Why Choose Annuity Payments Over Lump Sums When You Win The Jackpot?

paying for your win

Imagine that you win the Grand Prize of the Powerball lottery. A sum of value that could exceed one billion dollars and that never goes below 40 million dollars. How would you like this money? A one-time, lump payment, or yearly super-salaries?

 

Annuity Payments

Most people don’t realize this, but as a player, you have complete freedom in choosing exactly how you want the money that’s rightfully yours. This is called cash value vs. annuity payments. The term cash value here refers to a one-time payout of the whole prize money. Annuity payments are spread out over 30 years. At the time of buying your lottery ticket you may choose one of these two options, and in case you win the jackpot, the method of payment that you chose on buying the tickets will be the way you receive the money. No, you’re not able to choose differently after you win, so you need to consider this carefully before you pay for and register your lottery ticket.

 

Choices

Why on earth would someone choose to get their lottery Grand Prize over 30 years, you may ask. And your question is not difficult to understand. Experts agree that in most cases people would be better off getting the Grand Prize in a lump sum, because their liquidity then is extraordinary, and you’ll be able to live off interests alone, and after a considerable time like 30 years, unless you have utterly dishonest advisors, or spend your money irresponsibly, you should be able to double your fortune many times over. Imagine getting 500 million dollars today, just placing them in a bank account would get you at least 5 million dollars per year. And nobody would even dream of just placing a sum of money like this in something as old-fashioned as a bank.

 

investing in the stock market

 

Make More Money

What you need is to invest a huge part of the cash money in the stock market. There are many alternatives, and unless you have great knowledge about these things, the best option is to choose an investment firm and invest in some of their products. Typical options are Exchange-Traded Funds and Index Funds. Doing this should give you 5% to 15% a year, which means 25 million dollars to 75 million dollars per year. And now you probably see the enormous benefits of taking your jackpot as cash money. You have the possibility of making much, much more money. In addition to the stock market, you can do all kinds of things with your money, including investing in companies, charities or even just personal spending.

 

Personal Spending

And it is with personal spending we close in on some of the benefits of not getting your jackpot as cash money. Because history shows us that many, many lottery winners simply do not manage their money well. We are talking about people who have no experience with wealth, no understanding of how to invest money, and this could create serious problems. In fact, many lottery winners all over the world manage to lose all their winnings. It may sound too incredible to be true, but these stories are a dime a dozen so to speak. You may at first not even imagine how it’s possible to spend a sum like 500 million dollars in just a few years, but if you start thinking about it, you can probably imagine how this may happen. First of all, comes personal spending. 500 million goes a long way, but if you start spending like a billionaire – without having the billion – you could soon get into trouble. A top end apartment in London, for example,   could set you back 60 million dollars right there. And that’s just for the apartment, as the country house could go for many times this value. And you would probably need houses in more than one city, right?

 

Lottery Scams

Friends and family will ask for money, maybe even friends and family that you haven’t seen for a long time. You could also be a victim of scams and fraud, as many lottery winners have. The situation could spiral completely out of control, and if you’re married, you could face a sudden divorce, which would set you back even more. All these examples show that some people who win the jackpot would probably be better off getting annuity payments instead of a one-time, cash value. With this arrangement, you can never lose your money, and you have that certainty that you can spend about 17 million dollars per year, for thirty years, without any worries at all. At the end of the day, the choice is yours. And the tricky thing is that you need to choose before you’ve even won. Most people choose cash value, but some should’ve considered annuity payments. What will you choose the next time you fill in that lottery ticket? Play Powerball now, and find out!