Which Jackpot Should You Choose | Your Lucky Numbers

Cash vs. Annuity Option: Which Jackpot Should You Choose?

Every big jackpot winner is faced with a difficult decision: should you choose the annual payout or the cash option? Ultimately, this decision will affect how much money you receive and how soon you receive it. This article will explain the differences between both options and provide some Pros and Cons to help you determine which option is best for you.

First, let's take a look at both options, so you understand what they mean.

Annuity Option: Choosing this option allows you to receive the full amount of the jackpot. However, you won't receive it in one lump sum. Instead, you'll receive a portion of the payment once a year, over several years. For example, if you choose the annuity option after winning a Mega Millions jackpot, you will receive 26 annual payments – 1 payment a year for 26 years. For every $1,000,000 in the jackpot, you will receive approximately $38,500. So, if your jackpot is $75 million, you will receive about $2,887,500 every year.
Cash Option: Choosing this option allows you to receive one lump sum payment now, instead of over several years. However, choosing this option significantly reduces your winnings – you cannot take the full jackpot if you choose the cash option. For example, in a recent Powerball lottery, the advertised jackpot was $25 million; but the cash option is reduced to $13 million.

Now for the hard part: which option should you choose?

Several years ago, lottery players had to make this decision BEFORE buying their tickets. This is a very important financial decision that requires time and research to determine. So, thankfully, this decision is now made after a player wins the lottery, and you generally have up to 60 days to decide.

Here are some things to consider:

Quick money. If you want a ton of money now, not later, choose the Cash Option. It won't be the full jackpot, but you'll still have millions of dollars to do anything you want with.
More money. If you want the most money possible, choose the annuity option. You'll have to wait for it all, but in the end, you'll likely have received twice as much money as the cash option.
Investing? Many people choose the cash payout because it's generally understood that you can reinvest your cash winnings and end up with a much higher total in 26 years from now. Keep in mind though, investments can carry a lot of risk, so make you have a professional helping you.
Can you trust the lottery? Some fear that, if they choose the annuity, there is a risk that the lottery itself may fall apart before your receive all your money and be unable to pay you. This is incredibly unlikely. But if you're that concerned, it's probably better if you just choose the cash option anyway.

Before you make any decision, be sure to talk to a financial expert. They can help you make the best decision based on your exact financial situation. And don't forget that you will need to pay a significant amount of taxes on your winnings – sometimes up to 50% – which will lower your net winnings even more. A financial expert will discuss all of this with you to help you choose the right option. Good luck!