Lottery Jackpots – Annual Payments vs. Lump Sums
All lottery winners in the US face a choice of receiving the prize as a lump sum or in annual payments and financial advisers say that picking which is extremely complicated.
However, many find the idea of receiving a huge cheque just too hard to resist.
Since December 2009 the Florida lottery has paid out 148 jackpots to Lotto, Powerball and Mega Money winners and all but five of them chose the lump sum.
A Kentucky consultant who specialises in advising lottery winners, Don McNay, said that it is the same all over the country, “Ninety-eight percent of Powerball and Mega Millions winners take the lump sum.
But I advise people to take the money over time, if you are 84 or 30.”
McNay explained that this is because “At least 70 percent of winners run through the money in five years or less and it doesn’t make any difference whether they win $1 million or $100 million.”
As a result McNay believes it is a good idea for lottery winners not to “take the $100 million, take the $5 million a year. If you run through that the first year, you have 19 more chances to figure it out.”