Winning the lottery can mean the end of worry about cash, forever. It doesn’t work out that way for every lottery winner, though. Even though the jackpot amount might sound like more money than anyone could ever needs, that is not always the case. Some people get so caught up in their new lifestyle that they forget to put anything aside for a rainy day, and faster than you might image, they find themselves broke. If you want to avoid that fate, you might want to consider opting for the Powerball annuity payment option.
The annuity payment option means that you receive your Powerball payout over the course of 30 years. That might sounds like a very long time to get your hands on all that cash. It also might not sound like as much fun as collecting tens of millions of dollars all at one time. But, taking that lump sum payment has plenty of drawbacks. First, you will be taxed by the federal, state, and local government for the entire amount of your winnings the year your receive them. That means once you receive your money, you are looking at paying out at least 30% in taxes right away. Not a small chunk of change to be parting with at one time. Once you pay your taxes, you will need to find a way to manage the amount of money you are left with in such a way as to make if profitable for you for many years to come. If you are not used to handling large sums of money - and very few people are really used to handling sums of money as large as lottery payouts - then you will need to find a financial advisor who can make investments on your behalf, manage your money, and make sure you don’t blow through it too quickly. Finding a financial advisor who is up to the task is a challenge, and there are plenty of people who prey upon lottery winners and try to defraud them out of some of their cash. Taking responsibility for a lump sum payment requires skills most people simply don’t have.
The annuity option, on the other hand, removes many of these obstacles. When you choose the annuity, the lottery board invests the total amount of your jackpot on your behalf. You receive an annuity payment from them once a year. You still receive the entire amount of your winnings over the course of 30 years, but in this case, you also receive all of the interest generated by your investment. You keep 100% of the interest generated from your jackpot winnings, so if your investments do even moderately well, your total take from the lottery win could be significantly greater than the original jackpot amount, and therefore, of course, much greater than the amount of money you would have received if you had gone for the cash lump sum. Additionally, you will be receiving a guaranteed income for the course of the 30 years, which will allow you to have better control over your finances than if you take the entire jackpot at once.
Another benefit of the annuity payments is that you only have to pay taxes on the amount of money you receive in a year, not the sum of your winnings. You will still pay the same amount of taxes (or perhaps even a little more, because of your interest earnings), but the burden will be spread out across all the years you are receiving annuity payments.
Grabbing that whole jackpot at once can be very tempting, but if you want to make sure that money lasts for the long haul, the annuity payment option may be the best bet for you.
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