Nobody would say that the choice to sell your lottery payments is an easy one. But the fact is that winning the lottery isn?t exactly what people dream of it being. In fact, it?s a much more complicated process than most could ever imagine, which is why many winners are selling lottery payments in favor of lump sum payouts. Why is this? Well, once you know more about the reality of being a lottery winner ? versus the dream we all have ? you?ll be sure to understand.
Why Are People Selling Lottery Payments?
To understand why people are selling lottery payments, you first need to understand the realities of being a lottery winner. For one thing, 70% of all lottery winners ? whether they won $1 million or $100 million ? lose or spend all of their money within a five year time frame. This is somewhat difficult to grasp ? until you recognize the way lottery money is disbursed, and why so many wish to sell annuity payments. Rather than get a lot of money at once, most lottery winners end up with annuity payments. The Mega Millions annuity, for example, gives one immediate payment followed by 29 annual payments, with each payment being 5% bigger than the last. These payments are subject to taxes, with withdrawals before age 59.5 including a 10% early-withdrawal fee. Many fees and taxes, in fact, are attached to annuities. That?s why people are losing their money before they even get it. Annual annuity fees alone can be as much as 3%, and over the years this will take a toll.
Lump Sum Versus Annuity: What It Really Means
By selling fixed annuities, lottery winners get large lump sums rather than many annual or monthly payments over the course of years. This money is theirs to do with as they wish, and isn?t subject to the extra fees or penalties that come with lottery payments. Part of the reason why many choose to sell their lottery payments simply has to do with peace of mind. The money is yours to control, and yours alone. You don?t have to worry about it being left with others, and you can make withdrawals without extra penalties. This also eliminates many of the confusing taxes that come with annuities.
What Can I Do With A Lump Sum Payout?
That?s the beauty of a lump sum ? you can do whatever you want to do with it. Many choose to settle their debts with lump sum payouts, which isn?t something you can necessarily do when depending upon monthly payments. Another great thing about lump sums is that they allow people to do what they?ve always wanted to do, whether that means taking a dream vacation, buying the car you?ve dreamed of, or investing in your future. The choice is up to you, as it should be.
