Lotto Winnings: Annuity or Lump Sum?

Shawn Plummer, CRPC

Chartered Retirement Planning Counselor

Lottery Lump Sum Vs. Annuity

FactorLump SumAnnuity
Immediate CashYes, the entire amount is paid at once.No, payments are spread over several years.
Total Amount ReceivedTypically less than the advertised jackpot due to immediate taxes.Potentially receive the full advertised jackpot, as payments are spread out and may be taxed differently.
Tax ImplicationsTaxes are paid immediately on the entire amount, potentially at a higher rate.Taxes are paid on each installment, potentially benefiting from lower tax brackets over time.
Financial FlexibilityHigh, as you receive all funds and can invest or spend as needed.Lower, as you rely on yearly payments, although it provides a consistent income stream.
Risk ManagementHigher risk due to the potential for mismanagement of a large sum.Lower risk, as the money is distributed over time, reducing the likelihood of spending it all quickly.
InflationNot affected, as the money is received immediately.Future installments could be worth less in real terms due to inflation. However, some annuities include adjustments for inflation.

This table is a simplified guide. The actual decision between taking a lump sum or an annuity can be complex and should be made with the assistance of financial and tax advisors. It’s also important to note that laws and tax regulations can vary by state and can significantly impact the overall benefits of one option over the other.

Lottery Payout or Lump Sum?

If you win the lottery, you must decide whether to collect the money all at once or over a long time.


The first option is called a lump-sum award. This is when the person who wins the lottery keeps all of their winnings after taxes are taken out.


Option 2 is an annuity. Although it is called a “lottery annuity” by some people, it would be under the safest category of annuities: fixed immediate annuity.

Every state and lottery company has its own rules.

Lottery Annuity

Mega Million Annuity Payments

The Mega Millions annuity consists of one immediate payment and 29 annual payments thereafter. Each payment increases by 5% from the preceding year, which helps protect against inflation.

If someone wins the $100 million jackpot, they will receive about $1.5 million immediately, and then future annual payments will increase to about $6.2 million.

What Are The Annuity Payments For Powerball?

If you win the Powerball jackpot, you can choose to receive the jackpot in a lump sum or an annuity paid in 30 graduated payments over 29 years with an annual interest rate of 5%. An annuity calculator can help you determine your payout amounts over time.

Lotto Winnings: Do I Take The Annuity Payout Or Lump Sum

Annuity vs. Cash Option

When you take a lump-sum payment, it is less than the amount just reported as the jackpot. Taxes and discounts are taken out of the payment. You can take your winnings all at once or invest them on your own to help make more money later.

Lotteries may have annuity payments. These payments will be larger than a lump sum payment. Some lotteries do this with equal payments or by making the payments rise to keep up with inflation.

If you receive payments from an annuity, you’ll pay taxes as you go. This means some of the payments will be taxed lower than the lump sum option.

Annuity Advantages

  • Lottery winners sometimes go broke. If you have had trouble with money, you should consider an annuity.
  • You could take the annuity to get a regular, guaranteed income for the next 29 years. This would help you budget your spending.
  • An annuity can help you avoid a lot of taxes. You will not have to pay a ton of money in one lump sum, and you will not have to pay more taxes over the years if you invest in the winnings.

Helpful Tip: Use our free online annuity calculator to determine how much guaranteed retirement income you can receive, now or in the future.

Lump-sum Advantages

  • You might make your money grow faster if you invest it. However, the annuity option will not grow as fast as the lump sum. Interest rates are low now, and people do not get much money from savings. So it is better to take the lump sum right now and make the most out of it.
  • The lump-sum option today would be taxed in the 37% bracket. If you took the annuity, you might be paying higher taxes in the future.
  • The lottery winner’s estate could be hit with a huge tax bill on their inheritance. With the lump sum option, the money will be available to pay those taxes. In contrast, the annuity payment option won’t be liquid for the beneficiaries to pay any large tax bills.
  • Lottery Annuity At Death

An annuity prize for lotteries is awarded to a designated heir at the time of the winner’s death because the annuity payout is a period certain, typically 30ish years.

The primary beneficiary collects the winnings until the term is completed.

Powerball Annuities, Mega Millions Annuities - Lotto Payouts


So, what’s the best option for you? If you are lucky enough to win a large lottery jackpot, it’s important to understand the tax implications of each payout type. The lump-sum option may seem attractive at first because of the big payday, but you would only get about half of that money if you choose this route. The annuity payout is less exciting upfront, but over time, you will receive all of your winnings and pay much less in taxes. It’s always important to consult a financial advisor before deciding on major life changes like winning the lottery. Have you ever played the lottery? What was your dream payout scenario?

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Frequently Asked Questions

Are lottery annuity payments inheritable?

Yes, lottery annuity payments are generally inheritable. If the original winner passes away, the remaining annuity payments can be transferred to their beneficiaries or heirs. However, this depends on the specific terms of the annuity payments set by the lottery and the laws of the state where the ticket was purchased.

Are lottery annuities guaranteed?

Yes, lottery annuities are typically guaranteed. They are backed by the state lottery commission, which purchases annuities from insurance companies to ensure the payout over the specified period. However, the security of the annuity can depend on the financial stability of the issuing insurance company.

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Shawn Plummer, CRPC

Chartered Retirement Planning Counselor

Shawn Plummer is a Chartered Retirement Planning Counselor, insurance agent, and annuity broker with over 14 years of first-hand experience with annuities and insurance. Since beginning his journey in 2009, he has been pivotal in selling and educating about annuities and insurance products. Still, he has also played an instrumental role in training financial advisors for a prestigious Fortune Global 500 insurance company, Allianz. His insights and expertise have made him a sought-after voice in the industry, leading to features in renowned publications such as Time Magazine, Bloomberg, Entrepreneur, Yahoo! Finance, MSN, SmartAsset, The Simple Dollar, U.S. News and World Report, Women’s Health Magazine, and many more. Shawn’s driving ambition? To simplify retirement planning, he ensures his clients understand their choices and secure the best insurance coverage at unbeatable rates.

The Annuity Expert is an independent online insurance agency servicing consumers across the United States. The goal is to help you take the guesswork out of retirement planning and find the best insurance coverage at the cheapest rates

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