How Will I Get My Lottery Jackpot?

While images of mansions, yachts and private airplanes are sure to tempt lottery players, the amount a winner pockets following a win is not likely to match the advertised jackpot. That’s because the federal government and most states take a bite out of winnings for operational costs, advertising and other expenses.

In some countries, including the U.S, winners can choose how to receive their prize: as a lump sum or an annuity. Those who choose the lump sum option are typically closer to earning the advertised jackpot amount than those who opt for an annuity payout over 30 years.

Most lottery winners decide to take a lump sum, which is around half the advertised jackpot value. That’s because they don’t want to be stuck with a large annual payment for 29 years. The annuity option is also a lot less attractive from a tax standpoint. The IRS requires that lottery agencies withhold 24% of all winnings over $5,000 for taxes. That could put you in the top tax bracket each year, depending on the size of your jackpot and other income.

Regardless of how you’ll receive your winnings, it’s important to consult with financial experts before making any major decisions. This includes a tax attorney, estate planner and wealth management adviser, Azoury said. The adviser can help you make the best choice for your unique situation and goals. AARP’s financial advisor matching tool can help you find a professional who serves your needs.