Lottery Payout Options: Lump Sum or Annuity

Optional Lottery Payments

People who win the lottery usually have to make a very important decision: should they take their money all at once or spread it out over time?

The first is referred to as a lump-sum award. When a lottery winner receives all of his or her lottery winnings after taxes in one lump sum,

An annuity is the second choice. Although lottery annuities have been nicknamed “lottery annuities” unofficially, annuity contracts made for the purpose of delivering prize money often fall into the safest type of annuity: fixed immediate annuities.

Each state and lottery operator has their own set of rules. Winners of the Powerball lottery, for example, can choose between a lump-sum payment or a 29-year annuity. Mega Millions offers both lump-sum and annuity rewards. An initial payment is made, followed by 29 annual instalments. Each payment is 5% bigger than the one before it.

What if I told you that

“Lottery annuities” are sometimes used to refer to lottery payouts made with annuities, but they are actually fixed instant annuities backed by the United States government.

Lottery Winners: Lump Sum vs. Annuity

While both options ensure a lottery payout, the lump-sum and annuity options each have their own set of benefits. A lump-sum payoff can help winners avoid long-term tax ramifications while also allowing them to invest right away in high-yield financial opportunities such as real estate and equities.


Choosing a long-term annuity payment can save you a lot of money in taxes.

Lottery winnings are immediately reduced due to federal taxes. Instead of getting a lump sum, winners who choose to get annuity payouts are more likely to hit the jackpot than those who choose to get a single payment.

Consider the case of $228.4 million Powerball jackpot winner Vinh Nguyen, a California nail technician who was the game’s lone top prize winner on September 24, 2014.

The lump sum is preferred by the majority of big-prize winners. $134 million would have been the cost. Nguyen chose the annuity instead. This will result in his receiving the entire $228,467,735 jackpot, which will be paid out over 30 years.

Over the life of the annuity, those payments will include interest earned from investments.

Annuities also protect winners who would otherwise spend all of their money after getting a lump sum.

Some winners may spend their winnings all at once or invest them in the wrong way, which could lead to bankruptcy or other financial problems.

Not everyone is a good fit for an annuity. Annuities are set in stone, which means that winners can’t change the terms of their payouts in the event of a financial or family emergency.

A winner’s ability to make substantial investments may be limited by the annual payments. When compared to the amount of interest earned on annuities, such investments create more cash.

Taxes are a concern for the winners.

Many lottery winners’ decisions about whether to take a lump-sum reward or an annuity are influenced by taxes. The benefit of a lump sum payment is certainty: the lottery winnings will be subject to current federal and state taxes at the moment the money is won. The money can then be spent or invested as the winner deems fit once it has been taxed.

The annuity’s advantage is the polar opposite: unpredictability. Each annuity payment will be taxed at the current federal and state rates as it is received. Those who opt for an annuity for tax reasons are frequently betting that future tax rates will be lower than current rates. Lottery winners, on the other hand, have the option of selling their annuity installments for a discounted lump amount if they change their minds about taking an annuity payout.

Is it possible to sell my lottery annuity?

If you want to sell any or all of your annuity payments, you should first check with your lottery corporation to see if it’s possible.


As of right now, there are 28 places where lottery annuities can be sold after the market closes so that the winner gets the money all at once.

Winners might also sell all or a portion of their future payments. The sale’s parameters, including the total cost, are open to discussion.

For the transaction to take place, the lottery winner must obtain court clearance. A judge determines whether such a sale is in the best interests of the person.

Find out how much your future payments might be worth in cash.

Convert future payments into cash that you can use today. Start with a free estimate to learn how much your payments are worth right now!

What is the value of my lottery annuity?

People who win the lottery can use this annuity calculator to get a personalized quote from us that we stand by if they want to figure out how much their annuity will be worth when it’s sold.

When I die, what happens to my lottery annuity?

Despite concerns that the money goes to the government, lottery annuities are usually passed down to the winners’ heirs. In reality, some lottery firms only allow cash to be transferred when the annuity owner passes away. When someone dies or the contract is over, any remaining money will go to their estate or a living beneficiary.

Some lotteries will pay out an annuity award to an estate in order to make it easier for the estate to disperse the inheritance and pay federal estate taxes when it becomes due. The lottery must be legal in the state where the ticket was purchased in order for this to happen.

Selling Annuity Payments: A Step-by-Step Guide

Lottery winners who want to sell their monthly winnings must first find out if they are permitted to do so. This is frequently determined by the state in which the lottery was won, rather than the lottery winner’s home state. There are times when a loophole can be found, which is a job best left to a personal attorney.

Who Purchases Lottery Winnings?

Long-term lottery prizes are typically purchased by two sorts of firms: factoring companies and insurance companies. These are the same firms that buy settlements from people who have personal injury settlements, mortgage notes, and other long-term payouts.

Lottery winners can get quick cash for their annuity contracts through factoring companies. The lottery winner’s future payments are being purchased. The amount of the scheduled annuity payments is less than the cash payment.

The provider should provide you with a written quote at no cost to you.

Annuity businesses compete in a highly regulated and competitive industry. Inquire about the company’s certifications and licenses, as well as the validity of the quote. Inquire about any fees and the length of time the company has been in operation.

When choosing a buying firm, seek for one that has a lot of expertise and employs people who take the time to clarify the written offer. Do not sign anything if you do not completely understand and agree with it.

The firm you select will prepare a contract outlining the terms of the proposed relationship. A judge must approve the request in order to assess whether it is in the best interests of the lottery winner. The contract will be taken to a judge by the annuity purchase business.

Our partners have been evaluated by professionals in the area and are recommended by us. Thousands of people in need of cash have benefited from their services.

Selling Lottery Payments Has Tax Consequences

If you cash in any or all of your future lottery winnings, you will owe federal income taxes. Structured settlements from personal injury lawsuits are not sold in this way. Buyouts are tax-free in those circumstances.

Before making any financial decisions, please seek the opinion of a knowledgeable specialist.