Friday, August 25, 2006

I'm a numbers dork

Yup.  I’m not ashamed to admit it.

Last night we watched the finale of Treasure Hunters.

Yes, I know that was, like, 2 weeks ago, but get off my back; I have a new baby.  (I’m going to be milking that excuse for about 18 years.)

Anyway, the winners get a prize of 1 million each.  There were 3 winners, so you can do the math.

Genworth Financial was the sponsor of the prize.  My wife says “There’s no way they can do this again, that’s a lot of money.”  I say “It’s not like they’re giving away 3 million dollars, plus they have 3 new clients.”

That got me thinking.

The disclaimer thingie said they either got a 25 year payout from an annuity or a lump sum.  So I go to my calculator and begin to calculate.


A 25 year annuity that pays 40k a year ($1,000,000) is “only” about $570,000.  that means that after 25 years the annuity (assuming a 5.25% interest) will be valued at $0 and the contestants will have received $1,000,000.  Or they can receive a lump sum of something like $570,000.  To compound the dorkiness, I filled out a 2005-1040 tax worksheet complete with form 6251 (Alternative Minimum Tax) to determine our new millionaires will be paying $143,430 in taxes on their booty if they take the lump sum.  That is, of course, assuming they earned nothing else and I’m almost certain that they didn’t earn much for the rest of the year.

So, their net take, less taxes, will be $426,570.00.


$426,570, assuming the same 5.25% payout that I assumed from Genworth (which is pretty conservative and allows for added income of 1 – 4% to be plowed back into the fund for a hedge against inflation) will yield a PERPETUAL payout of $22,394.93.  Plus these kids will have something to hand down to their kids when they die.


Alternatively, they could take 40k for the next 25 years and Genworth can take the $570,000 and make 3 – 5% on the money while giving only 5% out to the winners.  The winners’ children get nothing and the party that controls the funds makes all the benefit. 




This is, by the way, also why social security is a rip off.

I looked at a pay stub from awhile back that said $88.99 was being “contributed” to social security every 2 weeks.  That comes to $192.81 a month.  At the same conservative 5.25% that $192 a month becomes $314,174.58 after 40 years.  If that were an actual account under my own control that would yield (at the same 5.25%) $1374.51 a year for ever and ever and ever AND I’d have something to hand down to my children when I die allowing them to live forever with someone who works part time, takes up no space, and doesn’t eat (that is, an extra $16k a year of free money).  What would you do with an extra $16k a year of free money?  Whatever you want, that what.

But I get a statement from my benevolent government that tells me that I can expect a whopping $850 a month from Social Security.  WOW!!  $850 whole dollars!!  Let me plan that vacation.

What’s worse the $850 means that $119,888 of MY MONEY has vanished into the governmental black hole.  Management and administrative fees, you say?  To the tune of 38%!!!  For 38% I better be getting a better return than 5.25%!!!  AARRRRGGGGGG!@!@#!@#$



I’d rather them keep the money and give it to someone who needs it and let me keep my $89 a month to invest on my own, thank you very much.


Yes, I’m a nerd.

But I’ve run a marathon, so stick it.


Blogger Vic said...

AMEN!!! Nothing makes me quite as mad as forking over that SS money every 2 weeks.

1:57 PM  
Blogger Jill said...

It boggles my mind!

5:21 PM  

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