Who wants to be a millionaire?
you just won $1 million dollars in the lottery! they offer you two options for your winnings: a lump sum payment right now, or $100,000 a year over the next 10 years. current 10-year interest rates are at 5%, and the current tax on lottery winnings is 40%.
what is the amount you will receive today with the lump sum option?
which option would you select? how would you present your argument for your decision in a debate?
sorry, you didn’t win the lottery, but here’s a way you can still be a millionaire! starting at age 22, every night you take $5 out of your pocket and put it in a manila envelope (title it “lottery winnings”). at the end of the year, you place the money from the envelope in a stock fund with an average interest rate of 10%.
how much will you have in the account when you retire at age 65?
what would be different if you started this plan later in your life?