£550 a week or £550,000 lump sum

trevman · 5 April 2018 at 2:12PM

For those of you that like do to some financial math;

The winner was offered the choice of a C$1m (£550,000) lump sum or C$1,000 (£550) a week for the rest of her life.

https://www.independent.co.uk/news/world/americas/woman-lottery-win-first-ticket-18th-birthday-teenager-canada-charlie-lagarde-quebec-a8277391.html

An interesting problem to have. It would take 20 years of weekly payments to accumulate the lump sum, but then 5% a year return would get you the same amount at 550 a week.

vernall · 5 April 2018 at 2:21PM

Take the lump sum, you could be hit by a bus in 3 weeks time and not of even got enough to pay for your funeral

jamei305 · 5 April 2018 at 2:22PM

You'd have to be confident that the entity responsible for giving you 550 a week would still be around in future decades and still willing and able to carry on paying out. Also they didn't mention inflation so the 550 might be worth peanuts down the line.

I'd take the 550000 now. Then I could invest and spend it how I wanted depending on circumstances.

Fatbritabroad · 5 April 2018 at 2:22PM

For me id take the million but in her situation i think shes made a wise choice. Although i did think if shes sensible enough to pick that shes probably sensible enough not to blow the lot

slapmatt · 5 April 2018 at 2:25PM

For me, a big factor would be the tax implications of either choice.

$1,000 a week at 18 seems a bit pointless, as to buy anything meaningful would require significant saving or a mortgage which would obviously attract interest and you wouldn't benefit from inflation reducing your debt.

Reaper · 5 April 2018 at 2:27PM

You are missing the two important factors:
1) The income option is tax free, whereas investing the lump sum yourself is not
2) She is young, so will be better off taking the income in the long run.

So she made the right choice. But if you were 80 obviously the lump sum would be better.

dealer_wins · 5 April 2018 at 2:31PM

Under 30, possibly the weekly amount, over 30 take the lump sum would be my rough suggestion.

Even if I were under 30 I think I would go for the lump sum, a bird in the hand and all that!

eskbanker · 5 April 2018 at 2:32PM

So an annuity rate of 5.2%, tempting for many pensioners, never mind 18 year olds?!

ewaste · 5 April 2018 at 2:40PM

I would imagine asking on a Savings and Investments forum there might well be many in favour of managing their own money and risk for the likely probability of better returns and having the capital available shoud they need it.

The Tax free and somewhat de-risked weekly income for life is attractive for someone at the age of 18 albeit with the risks of inflation and lottery solvency. Nothing says they have to spend that tax free income so they could also be investing a portion as time progresses etc.

There are so many variables and scenarios given the timescales involved.

dunstonh · 5 April 2018 at 2:48PM

I haven't read it, so apologise if its covered, but was there indexation for inflation on the monthly?

If no, then whilst the income seems to be a good idea, the level of income after inflation in 20 years time is going to be low. If it was spent poorly in that 20 years then the latter part of their life will see the money being too low to make a difference.

This is a bit like many financial decisions. The best answer on paper in pure monetary terms is not always the best answer when individual circumstances and behaviour are taken into account.

binaryuniverse · 5 April 2018 at 2:57PM

A lump sum would allow me to buy a house outright, immediately. Which would save me huge amounts in rent/future mortgage payments, and the current amount I'm putting away for a deposit at the moment.

So it'd be very tempting to go for the lump sum.

£550 a week or £550,000 lump sum

Which would you take? 79 votes

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