If you win the lottery -- take it in one lump sum or paid out over years?

Question

Let's say the amount is 100 million dollars. What are the pros and cons of taking it as one lump sum verses having them give you an amount per year?

Answer 1

take it in the lump sum.
you can invest and make more money with it than you would save by doing it in yearly payments.

Answer 2

If you're older, you definitely want it in one lump sum.

If you're younger, you have a good chance of being better off taking it as a lump sum and investing it, but you also have a chance of doing worse if the market takes a big dip.

The other thing to consider is that winning the lottery is usually an emotionally traumatic experience. It may be a good kind of trauma, but it still requires a drastic change in your lifestyle. A high percentage don't make a very good transition to their new life and wind up broke. If you're young, taking the pay out gives more time to adapt (maybe - if you run into problems, some financial firm will buy your lottery payments for a lump sum considerably less than you would have originally gotten).

Answer 3

You are going to pay alot more in taxes if you get a lump sum, you may lose as much as 1/2 of that amount in taxes. However if you are a good investor and can get a good return it's better to get a lum sum and they grow the money your way.

The annual payments are secure, you're guaranteed income for the next 20 years and that gives people comfort and security, and I don't think it's a bad idea for alot of people since alot of them win the lotto and then a few years later they are bankrupt and worse off financially than they were before they won! I'll never understand that but it happens VERY frequently.

Most people go with the lump sum though because as the saying goes, a bird in the hand is worth 2 in the bush.

Answer 4

If you KNOW you can invest the money and live off the income your investments earn, it's usually better to take the lump sum. However, most people who win the lottery are broke again within a year or two. Probably because most of the people who play the lottery aren't the kind of people who have financial disipline.

Remember, the lottery is a tax, unfairly levied against those who didn't pay attention in math class. Your odds of winning the lottery are about the same as getting hit by lightning -- 17 times!

Answer 5

Lump sum. Because $$ today are worth more than the same amount in 10 years. Due to inflation. Invest the lump sum and you'll be ahead in 20 years (the typical annuity)

Answer 6

Right now, tax laws appear to be very favorable and inflation is low...therefore, since one can expect both of these factors to deteriorate in the future, taking the lump sum will pay off in the long run, provided you resist the urge to spend it all. With a lump sum payout, after taxes, you'll end up with a bit more than a third of the prize amount....so a $100M pot would net you about $35M after tax.

Answer 7

Lump sum. If you take it over years, you lose out on the earning power and you also lose to inflation. With a lump sum, properly invested, you will have much more in the end.

Answer 8

i would take it in a lump sum--have all the taxes taken out at once, then go right to an accountant and a lawyer and set up a trust for me to live off of, that way I would not spend it all too foolishly and be left with nothing and also the government would not control my payments over the next few years.

Answer 9

If you are relatively young, it's best to take the money over a period of time for tax purposes. If you are elderly, Take a lump sum and enjoy your remaining years.

Answer 10

Take the lump sum...
A dollar today is worth more than a dollar tomorrow.

Answer 11

I would take a lump sum: you are in control then. What if they go bankrupt, for instance?

Also, with a bit of good planning, you get the interest.