I once had a friend that would check his mailbox every day hoping for a chance to win a million dollars. The problem is, he never played the lottery or won a court case. Those who have actually won an annuity or structured settlement on the other hand might be a bit disappointed to find that only a fraction of that money will ever end up in there wallet. Here is everything you need to know about annuity payments.
Lotto Winnings
The Mega Millions pays out in 30 payments that incrementally increases by about 5% each payment. A typical $50 million dollar Mega Millions jackpot would have an initial payment of over $750,000 with future annual payments growing to nearly $3.1 million dollars. That money would pay out over the course of 30 years, although many have the option of a lifetime lottery annuity that would pay until death. No matter which payment option you chose however, you will never fully receive the total sum of your winnings due to taxes and fees you will be accountable for.
Court Settlements
If you feel that you are entitled to financial compensation from personal injury, medical malpractice, or some other reason, then an attorney can help you receive a structured settlement annuity to compensate you for damages done. A lawyer can help you determine how much money you should be owed with nearly 90% of cases ending in victory for those who brought forth the lawsuit. Around 80-92% of cases even settle out of court. Like lottery payments, a structured settlement pays out annually. Some people cannot afford to wait for their money, many of them ask ,”can I sell my annuity”? We have the answers!
The Problem with Annuities
Of those people who win big in the lottery, nearly 70% lose or spend all of their money within five years due to taxes or fees. Nearly a quarter of your winnings will be lost to federal taxes, with an additional 3-6% being withheld for state taxes. Furthermore, early withdrawals taken from your annuity before the age of 60 may be subject to taxes and penalties that could amount to an additional 10% in fees. Annual fees alone can amount to 3%. So, can I sell my annuity for a lump sum? If you’re ready to get your money in your pocket, then absolutely.