Winning the lottery sounds like a dream, but for some, it quickly turns into a nightmare. In fact, people who win the lottery are more likely to declare bankruptcy than the average American.
Should your lucky numbers finally pay off, you can help prevent the financial woes of past winners by knowing your payment options. Fortunately, we’re here to help.
Keep reading to learn more about lottery annuity payments so you know what to expect should you become a winner.
What Is an Annuity Payment?
When you win the lottery, you have two payout options. You can either choose a lump sum or ongoing annuity payments. As its name suggests, the lump-sum option means that you’ll get your full payout (minus taxes, of course!) all at once.
An annuity payment, on the other hand, guarantees you a recurring payment over a set amount of time. In most cases, you’ll get 30 total payments. You’d get the first one upfront, and then another payment each year for the following 29 years. Generally speaking, in this case, each payment would be 5% higher than the previous one, so you’d receive a little bit more each year.
These structured payments are backed by the government, but each lottery company and state have options that vary. If you become a winner, make sure you understand your options based on your particular state’s guidelines.
Pros of Lottery Annuity Payments
The biggest pro of choosing the annuity payments is that you have guaranteed income for 30 years. This can give your life a certain sense of stability that you might otherwise not have. It also takes out a lot of the risk of going bankrupt, since you won’t have a large sum that you accidentally spend too quickly.
Also, in some cases, you may pay less in taxes if you take the annuity option over the lump sum. And, if you die before the full amount has been paid out, your estate will receive the remaining funds, so your heirs will be taken care of in the event of your passing.
Finally, the annuity payment gives you options. If an emergency pops up and you need a large sum of money quickly, you always have the option to sell your annuity payments. Learn more about companies that purchase annuity payments by clicking the link.
Cons of Lottery Annuity Payments
One downside to choosing annuity payments is that you don’t have full control over your money like you would with the lump sum. This means that you can’t invest the full amount of money to help get even more returns.
Another thing to consider is your age. While your estate will receive your remaining funds if you die, you won’t be able to enjoy the money as much if you win the lottery in your 80s. In that case, you might prefer to receive the lump sum so you can fulfill some of your dreams.
Know Your Options
Now that you know more about lottery annuity payments, you can make a more informed decision about your payout if you win the lottery. As a result, you can prevent some of the mistakes that past winners have made.
Looking for more like this? Check out our other articles before you go.