, for example, “you would get around $600 million instead of $1 billion,” he said. And after state taxes, depending on where you live, and federal taxes, that jackpot may be closer to $300 million in the end. Whereas, the annuity is given as 30 payments over 29 years, which will come closer to hitting the advertised $1 billion jackpot than lump-sum takers would get. So being patient can pay off in the long run, especially with a bigger prize like this.

    As far as taxes are concerned, Pagliarini still leans toward annuity — especially for a smaller jackpot, like if it was $1 million. That’s because you would get a lump-sum payment of about $600,000, which would put you in the highest federal and state income tax bracket (for single filers anyway) that year — versus taking an extra $30,000 a year for 30 years. “That annuity payment is probably not going to catapult you into the highest tax bracket,” he says. But for a $1 billion-plus jackpot like this, you’re going to be in the highest tax bracket whichever payout you choose, he says.

    But there’s another reason to consider going the annuity route, Pagliarini says — it can save you from yourself. 

    “The biggest advantage of the lump-sum payout is that you get most of the money up front, and then you can do whatever you want with it,” he says, such as pay off debt, invest it, buy a house, etc. “But that actually happens to be the biggest disadvantage of the lump sum,” he continues. And that’s because, if you overspend your winnings and run out of cash with your lump sum, then you are out of luck. But the annuity payments are almost like a do-over each year, he says, because you can learn from your mistakes and spend the next annual windfall more wisely. “I’ve advised most people honestly to take the annuity,” he says. “It just allows you to really make mistakes, but have them not be a total derailment.” 

    If you still can’t make up your mind, he also has a free online quiz to help you decide whether you should take a lump sum or an annuity payment. 

    Keep it simple when deciding where to put your new money.

    So you’ve secured your ticket, tried to keep it quiet, hired some professional help, and decided how you are going to collect your winnings. Then what do you do with all of this cash? 

    Every financial situation is different, of course, which is where a financial adviser can help you sort out the nuances to make this lottery win a real dream come true for you. But in general, Pagliarini recommends keeping things simple — even considering that this $1 billion jackpot (even whittled down after taxes) would allow you to do basically whatever you wanted to do. 

    “If I were meeting with you, we would sit down and make some serious decisions, and prioritize what you want to do,” he says, “such as paying off debt, and discussing what is on your wish list. Do you want to buy a new house or a second house, or buy your family houses?” He suggests pricing out your wish list together with your adviser to see whether you could afford to do everything you want.

    But you still want money left over to live on. “We want to make sure the money left over is generating enough income so that they could survive on that for as long as they wanted — and particularly in this case, I’m sure generations would be able to survive on this amount of money,” he says. “I would invest in index funds. I wouldn’t get esoteric with limited partnerships and venture capital. Just go for a diversified portfolio, because as soon as you start deviating from ‘simple’ you can really increase your chances of just losing it all.” 

    He notes that because lottery winnings don’t feel “earned,” the prize may not feel like “real” money — which is one of the reasons so many lottery winners don’t manage their newfound wealth well. Again, about 70% of lottery winners lose or spend all that money in five years or less. “If the money doesn’t feel earned or real, you’re going to make decisions with that money that are probably not going to be in your best interest,” he adds. “You’re giving it away more freely, spending more freely, or freely investing in things a lot riskier than you would have done if you had to sweat and earn that money.” 

    So keep it simple. “Don’t think just because you have x-millions of dollars now that you really have to get ‘sophisticated,’” he adds.

    And some bonus advice for office pools

    This is more of an extra, hindsight tip for before you and your co-workers start throwing in a buck apiece for a long-shot bid at a jackpot like this. Pagliarini warns that office pools can get “tricky,” so it’s good to sign a contract setting some ground rules before you all pool together. 

    “There’s been a lot of litigation around office pools, because maybe somebody forgets to play one week, and that’s the week everyone wins. Or someone thought they played this week, but on this particular week they didn’t,” he says. “So loosey-goosey situations can end up in court to battle it out.”

    A much simpler solution to avoid this is to have an office pool contract that spells out who is in this pool, how much they are contributing, and it also determines in advance whether the group will take the lump-sum payment or the annuity payment. 

    “Because the last thing that you want is to win $1 billion or $100 million dollars, and then to be tied up in court for four years,” says Pagliarini. “That’s no fun.”

