Maybe you’ve been playing the lottery loyally for years, just dreaming of that big win. You wouldn’t be alone—the most popular form of gambling in the United States is currently lottery gaming, according to surveys. But have you ever thought about what happens when you hit the jackpot? There’s a lot to consider when faced with the choice between a lottery annuity and a cash payout.
Many people elect to take lump sum lottery winnings. Taking the cash can make a lot of sense if you need cash quickly. This wouldn’t make you at all unusual: in the United States, total consumer debt is over $11 trillion. For this reason, taking a lottery lump sum payout is often very attractive. But is it smart?
A lottery annuity is a means of payment in which the lottery pays you a larger sum of money in smaller monthly installments. If you take a lottery annuity instead of cash for lottery winnings, over time you will receive a larger sum of money. Most of the time, people seem to prefer the cash payout lottery winnings because it gives them access to more money faster. All this makes sense if you consider that approximately 35% of the American population had trouble in 2014 paying bills or getting out of medical debt. Who doesn’t want fast money?
Often, people who take a lottery annuity find themselves needing fast cash later in their lives. Maybe it’s time to purchase a home, or a boat, or take an expensive and well-deserved vacation. In this case, selling an annuity settlement to a third party for cash is also a good option. Although you will pay some fees associated with this type of payment, there are times when cash in hand is really your best option. Under those circumstances, cash for annuity is certainly something to consider.
If you’ve won the lottery, you’re already luckier than most. Choosing whether to take cash or a lottery annuity is a big decision. Speak to your financial adviser before making any moves. Once you’ve decided how to take your money, you’re ready for the fun part—spending it!