Who Wants To Be An Annuitaire?

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The fan community is in a tizzy over the new rules for the coming season of Who Wants to Be a Millionaire?, particularly the rampant cost-cutting measures. To wit:

  • Contestants must now arrange for their own transportation and lodging and pay for them at their own expense.
  • $500,000 winners receive $125,000 after 30 business days, then $37,500 per year for the next ten years (instead of everything in one lump sum).
  • $1,000,000 winners receive $125,000 after 30 business days, then $43,750 per year for the next twenty years (instead of everything in one lump sum).

    Audience members attending a taping of the show will now be able to audition to become contestants. Some fan hopefuls-- particularly those in other areas of the country-- fear this may lead to far more contestants from the New York area, much as game shows taped in Hollywood are stuffed with southern California residents.

    This pretty much brings Millionaire into line with other daytime game shows, none of which pay to bring contestants to the studio. That benefit was a holdover from the show's prime time days, and I'm happy to have been able to benefit from it. It was pretty cool to walk down to baggage claim and see someone holding a placard with SARRETT in big block letters. Small pleasures. Having all the contestants stay in the same hotel, and therefore able to get to know each other a bit outside the studio, was also a bonus future contestants will miss.

    The new payout schedule is a bit odd, though. $250,000 winners get their money all at once, but $500,000 winners only get $125,000 up front. In fact, it'll take four years before such winners have as much money in their pocket as they'd have if they'd just stopped one question sooner. Bizarre. Of episodes broadcast thusfar from last season, only two contestants won a million and another two won $500,000, so the change is unlikely to affect many people-- unless it signals a reduction in the difficulty of questions to produce more big money winners. As far as fantasies go, however, $125,000 + $43,750 for 20 years packs a lot less punch than a check for $1,000,000.

    Update: The winner of tonight's For Love Or Money finale can choose to take the man or the money. The latter is $1,000,000 in the form of a FORTY year annuity ($25K per year, before taxes), or a one-time payment of the present cash value of the annuity. According to The New York Post's insurance experts, that's about $800K. That seems high to me, but I'm not paid to give sound bytes to big city newspapers. So the smart thing to do is take the lump sum, right? Not according to these experts. Check out this logic:

    "There is a real value to the annuity [annual payment] '' said Jack Dolan, a spokesman for the American Council of Life Insurers. "While at first glance, an individual may perceive it as something that is far less than that big prize, over the long term it is the big prize because consistent income over forty years is truly a prize."

    Uh-huh. Let's ignore the lyrical eloquence of that statement and do the math. $800,000 is $520,000 after taxes, assuming a 35% tax rate. Now put that money in a secure, conservative investment that yields 5% interest annually. Well lookee there, that's a $26,000 annuity-- even better than Dolan's "true prize", and that's not even counting the principal! Financial wizards, is it really that simple? And if so, how can an American Council of Life Insurers spokesman possibly make such an asinine statement and remain employed?

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    "how can an American Council of Life Insurers spokesman possibly make such an asinine statement and remain employed?"

    Because he doesn't want his insurance company to have to pay lump sums out to people, so he will say anything to make small payments look good.

    Of course, for some people, who have no control over impulse spending, there actually is some truth to it being a good thing. But for most of us...

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