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  • A Retirement Tax Break That Ends the Fear of Outliving Your 401(k)

    A Retirement Tax Break That Ends the Fear of Outliving Your 401(k)

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    A Retirement Tax Break That Ends the Fear of Outliving Your 401(k)

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  • While investors can’t expect a deal like former baseball star Bobby Bonilla, they can use an annuity to create a stream of income in retirement

    While investors can’t expect a deal like former baseball star Bobby Bonilla, they can use an annuity to create a stream of income in retirement

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    Infielder Bobby Bonilla of the MLB’s New York Mets at a game against the Los Angeles Dodgers at Dodger Stadium, July 25, 1993.

    Stephen Dunn | Getty Images Sport | Getty Images

    Former Major League Baseball player Bobby Bonilla collects a $1,193,248.20 check from the New York Mets every July 1, and he’ll continue to do so until 2035. The catch? He hasn’t played for the team in 24 years.

    Bonilla scored this deal in 2000, when the Mets still owed him $5.9 million. However, the all-star player agreed to defer his payment to let the Mets invest in the team and stadium. In return, the Mets agreed to pay Bonilla back $29.8 million over 35 years — one of the MLB’s most famous deals ever.

    In fact, ever since, July 1 has been known as Bobby Bonilla Day.

    “For Bobby Bonilla, they’ve taken big lump sums of money [and] instead of giving [him] money up front, they’ll convert that money into a future stream of income payments,” said certified financial planner Louis Barajas, CEO of International Private Wealth Advisors in Irvine, California. Barajas is also a member of CNBC’s Financial Advisor Council.

    More from Personal Finance:
    Social Security phone mishaps hampered beneficiary services
    Your 401(k) plan may be worsening climate change
    Psychologist recommends spending plans over budgeting

    While most investors can’t expect a deal anything similar to Bonilla’s, they do have access to a similar financial product called an annuity.

    Annuities provide a guaranteed stream of income

    An annuity is a lump sum of money, often taken out of a retirement plan, which is converted into a future stream of income, or annuitized. Insurance companies guarantee payments for a set period that can span the rest of your life or beyond. Payments might begin immediately or be deferred.

    The allure for investors is a guaranteed stream of income, much similar to Social Security or pensions. That can alleviate fears of running out of money in retirement.

    How do insurance companies determine how much money they’re going to give you? It’s based on a couple of things, said Barajas. These include the rate of return they think they can earn on the money you give them, and your life expectancy, added Barajas.

    Demand for annuities has soared this year amid concerns about the economy and lingering hints of a potential recession. Annuities struck a record sale of $310.6 billion in 2022, according to estimates released by Limra, an insurance trade group.

    More than half, or 54%, of savers are considering a type of guaranteed lifetime income, according to a survey by Morning Consult for the American Council of Life Insurers.

    Annuities are an investment product that have benefited from record-high interest rates — the higher the interest rate, the better the monthly rate you’re going to get, Barajas said. Calculations are starting to change because companies have to figure out how to benefit the consumer and people are, on average, living longer, sometimes to age 95 or 100, he said.

    “If you annuitize it, the company has to guarantee you that income,” said Barajas. “Once it’s annuitized, it’s guaranteed for the rest of your life.”

    Three ways to gauge an annuity offer

    Annuities aren’t for everyone, however. There are many different kinds, and some can be hard to understand or come with expensive terms and fees. There can also be restrictions and important but easily overlooked fine print, including terms that make it difficult or impossible to get your principal back if you change your mind.

    Here are three ways to educate yourself before signing an annuity contract, Barajas said:

    1. Look at the insurance company’s reputation. You’re giving a significant amount of money to an annuity provider, so make sure it has a good reputation, including a strong credit rating from an agency, such as AM Best or Standard & Poor’s, and favorable reviews from customers.
    2. Vet the agent or advisor. “Don’t pull the trigger with the first person you meet,” said Barajas. Check that the person selling you the annuity has a good reputation and a clean professional history. Ideally, pick someone who isn’t a captive agent and can work with multiple companies. “I always tell clients to ask, ‘Are you working as fiduciary for me, and can I get that in writing?’”
    3. Consider how an annuity fits in your larger financial plan. There are no good or bad products; it’s the context, said Barajas. “What are the pros and the cons?” he said. “Every investment has a plus and a minus.” Make sure you fully understand the commitment you are about to make and talk with a financial advisor about whether other products might be a better fit for your needs.

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  • The Baby Boomer Retirement Crisis Is Here. Why the Richest Generation Is Hurting.

    The Baby Boomer Retirement Crisis Is Here. Why the Richest Generation Is Hurting.

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    The Baby Boomer Retirement Crisis Is Here. Why the Richest Generation Is Struggling.

