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Poll: I want to see how many people will get this wrong


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Poll: How would you cash in? (50 member(s) have cast votes)

How would you cash in?

  1. 1 million every year for the next 30 years (30 million total) (22 votes [44.00%] - View)

    Percentage of vote: 44.00%

  2. 15 million immediately (15 million total) (28 votes [56.00%] - View)

    Percentage of vote: 56.00%

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#21
Wolfpacks

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My question is where do I get these ponds from, I want to put some fish in them lol

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#22
DeathMerchant

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I picked option 1. Taking projected inflation over the next 30 years, and the high tax rate on receiving Option 2's lump sum, it seems better to get the money over a long period of time.

 

If the world economy was better (mainly US and Europe), I would be very tempted to take Option 2 and invest every penny of it. 10 years investing during a good economy would bring in an absurd influx of cash. Of course, the economy seems to swing up and down every 10-15 years so your investment growth would slow to an extent. I still don't think it would be very feasible if choosing Option 2 to make more than Option 1 after 30 years. It would require a phenomenal investor to turn large profits during times of financial crisis or economic downturn.


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#23
Blade 619

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I believe both options are free from tax in the UK.


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#24
Lord MK

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i am going with Option 2 after intial tax i get 11.5 M and putting that in a bank at a bank at 8% interest will put you over 30 M after 30 year s


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#25
Yehom

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I will post my answer later today

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#26
Yehom

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First of I would like to point out a couple of things before I want to answer the question

 

1) I like how I can immediately pick out the Americans by asking this question, because your first follow up question is: how about tax? I don’t know how the tax on lottery winnings are in the States (or the rest of the world for that matter), but here in the Netherlands you get taxed for everything above €454 for 29%, hence this wouldn’t be a problem
2) It’s funny how easy people read past my note (or are just selfish) as I’ve pointed out that the lottery will pay you out, even if something would have happened to you in the meantime, yet people have stated that they’d prefer the immediate payout solely based on the fact that they don't want to miss out
3) I’m actually surprised that in this setting, most people got the right answer, though not all got it through the right reasons (Blade was the only one who got the premise of the questions right)

 

Some background: couple of friends were hanging out and one of my friends asked this question. All my friends answered that they would wait out the 30 years to get the 30 million, because according to them 30 > 15. I however answered that taking the 15 million now is probably more beneficial, because, like Blade pointed out, the 15 million that you have now is most likely going to worth more than that future 30 million.

 

As Blade has also pointed out, factoring the ‘standard’ discount rate of 5% you’d get around 15,7 million current worth out of the 30 year 30 million. However nothing is going to guarantee that 5%, certainly here in Europe where inflation is high (Euro-zone keeps it at a max of 2%) and interest is low (interest on most European savings accounts is almost down to nothing). Also something that I haven’t heard for you: the reliability of the counterparty. I stated that you would get the 30 million, even if you pasted away, but nothing was said about the opposite situation happening. How stable is the lottery that is paying you out? There is no guarantee that your counterparty is still running business in 30 years.

These are all things that have to be taken in consideration when you work out that discount rate and depending on that discount rate is the translation of the value of future money versus value of current money. Therefore I personally would take 15 million immediately, because all in all translating that 30 million to current value, you’re probably no getting more than 15 million, taking all factors and risks in account. 

 

At the time that I’m writing my answer the poll results are as following: 10 would take 30 million in 30 years, 17 (excluding myself) would take 15 million immediately. Funnily enough most people got this, according to my analysis, right, here as in the group of friends in which this question was asked to me the first time every single person answered that they would take the 30 million.

 

@ccabal86 @Blade 619


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#27
Samus

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I like these kinda polls, gets the mind working



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Only I have the baptismal power.

Samus because of your dedicated service to IRON; your high casualty count and aid given your fellow IRONers. I hear by baptize ye in Fire and blood. You rise as IRON!

You may now wear proudly in your Sig "I have been Baptized in Fire and Blood and emerged as IRON."

