A woman from Laval, Québec, Canada had the great fortune to hit the grand prize on a lottery scratch-off ticket just before Christmas. Little did she know, though, that she would become the center of a social media debate a month later.
Maria Caroli won the top prize in Loto-Québec’s “Gagnant à vie” game, CAD$1,000 (US$730) per week for life. Per the game’s rules, she had the option to take a CAD$1m (US$730,084) lump sum instead. Canada does not tax lottery winnings and it appears the lump sum would have been the full $1m, not discounted because of the time value of money.
many believe she should have taken the lump sum
Caroli took the $1,000 per week, and when the internet got wind of it this week, it did not sit well with most people. She is allegedly 58 years old, though Loto-Québec did not disclose her age in its press release. It is primarily that reason why many believe she should have taken the lump sum.
The thought process makes sense: Caroli would have to live to about 78 to (19.23 years) for the $1,000 per week to add up to $1m. In the meantime, if she took the lump sum, she could earn interest on whatever she saves, dramatically increasing its long-term value and extending the number of years she would need live to end up with at least a million from the weekly payments (she could also earn interest on the weekly payments, of course).
Additionally, as many pointed out, nobody knows what’s going to happen tomorrow, so she could pass away long before her weekly checks amount to anywhere close to $1m. People say take the lump sum and enjoy it.
Those who feel the weekly payment route was the prudent move look at two things. First, there is less risk of blowing $1,000 week-by-week or being crushed by a bad investment than there is with $1m all at once. And second, if Caroli does live to a ripe, old age, she will end up with more than $1m, though, as mentioned, this ignores possible interest or other return on investment.
For those wondering, the $1,000 weekly payments are transferable to Caroli’s heirs if she dies within 20 years. So, in that sense, again, ignoring interest, she is guaranteed at least $1m.
