Tuesday, March 6, 2007

How to Spend $355 Million Wisely

Today, the Mega Millions will hold a drawing for one of its largest jackpots ever, estimated at $355 million! Now it is a lot of money, but how much money is it really?

Typical lotteries allow two payout types: regular payments or lump sums. Most people prefer lump sums, but tend to not realize what they can actually get. So let's break it down.

As regular payments, $355 million will be paid out over 26 years. Assuming monthly payments, you'll get $1.14 million each month. At $12 million a year pre-tax, you'll be living pretty, but no one likes this choice. Why take it over 26 years when you can get it now?

Unfortunately, if you take it right now, it'll only be $48.0 million, pre-tax. Assuming a 35% tax rate, you'll still get $31.2 million.

Now what?

Smart money says take the first $20 million and run to a big Wall Street bank that has a reputable wealth management firm. A typical firm can get you about 10% interest rate on a deposit that size. That alone will guarantee you about $2 million a year.

Second, its time to pay off some of your loans. We'll wipe off that $0.2 million in change.

Next, its time to find a nice house in the Hamptons. $5 million sounds like a good buy (Like this one, see picture).

Finally, you've got about $6 million left over for FUN! Send $1 million to your favorite charity. Buy five Lamborgini's (@ $200K each). Keep one, give four to your new best friends.

With $4 million left, what is there left to do? Go on a crazy month(or year)-long vacation somewhere! You're going to have a lot left over, so maybe try to spend a week in Vegas!

With cash like that, you'll be in a high-roller suite for sure.

Once its all done with, you'll probably still have about $2 million left. Its time to think about a yacht. This one fits the bill.

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