Winning a lottery annuity is often the subject of a great story, but rarely happens in real life, right? The truth is, lottery winners are living and working along side of us; chances are you know one. So why are these hidden millionaires not driving yachts or sipping champagne? Here are three hidden truths that the lotto business doesn’t want you to find out.

Taxes 
To put it mildly, lottery taxes are brutal. The government will instantaneously withhold around 25% of jackpot winnings for federal taxes, plus an additional amount for state taxes too. These heavy taxes significantly cut down on your winnings, which may be why nearly half of lottery winners continue to work even after receiving annuity lottery payments.

Hidden Fees 
Unfortunately the taxes are only the beginning of what can be a lengthy process of fees and restrictions. Many annuities have hidden fees that are enacted once you try to make a withdrawal; if you make a withdrawal within the first five to seven years you may surrender charges of up to 7% of your investment or more. In some cases, withdrawing from particular annuities before the age of 59½ can result in additional taxes plus a 10% early-withdrawal penalty. Just maintaining a variable annuity can cost $20 or $30 per year in maintenance fees — those millions don’t look as attractive as they used to.

Payouts 
Getting money is the only reason people really play the lottery anyways, right? Unfortunately a lump sum lottery payout is not going to happen, so you’ll have to receive yearly payments. Some annuities come with options for payments, including payments over a specified number of years ore payments that continue for as long as you or a spouse are still alive. A lottery annuity, such as the Mega Millions is paid out in one immediate payment followed by 29 annual payments that each increase by 5% every year. While some are happy to sit back and collect, some people want to get cash for annuity payments as quickly as they can to pay bills and come out ahead. In order to get cash for annuity payments, you’ll have to find a specialized buyer who will continue to collect on your annuity while giving you a certain amount of money in a lump sum. Selling your annuity may just be the best way to get the most out of your lottery payout.