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Player of Mafia; Master Samus/emudevelopment (shared); I think both were instrumental in the town’s defeat. Both were manipulative and deceptive. They clearly came out as pro-town and looked like de-facto town leaders. They led the lynch wagon w/o anyone uncovering their true motives.

Samus, you should be proud that you've helped make an environment where people feel safe enough to share their experiences.


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#28
welder572

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15 Mil now. I'm 50 years old. Most male men in my family die at 62, so I would take less now just in case history continues to repeat itself.


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#29
Shahenshah

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Due to time value of money, the 30'th million in 30 years will be worth less than the million today, given the current global economic system of printing money, there will only be inflation, if there is global deflation, you're fucked anyway. 

 

How less, depends on the current rate of interest/ discount rates, the simplest to benchmark would be against long-term govt t-bills. I'm too lazy to do the NPV of this right now.



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#30
Count Lugosi

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Option A: More money overall, and easier to budget. Also you won't be as apt to give the money to relatives and friends who come out of the woodwork years after you last saw them if you don't have as much at any given time. Also I could be wrong as I'm not super familiar with taxes on amounts this large, but I would think you'd lose way more in taxes from a 15 million lump sum (due to higher bracket) than 1 million per year.



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#31
JayMillz

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Option 2

 

http://www.bankrate.com/calculators/retirement/roi-calculator.aspx

 

I put in 30 years, 6% rate of return (fairly modest), $10M (max it can handle), an expected inflation rate of 2%, and a CyberNations scam tax rate of 30%. Still ended up as $34 million dollars after 30 years.

 

Edit: I chose wrong.

 

I put in 30 years, no initial investment, $1million invested yearly with all other options the same as above. It ended up as $64 million after 30 years. Option 1 is better


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#32
ToxicMcCloud

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lump sum and live off the interest



#33
Rhythmition

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I personally would take the 15million now.  Put it in a retirement plan of some sort and retire in a few years off the interest it would make.  Leaving me to pursue whatever dreams and goals I want for the rest of my life.



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#34
legoboyvdlp

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I'd take the annual payment. 1 million a year is quite enough for me, I'd rather spend it all in one year and not worry about where next year's million is coming from :P

jk, though, a million is a lot, even still, there is less tax and probably more interest with the annual payment.


What is the RIGHT answer, anyway?


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#35
DeathMerchant

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What is the RIGHT answer, anyway?

 

Technically the 'right' answer is to take the lump sum, and invest the entire thing into stocks. In theory, you will make more money doing this, then gradually getting money by taking a payout over a longer period of time and investing it slowly.

 

The only flaw to this theory, is market instability. Stock market could crash or drop heavily, or stocks that you chose to invest in may become stagnant with little to no growth. Of course, if you know what you are doing or you hire an investor you can reduce the possibility of this happening. But it all very much depends on the general health of the stock markets, both domestic and globally.

 

My personal choice was to play it safe and stick with the gradual payout.


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#36
Yehom

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Technically the 'right' answer is to take the lump sum, and invest the entire thing into stocks. In theory, you will make more money doing this, then gradually getting money by taking a payout over a longer period of time and investing it slowly.

No you've got it the other way around. 15 mil now is worth more than gradually getting 30 mil over 30 years. That's because like you said the market isn't stable, so there is a factor/rate that you need to discount that 30 mil from the future. The premise of the answer was that because the value of money from the future isn't set, it's not worth as much as money that you have in your pocket. Not because it's investable, but because it's guaranteed value. You don't know what the value of your money is in 30 years, if you're actually going to get payed for those 30 years etc.  


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#37
DeathMerchant

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Technically the 'right' answer is to take the lump sum, and invest the entire thing into stocks. In theory, you will make more money doing this, then gradually getting money by taking a payout over a longer period of time and investing it slowly.

No you've got it the other way around. 15 mil now is worth more than gradually getting 30 mil over 30 years. That's because like you said the market isn't stable, so there is a factor/rate that you need to discount that 30 mil from the future. The premise of the answer was that because money from the future isn't set, it's not worth as much as money that you have in your pocket. Not because it's investable, but because it's guaranteed value. You don't know what the value of your money is in 30 years, if you're actually going to get payed for those 30 years etc.  

