paying taxes lottery winnings

paying taxes lottery winnings

Why Invest in mutual funds can be worse than investing in the Lottery

Never AM NOT an investment advisor and I proposed as one however my clients continue to ask how to best prepare for retirement. Should I make an IRA? Should I max out my 401 (k) contribution? Should I put more in my profit-sharing plan or pension plan? What do I say? You can also invest in the lottery!

Contrary to popular belief, none of these are wise investments. Why? Among other reasons, they all involve putting money into an investment vehicle that have little control over investment and the time and most people end up choosing mutual funds as their investment within these plans. In fact, putting your money in the Lottery would be a better investment.

Really? The Lottery is an investment vehicle? Sound crazy? Gamble my retirement funds away in a game government-sponsored gambling where I have little chance of winning? When millions of people are putting in money in hopes of winning big? When most of the money goes to another person, and most likely is strong, I will lose part or all of my money?

Wait a minute – we are, or Lottery Funds on mutual accountability? Hmm, a program sponsored by the government in which they have little chance of winning. Sounds like a lot of mutual fund investments in a 401 (k) or IRA. After all, what are my chances of retiring on Mutual Fund investments? Not very high, actually.

A couple few years ago, was listening to a financial program on the radio on my way to work. The interviewer asked the representative of a large investment fund on the Fund's performance. The Rep said The Mutual Fund had risen in value by an average of 20% per year over the previous two years. But when the interviewer asked about the average return for the average investor in the fund, the representative replied that the average investor had actually lost 2% annually. Why? Due to the timing to enter and exit the market. Compare this with the lottery, where everybody knows the exact chances of winning and the exact amount you can earn!

But what about the tax advantages great to put my money in a 401 (k) or IRA? Yeah, right! Get a tax deduction when it is young and a relatively low level of taxes to pay the taxes on the money you got when you're retired and on a higher tax bracket? Yes, that's a good deal. Or, consider the difference in tax rates capital gains and dividends, if you are not in a 401 (k) or IRA against ordinary income rates of tax on income when you take them out of your 401 (k) or IRA.

So now you're thinking you should just invest in mutual funds outside your 401 (k) or IRA? Wrong again. Mutual Funds result in capital gains taxes when fund managers trade even though you do not see them the money! You have to pay taxes, although the Fund may actually have decreased value! What about the lost opportunity cost of that money are now paying the taxes that could be put into other investments? At least with the Lottery, you know the exact amount of taxes you can expect to pay if you win and you only have to pay taxes if you win.

Yes, you say, but the game is the Lottery and I have no control over whether you win or lose. You are right. The Lottery is gambling. But so is a Mutual Fund. You have no control over the stock market and not the administrator of the Fund. The market is down, so does the Fund. At least you acknowledge that you are playing the game of the Lottery. You do not have your employer financial instututions, and even the government telling you that the lottery is a good investment. And your employer does not go so far as to match the money that comes in Lottery that could do with your 401 (k). No one is lying to you about gambling from the lottery to be, but those in positions of authority are lying about the chances of success in a Mutual Fund?

But surely, that is, there is a better chance to win money in a mutual fund that is in the Lottery? I think not. There may be less likely to lose all the money you put into a mutual fund that is losing all the money invested in the lottery. But never going to win big in a mutual fund. In fact, Mutual Funds are designed to minimize their statements by creating a portfolio "balanced." If they could minimize the risk of the market itself, this would be fine. But the problem is that no one can minimize the risk of the market without sophisticated hedging strategies are not frequently used in the Mutual Funds. At least with the lottery, you have the opportunity to win big. And you can sleep at night, because they wonder if the chances of winning are down at night because of something that happens in Tokyo.

You say you do not like the idea that most of its gamblings Lottery will support government programs? Where do you think most of the profits from your mutual fund is going to go? No, no, to support government programs, but rather to support your investment advisor and retirement, the manager of Mutual Fund? You take all the risk, you put in all of the capital, but most of the Mutual Fund revenues go to the fund manager and investment adviser. At least with the Lottery funds go to a good cause, such as the Arts.

Of course, never advise a client to trust in the Lottery for retirement. But I advise you not to rely on mutual fund investments. For my dollar, the Lottery is much more fun and at least I know that I am the game. But if you want to retire, look at other investments and work with someone who is willing to put in the time to help you retire soon and retire rich. Financial freedom is available for those who are willing to work and learn about it, but probably not for those who want to rely on such strategies as risk investment funds mutual.

Hottest Regards,

Tom

About the Author

http://www.provisionwealth.com

Do I have to pay taxes after winning the lottery and am under the amount of minimum income to file?

I worked for 1 month of this year and made about $ 1500. I won $ 1,000 in July, and tonight I donated another $ 1,000. IRS.gov website says the minimum requirement of taxable income is approximately $ 9,000 for 2009. Lottery winnings are taxable and considered "other income" according to the IRS, and my income for the year At this point, is approximately $ 3,500. Assuming that earn less than the taxable minimum income requirement, do I have to pay taxes just because I won the lottery?

No, you are not required to file tax return if your total income is from them that the filing requirement. Only if the tax is withheld by profit, tax will file for a refund.