If you’re like most Americans this week, you were hoping for a shot at winning the record breaking 1.5 billion Powerball lottery. While it’s too late for you now (thanks to three very lucky winners), you’ll probably play the lottery again in the future in hopes of a big payout and an early retirement. If you do get lucky the next time around, here is why you should take annuity payments over the lump sum lottery payout:
Pay less taxes
By taking the annuity payments, you only pay tax on the payments once they are received. If you go with the lump sum, you end up paying double: first you pay when you collect the prize and then you continue to pay taxes on any income received from investing the money.
Preserve your savings
We’ve all heard the unfortunate stories of lottery winners who blow all of their money in a year and go bankrupt. By taking the annuity payment option, you will only have access to a certain amount of money at a time, protecting the remaining amount. It ensures you get paid every single year, no matter what you did in the previous year.
You can always sell your annuity payments
92% of people who choose to sell annuity payments are pleased with their decision. You can do the same with your lottery winnings if you decide you want a chunk of cash instead. It’s easy to find a service that will buy your annuity payments but you need to check your local and state laws first as it is prohibited in some places.
There are a lot of misconceptions and bad press surrounding annuity payments. People think it means they have to wait around to get their money when really, it only takes about 30 days to receive your first payment. You have flexibility and choices with your annuity as well. Given the benefits listed above, it shouldn’t be a tough decision. Take the annuity payments over the lump sum and live happily ever after with your winnings!
