The latest Powerball drawing didn’t produce a winner, so the jackpot is now over $333 million. It’s likely to edge close to $350 million before the next drawing.
You see stories like this every few months. It makes it worth playing the lottery just in case you have the winning ticket.
You’ll have a major decision to make if you do win the lottery. Your lottery payout options are to take a lump sum or annuity payments.
Keep reading to discover what the best lottery payout option is for you.
Taking the Lump Sum
A lump sum payment means that you take your winnings in a single payment. Your lottery payout is considered income by the IRS and state treasury departments.
Your windfall is subject to tax withholdings. Any winnings over $5,000 have 24% withheld for federal income taxes. Most states withhold a small percentage for income taxes as well.
Your lottery payout after taxes is somewhere between 76% and 65% of what you won.
If you win a huge payout, you may owe even more in taxes. You’ll want to contact a tax professional and financial advisor immediately, so you don’t get into tax trouble.
On the positive side, tax rates for the highest earners are at the lowest they’ve been in decades. You’ll be able to enjoy more of your winnings.
Another advantage to a lump sum payment is that you can pass your wealth on to your heirs. You’ll be able to plan an estate and create trusts to protect your wealth.
One of the disadvantages of taking the lump sum is that you could spend the money in a short period of time. You might not be able to get through $300 million, but you could certainly overspend $5 million.
What Are Annuity Payments?
Annuity payments allow you to take annual payments for a certain number of years. You’ll get one payment upfront, and annual payments spread out over 29 years.
It seems like a safe option because you won’t overspend your money. You could retire and live off of your winnings.
If you pass away unexpectedly, most lotteries pay out the remaining funds in a lump sum to your estate. If you don’t have a will in place, that leaves a messy situation for your heirs to clean up.
Annuity payments leave you with more financial options. You might need more cash to pay for a large medical bill or emergency situation.
You can cash out the annuity through Right Way Funding. It’s like taking a lump sum after you decide to take the annuity.
Many people think that annuity payments are the best lottery payout option because they can control their spending habits.
Choose the Best Lottery Payout Options for You
Out of the two lottery payout options available, which is the best lottery payout option? It depends on several factors. You always want to consult with financial professionals before you make a decision.
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