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  • Q&A: A look at $1.9B Powerball jackpot, how it grew so large

    Q&A: A look at $1.9B Powerball jackpot, how it grew so large

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    DES MOINES, Iowa — Monday night’s estimated $1.9 billion Powerball jackpot is nearly $400 million larger than the previous record jackpot and will keep growing until someone finally wins the prize.

    The jackpot started at $20 million back on Aug. 6 and over three winless months has grown to be 95 times as large. Put another way, it’s a crazy amount of money.

    WHY SO LONG WITHOUT A WINNER?

    Those who spend $2 on a Powerball ticket might wonder if something is wrong when 40 drawings pass without a jackpot winner, but this is how the game is designed. With odds of 1 in 292 million, that means it’s unlikely anyone will win the prize until a growing jackpot attracts more players. And more ticket sales mean the lottery can raise more money for public programs, which is the point of the state lotteries. Still, it has been an awful long time without a jackpot, and if there isn’t a winner Monday night, a new record will have been reached: 41 draws without anyone matching all six numbers.

    PLENTY OF PEOPLE MUST BE PLAYING NOW, RIGHT?

    Yes and no. Many, many more people are buying tickets now that the jackpot has reached nearly $2 billion. That’s clear from the fact that when the jackpot started at $20 million in the summer, players bought only enough tickets to cover less than 10% of the 292.2 million possible number combinations. For Saturday night’s drawing, that had climbed to 62%, so millions and millions of people are playing. But that percentage is still less than the 88.6% coverage reached for the previous record jackpot in 2016. And if 38% of the possible number combinations aren’t covered, there is a good chance there won’t be a winner.

    WILL THE EVENTUAL WINNER REALLY GET $1.9 BILLION?

    Pity the poor Powerball winner, as the lucky ticketholder will see nothing close to $1.9 billion. It’s only a question of how much less.

    First, that $1.9 billion prize is for winners who choose payment through an annuity, which sends out a check annually for 29 years, with a 5% increase each year. But almost no winners take the annuity, instead opting for cash. For Monday night’s drawing, the cash prize would be $929.1 million, or less than half the annuity prize.

    Federal taxes would take an additional bite, lessening the payout by more than one-third, and many states tax lottery winnings would as well.

    The difference between the annuity and cash prizes has grown larger recently because inflation has resulted in higher interest rates, which means money invested in the annuity can grow.

    DO I HAVE A BETTER CHANCE OF WINNING IF I BUY MORE TICKETS?

    Yes, but your odds of winning aren’t significantly improved. Think of it this way: If you buy one ticket, you have a 1 in 292.2 million chance of winning the jackpot. If you spend $10 for five number combinations, your chances are better, but at 5 in 292.2 million you still almost undoubtedly are not going to hit the jackpot. The same is true if you spend $100. Lottery officials say the average player buys two or three tickets, meaning they’re putting money down on a dream with very little chance it will pay off in a rich reality.

    WHERE IS POWERBALL PLAYED?

    Powerball is played in 45 states, as well as Washington, D.C., Puerto Rico and the U.S. Virgin Islands.

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  • Going to win $1.2B Powerball prize? Consider not taking cash

    Going to win $1.2B Powerball prize? Consider not taking cash

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    DES MOINES, Iowa — Think you’re a sure bet for Wednesday night’s estimated $1.2 billion Powerball jackpot?

    If so, you need to decide whether to take cash, which would actually pay out $596.7 million, or choose the $1.2 billion annuity option that is twice as large but is paid out over 29 years.

    Winners of giant jackpots nearly always take the cash, and financial advisers say that might be a mistake.

    Nicholas Bunio, a certified financial planner from Downingtown, Pennsylvania, said even with his expertise, he would take an annuity because it would so dramatically reduce his risk of making poor investment decisions.

    “It allows you to make a mistake here and there,” Bunio said. “People don’t understand there is a potential for loss. They only focus on the potential for gain.”

    The gulf between the cash and annuity options has become larger because inflation has prompted a rise in interest rates, which in turn results in potentially larger investment gains. With annuities, the jackpot cash is essentially invested and then paid out to winners over three decades.

    Under the annuity plan, winners will receive an immediate payment and then 29 annual payments that rise by 5% each year until finally reaching the $1.2 billion total.

    Lottery winners who take cash either don’t want to wait for their winnings or they figure they can invest the money and end up with more money than an annuity would offer.

    As Jeremy Keil, a financial adviser from New Berlin, Wisconsin, put it, “There is no bad choice.”

