It’s a special feat to win the lottery, but now is the time for some serious decision. The first important question is which lottery payout option you’ll choose. Major lottery games like Powerball offer lump sum and annuity payouts.
It’s easy to explain the lump sum – you pick to receive the entire prize at once. The trick is you only get around 60% since the lottery rules allow the platform to reduce your reward in this case. So, is a lump sum really better than an annuity? That’s what we are trying to figure out in this guide!
How Does the Lottery Annuity Work?
Before choosing the winner of the lottery cash option VS annuity battle, let’s explain both. A lottery annuity payout option Kbc official website indicates you pick to receive the prize in several installments. Those installments usually stretch over several decades. In big US lotteries like MegaMillions, the rule is to spread the prize across 30 annuities. The trick is there’s a yearly increment rate to accommodate inflation. That’s why you’ll receive the least in the first annuity and the most in the last annuity payout.
Mega Million Payout Options: Lump Sum VS Annuity
Did you know that the biggest jackpot a single winner received was in MegaMillions? The guaranteed prize fund is $40 million, and the reward can only increase.
Now, let’s say you won $100 million. If you choose annuity payouts, the first thing to consider is paying the taxes. They depend on the state and country but are usually around 30%. So, you’ll have around $70 million to receive across 30 years. Now, if we assume that the yearly increment is 5%, you receive $1 million the first year. Your last installment will be $4.33 million.
But if you choose the lump sum, you get around $43 million right away. Here is how – the lottery rules imply that your prize will be lowered if you pick the lump payout. You’ll receive around 61% of the prize, which leaves you with $61 million. Upon paying the taxes, you’ll go home with $43 million. If you need help, you can check the MegaMillions payout and tax calculator we designed.
Powerball Payout Options: Lump Sum VS Annuity
The story in US Powerball is similar to MegaMillions. You have both options to choose from, and it only depends on how you prefer the prize. The lump sum will reduce the total prize value, but you’ll get all your money now.
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