Decide between the lump sum and lottery annuity
It is always better to be ready for whatever it might come along and this includes both the best and worst case scenarios. For those who play the lottery on a regular basis, the best possible outcome is to win the main prize and if this happens, some practical decisions need to be taken quickly. Perfect planning will prevent any unforeseen obstacles and will enable the winners to fully enjoy their newfound wealth. Among the difficult decisions that need to be taken is whether to settle for the lottery annuity or the lump payment.
Pros and cons of choosing the lump sum
It is only fair to begin by evaluating the benefits and shortcomings of settling for the lump payment, as this is a decision taken by most lottery players who win it big. The obvious advantage is that you receive the entire amount you are entitled to right the way, and you can dispose of that money in any way you see fit. The cash is transferred straight to the bank account, and the winners can purchase the expensive property book equally pricy trips or make whatever investment they consider to be profitable.
The shortcoming resides in the fact that those who opt in for the lump payment will receive less money because in addition to taxes, the lottery withholds a significant part. At the end of the day, someone who wins a huge amount in the lottery will receive slightly above half after all the taxes and commissions are taken. The higher the price is, the larger the amounts lost, so unless the winner has a clear idea about what to do with all that money right away, it is worth thinking twice before requesting the lump payment.
Advantages and downsides of a lottery annuity
Compared to those who demand all the money at once, those who accept the annuity will have to wait for 20 or even 30 years for every cent to be credited to their bank account. It is a long period of time and for those who are elderly or not exactly healthy, this is simply too long to wait. Furthermore, many are concerned about the possibility of legal changes and with the economy struggling to recover it wouldn’t come as a surprise if the government would choose to impose higher taxes on these lottery winnings.
In terms of net amounts, at least in theory the annuity will generate at least 30% more money, which will be evenly distributed over two decades or more. Unless the prize is really high, those who intend to purchase an expensive property might have to find alternative ways, since down payments are not actually possible. It is also more difficult to make investments, as you don’t have the entire amount at your disposal and might miss out on potentially lucrative opportunities. On the flip side, there is always a safety net in place, so in case things go sideways the lottery winners won’t go totally broke.
Check out the Practical advices for lottery winners right now.
