Should lotto winners be allowed to choose between annual pmts or lump sum payout? What would you do? Do you trust yourself becoming wealthy overnite?

[DrPepper12]

Some facts about lotto in the USA:

The taxation difference between a lump sum and annuity lottery payout primarily lies in the timing and amount of taxes paid. A lump sum payout is taxed immediately on the entire amount, often pushing the winner into the highest federal tax bracket of 37%. This results in a significant portion of the winnings being taxed upfront. In contrast, annuity payments are taxed annually as they are received, potentially at lower rates if future tax brackets are reduced or if the annual payout doesn't push the winner into the highest bracket.

Estimates suggest around 30% of lottery winners face bankruptcy within three to five years.

Lottery players in America tend to come from specific demographic groups:

Socioeconomic Status:
People in lower-income brackets spend a larger portion of their income on lottery tickets. The poorest households spend nearly 5% of their income on lotteries, while wealthier households spend much less.

Race and Ethnicity:
Blacks and Native Americans have higher average days of lottery play compared to other groups.

Gender:
Males play the lottery more frequently than females.

Age:
Lottery play peaks in the twenties and thirties, then declines with age.

The odds: gambling is often referred to as "a tax for people that are bad at math". Here's your proof:

Here are some events more likely than winning the lottery:

Struck by Lightning: 1 in 186,978 chance annually.

Attacked by a Shark: 1 in 11.5 million.

Dying in a Car Accident: 1 in 67,003.

Winning an Olympic Gold Medal: 1 in 662,0005.

The odds of winning the Powerball jackpot are about 1 in 292.2 million.

Approximately 1% to 2.6% of the U. S. population has a gambling addiction, which translates to about 2 to 10 million people.

Bet with your head, not over it!

I would take the lump sum @ 38-45% taxation

I'd take the annuity @ 28-33% taxation

[slatyb]

I'll take the lump sum, as most lottery winners do. There is no interest paid on the annuity, they just divide the amount by some number of years, so you lose a lot of interest you would gain by having the money on deposit.

[OtterMan68]

before you claim it, consult a tax lawyer & accountant. Form a trust, and claim the prize in the trust's name

[DrPepper12]

Correct answer if I played!!

[GoodGuyBreakingBad]

I'd take the annuity @ 28-33% taxation

[Crimsyjo]

Oh. I was thinking lump sum. Totally. But now your post makes me realise that's not the smart option!!

I wouldn't feel like as much of a "winner" with it spread out. But it does make sense and still more than enough to enjoy living a good life from!

[BoopBoopBeep]

You lose about half if you don't take the annuity. A billion dollar jackpot is only 500 million, then you pay taxes on that 500 million. Just on principle I'd take the annuity to get all the money.

[Anonymous]

The current powerball jackpot is $336 million. Even if you took an annuity, you'd be getting nailed with the highest tax rate every year. With the lump sum your expected returns from a diversified investment portfolio would very likely outperform the annuity by a good margin. So I'd go that route.

[Kori1236]

We don’t have taxation on lotto winnings where I am and I would want a lump sum. Get everything in order for what I want for my friends and family, invest some and put the rest in savings

[Wiredone]

Where I live they give you the option of lump sum or annuity. I would take lump sum. Why should I let the government hold my money and collect interest on my money. They tax more on lump sum because they won't be getting interest on it.

[exitseven]

I think the lottery where I live gives you the option of taking it in a lump sum. I think most people do that especially if they are old.

[abc3643]

I think they are given that option.

At my age, a 30-year pay-out doesn't help much.

[RedInnocent69]

Depending on the amount, I would probably take the lump sum, but only after consultation with financial and tax advisors and a comprehensive present-day value calculation

[Dargil]

I'll take all the cash as soon is permitted. Government can always change its mind.

[Anonymous]

Why don't you let the indiviual or the lottery they choose decide the issue?

A lot of people who are poor are going to do better with someone else to manage the money for them, either provided as a service by the lottery or by hiring someone.

[Anonymous]

I'd take the lump and invest into commercial property and stable asset classes that will outearn the taxable rate

[gatixek710]

So the government collects $2 for every mega-lottery, keeps $1, uses the other $1 for the prize, then taxes it to oblivion. I think we see who the scam artist is here.

[gatixek710]

Oh, and they don't give you the full amount of your winnings if you take the lump sum. They keep half that, too.

[OddBeMe]

I think they should just save that money in an accruing acct.

[beefcakebradybatson]

At 71, a lump sum, and I trust myself to be wealthy because I lack extravagant tastes.

[Hispanic-Cool-Guy]

I'll take the annuity though I don't spend much money anyways.

[jshm2]

Not really their decision to make as it's down to the company.

[Fireguy17]

At least here they do get to choose.

[NathanDavis]

how much is the prize?

[elaphe]

I don't play the lottery.

[Twalli]

I doneed that much $ at one time.