Everyone wishes for a little bit of luck every once in a while. Even though many people may hope that traffic isn’t too bad on their way to work, or that class will get canceled the next day, some aim a little higher. Considering the massive amounts of debt that are facing citizens in the United States, hoping for a pile of money to drop in your lap is not uncommon. Fortunately, the lottery offers the chance for people to do just that.
The lottery is the most widely spread and used form of gambling in America. The easy and cheap cost of entry is affordable enough for anyone to enter. To do so, one must simply travel to the nearest gas station or convenience store and jot down their lucky numbers. From there on, it’s just a matter of waiting.
For those lucky few who do find themselves sitting in a pile of lump sum lottery winnings, there is still work involved in receiving the money. The problem that lottery winners face, is the enormous taxes that coincide with lottery winnings. The government can withhold up to 25% of lottery jackpot winnings, which is a substantial chunk of change from a multi-million dollar prize.
There are essentially two ways to handle an individual’s winnings. They can choose an annuity, or just a lump sum lottery payout. An annuity settlement allows the winner to receive fixed sums of money every year, rather than all at once which will accrue higher taxes. The Mega Millions for example offers a version of lottery annuity wherein they pay the winner one immediate payment, which is then followed by 29 annual payments; each payment is 5% larger than the previous one.
The choice between an annuity or a lump sum lottery payout can be difficult to make in the heat of the moment. Having all of the money at once is tempting, but overall you will receive more from structured settlement annuity payments. If it’s any indication of how large of an impact this can have, consider that about 48% of lotto winners still work after they’ve won.
Take time to weigh your options before taking the lump sum lottery payout. It could mean the difference between working and sitting on a beach for the rest of your life.