    Keil said Powerball’s annuity assumes a 4.3% investment gain of the jackpot’s cash prize.

    “If you think you can beat the 4.3%, you should take the cash,” Keil said. “If you don’t, take the annuity.”

    While purchasing five Powerball tickets at a Speedway gas station in Minneapolis, 58-year-old Teri Thomas said she’d rather take the cash prize because she doesn’t think she’ll live long enough to collect an annuity over 29 years.

    “And I’d rather get all my good deeds done right away and feel good about the giving,” Thomas said, adding she would donate to groups that do medical research for children as well as help veterans, homeless people and animals.

    Of course, it’s good to keep in mind that your chance of winning the jackpot is incredibly small, at 1 in 292.2 million. That’s why no one has won Powerball’s top prize since Aug. 3 — resulting in 38 consecutive draws without a jackpot winner.

    All that losing has let the Powerball jackpot grow to be the fourth-largest in U.S. history. If no one wins Wednesday night, the jackpot could become the largest ever, topping a $1.586 billion Powerball prize won by three ticket holders in 2016.

    Officials urge anyone lucky enough to win a Powerball jackpot to consult a financial adviser — while keeping that valuable ticket safe — before showing up at a lottery office for an oversized check.

    Matt Chancey, an investment adviser in Tampa, Florida, said that certainly makes sense. But Chancey also urged winners to understand that if advisers earn a percentage from the investment of all that money, they have a financial stake in how the money is paid out and should be clear about any potential conflict.

    “If you go to a financial person and say you want to invest $1 billion, the financial person will say take the $600 million and we’ll pay taxes on it, you’ll have $300 million left over and I’ll invest it for you,” Chancey said. “That investment adviser will get fees off managing that money.”

    Chancey said talented investors probably could make more money than paid through an annuity but there is risk and advisers need to be open about their potential gain depending on how the jackpot winner’s invest choices.

    Powerball is played in 45 states, as well as Washington, D.C., Puerto Rico and the U.S. Virgin Islands.

    ———

    Associated Press writers Trisha Ahmed in Minneapolis and Margery A. Beck in Omaha, Nebraska, contributed to this story.

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  • Rising Capital Associates Announces ‘Structured Settlements’ Scholarship

    Rising Capital Associates Announces ‘Structured Settlements’ Scholarship

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    Leading Structured Settlement Company Offers $1000 Scholarship to Undergraduate and Graduate College Students

    Press Release
    –


    updated: Dec 1, 2016


    Delray Beach, FL, December 1, 2016 (Newswire.com)
    –
    Rising Capital Associates, a leading structured settlement purchaser and annuity buyer, is giving a $1,000 scholarship to one student to assist them with their post-secondary education costs. The Rising Capital Associates Structured Settlements Scholarship is open to any student enrolled in an undergraduate or graduate degree program by September 1st, 2016 at any accredited U.S. college, university or institute.

    Each applicant must submit an essay of 2000 words or less, answering the question, “If you were offered a million dollar lump sum today, or three million dollars paid monthly over the next 30 years, which would you choose and why?” The essay must be submitted via an online form by Dec. 31, 2016.

    “We know that college can be expensive. We want to assist in making it a bit easier for students to focus on their studies by offering a scholarship to assist with school-related expenses.”

    Gina Tedesco, Rising Capital Associates

    The winning essay will be judged on the following criteria: content, style, creativity, and how persuasively the applicant presents his or her point of view. After the deadline of December 31, 2016, all entries will be reviewed and after review, the winning essay will be selected by a panel of three judges. All entries must be entered through the official Rising Capital Associates Structured Settlements ​Scholarship submission form.

    “We know that college can be expensive,” said Gina Tedesco at Rising Capital Associates. “We want to assist in making it a bit easier for students to focus on their studies by offering a scholarship to assist with school-related expenses.”

    The applicant of the winning essay will receive a one-time scholarship of $1,000 to be applied to school-related expenses including tuition, fees, books, and on-campus room and board.

    About Rising Capital Associates

    Rising Capital Associates has over 30 years of combined industry experience in the life settlement market. The company focuses on working with you to find a solution that meets your financial needs. They help customers with structured settlements and annuity purchasing, and have a 100 percent satisfaction guarantee. Rising Capital Associates is dedicated to providing clients with the best lump sum purchase for your structured settlement, annuity, or lottery payment.

    For more information, please visit http://www.rcapitalassociates.com/ or call 855-805-3863.

    Source: Rising Capital Associates

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