Cash vs. annuity: Which payout should you pick if you win Mega Millions, Powerball jackpots?
(
As of Tuesday, the Mega Millions jackpot is estimated at
Meanwhile, without a winner in Monday's drawing, the
The odds of winning either jackpot are steep — 1 in 302.6 million for Mega Millions, 1 in 292.2 million for
These are the best, worst states to win the lottery in
Once you're ready to come forward and claim your prize, you'll have a big decision to make: take the annuity option or the cash payout.
The annuity option is the dollar amount you'll most frequently see advertised when it comes to Mega Millions and
The cash option —
If you want your winnings right away, you'll want to select the cash option, but if you want more money in the end, you may prefer the annuity option.
So how do you know what's best for you?
"Most people take the lump sum because they want the money, they want to control it,"
If you win the
As mentioned, the annuity option means you'll receive a check every year with another, slightly larger portion of your lottery winnings. While that annual allowance may sound annoying to a newfound jackpot winner, it can also help protect you.
For example, let's say you mess up with your winnings one year. Maybe you spend it unwisely, make some poor purchases, or gift too much away. If you had selected the cash option, "there's no do-over, there's no reset," Pagliarini explained.
"But with the annuity, you get to redeem yourself every single year," he added. "It might take a few years, it might take five or six years, but eventually you'll figure it out."
You'll also see more taxes are withheld if you select the lump sum cash payout. Every state is required to withhold 25% in a federal lottery tax, and after additional withholdings, you'll be losing roughly 37% of your jackpot to taxes. Then, depending on where you live, you'll see even more withheld for state taxes.
However,
"If you think you can beat the 4.3%, you should take the cash," Keil said. "If you don't, take the annuity."
Regardless of what option you pick, if you win either jackpot, Pagliarini recommends building your team of experts, signing the ticket and keeping it secure, and "make [your payout] decision as fast as you possibly can, in a way where you feel very comfortable about the decision."
Mega Millions and
Fed rates: how far they will cut rates this year and when they will do so
Selling your home could boost your nest egg — but is it worth it?
Advisor News
Annuity News
Health/Employee Benefits News
Life Insurance News