Some of you may think I'm a dunce (not that you don't already) for watching America's Got Talent (AGT). For three years now it has been my family's guilty summertime entertainment choice. We enjoy following the contestants through the process, seeing how America votes, and watcing Piers Morgan blast many of the particimants. Yes, now's the time when you can call me a dunce. ;-)
For those of you who have better things to do with your lives, you may not know that last night was the season finale of AGT. The final came down to soulful singer Michael Grimm beating opera sensation Jackie Evancho (who's 10-years-old, BTW). For those of you interested, here's Michael's last performance:
And here's Jackie performing with Sarah Brightman last night:
For the record, I think Jackie out-performed Sarah and should have won it all, but Michael is a great talent as well (just not as unique.)
Anyway, Micheal wins the $1 million -- which seems like a lot of money. So much so that he's planning on using it to buy his grandparents a new home. But wait a minute, he doesn't get $1 million all at once. Check this out:
The prize, which totals $1,000,000, is payable in a financial annuity over forty years, or the contestant may choose to receive the present cash value of such annuity.
In other words, the prize is like many lotteries: take a smaller amount of cash now, which over time will earn enough interest to make it worth the big amount, or wait for the full amount to trickle in over time as inflation makes each payment less and less valuable.
If we assume the annuity pays a fixed 5 percent interest rate, that would make the one-time payment worth $450,426. That, of course, would be subject to income taxes, so maybe the prize is worth $375,000, about a third of the advertised $1 million.
So that $1 million isn't really going to make him instantly wealthy and he's certainly not going to be paying cash for any home (unless he takes the lump sum -- but even then a home would suck up most of it.) Of course he'll likely go on to fame and fortune and make a boatload more off his music, he just isn't a millionaire today.
Nope, $1 million isn't always what it seems to be...