 

I agree with that to an extent. You will not know the actual monetary value of your currency in the future.

 

My counter argument to that is if you live in a well established 1st world country, massive currency depreciation isn't so much of a concern. I can make a very informed, educated guess that my country (U.S.) will still exist in roughly the exact same financial stature in as it currently is now. I can say with almost absolute certainty the U.S. and Canada are the only 2 countries where the currency will remain as being consistently valuable. To a lesser extent I would also include the UK and certain EU countries, although given recent events over the past 5 years I am somewhat hesitant to include them. Canada and the U.S. will see minor fluctuations from time to time + average inflation, but its still much more stable than currencies anywhere else in the world.

 

Why did I pick the U.S. and Canada as most stable currency users? I took into account countries with regards to geographical location, population increase/decrease, debt, international trade, size, recent wars, natural resources. The U.S. and its Dollar will remain for the foreseeable future as the global currency. The U.S. and Canada are also largely geographically isolated from the rest of the world (half the world's countries could fail financially and it would only barely effect either of us). While the U.S. does have a high debt level, this could be reduced if the U.S. clamped down on spending and stopped giving away loads of money to every country that asks for financial aid. Canada has not fought a defensive war since 1812, while the U.S. had its last defensive war during WW2. Both Canada and the U.S. are rich in natural resources.

 

Please don't take this as an elitist attitude as that is not what I am trying to convey. I realize that if the U.S. was to have a financial fallout, it will likely be somewhat temporary, and unfortunately not many countries can say the same. The U.S. wouldn't turn into some 3rd world country or dissolve into multiple entities. Within 5-6 years after a financial crisis, things will likely bounce back close to their original values.


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#38
Yehom

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@DeathMerchant I'm not saying that the value of your money could depreciate, i'm telling you it IS going to depreciate. No matter where you live on this world, money loses some of its value over time. Inflation is a given, the question is just how high the inflation will be. The EU wishes to maintain a 2% inflation rate at max every year, i'm thinking that the US/Canada have set a same goal. I can guarantee you that if you had a million dollars 30 years ago in the US, that you could do a lot more with that money than that you could do with a million dollars now. I'm arguing that it goes as far as that 15 million now is worth more than 30 million 30 years into the future, given the circumstance that you don't know what is going to happen in the near future. Even though yes the Western World has kind of a hold on inflation for the foreseeable future, however you don't know what is going to happen 10 years, 20 years after that. That risk is part of the reason makes your money now worth more than money in the future. Other reasons I've already discussed above. 


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#39
DeathMerchant

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@DeathMerchant I'm not saying that the value of your money could depreciate, i'm telling you it IS going to depreciate. No matter where you live on this world, money loses some of its value over time. Inflation is a given, the question is just how high the inflation will be. The EU wishes to maintain a 2% inflation rate at max every year, i'm thinking that the US/Canada have set a same goal. I can guarantee you that if you had a million dollars 30 years ago in the US, that you could do a lot more with that money than that you could do with a million years now. I'm arguing that it goes as far as that 15 million now is worth more than 30 million 30 years into the future, given the circumstance that you don't know what is going to happen in the near future. Even though yes the Western World has kind of a hold on inflation for the foreseeable future, however you don't know what is going to happen 10 years, 20 years after that. That risk is part of the reason makes your money now worth more than money in the future. Other reasons I've already discussed above. 

That is a fair point in regards to inflation. We don't know what may cause it to spike in the future.


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Help MyMiniCity Grow!

 

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IRON STATS Wars Fought: 13 POWs Taken: 2 Nations ZIed: 2 Aid Given: $341 Million

Recruits: 7 Alliances Fought: LSF, Sparta, VE, Umbrella, DBDC, STA

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#40
ItZRouge

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Ehhh A I guess, I can't think of anything to spend it on. Or what I would do with it.






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