Mature Life Features

Cecil Scaglione, Editor

Test Your Financial IQ

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By Cecil Scaglione

Mature Life Features

A fun question posed not too long ago by Kiplinger’s Personal Finance is a quick test of your economics erudition.

It asked how big a check you think you would get if you chose the cash option after winning a lottery jackpot of $100 million but had to split it with another person who also had the winning lottery number.

After cutting the winnings in half and choosing a one-time cash payment, you would get a check
of about $20 million, according to the magazine.

By taking the one-time payout instead of payments over 30 years, the prize amount is whittled
down by the principle known as the ‘time value of money” using a formula comparing the worth of today’s dollar against $1 three decades from now.

This cuts your half-share ($50 million) of the lottery winnings to about $27 million. The Internal
Revenue Service claims about a quarter of that right off the top. And then there are layers of other state and federal taxes to cut through before being able to tote your final take to the bank. However, investing a $20 million windfall into tax-free investments isn’t such a terrible financial fate.

Another question dealt with this quandary: should a woman remarry after her husband of several decades has died and give up  his Social Security survivor’s benefits based on his hefty earnings history?

It depends how old you are. If you’re 60 years or older, you can remarry and collect benefits based on your  deceased spouse’s record.

Mature Life Features, Copyright February 2004

Written by Cecil Scaglione

October 29, 2012 at 12:05 am

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