Lottery Winners Can’t Keep All of the Money – Annuity Or Lump Sum

The Powerball jackpot has ballooned to an eye-popping $1.765 billion, but even if you have the winning ticket, you may not get to keep all of that money. Lottery winners must decide how to receive the funds and are typically offered the choice of a lump sum payout or an annuity that will pay out annual payments over 30 years.

The lump sum option allows you to enjoy your windfall immediately, but it will put the prize in your highest tax bracket for the year of the win and could leave you with less than advertised. The annuity option provides a lower initial payout but will grow each year by 5%, and according to USA Mega, will have you close to the advertised value after taxes by the end of the 30th year.

When you are deciding whether to take the lump sum or annuity, it is best to seek financial advice and consider your goals. A sudden infusion of cash can change anyone, but it is especially important to stay grounded and hammer out a wealth management plan and financial goals before you start spending. Also, you should consider putting the winnings in a blind trust so that they are protected from theft and can be moved little by little into investments. That way, you can quietly start college funds and make small investments without letting your good fortune become newsworthy. It is also a good idea to hire a lawyer for estate planning and a CPA to help you prepare for your taxes.