Powerball jackpot of $1.9 billion, per annuity. The lump sum is overrated

It’s hard to imagine what it would be like to win the $1.9 billion Powerball prize. But the reality is almost always far below the fantasy.

“The curse of lottery losers is very real,” said Andrew Stoltmann, a Chicago attorney who has represented several recent lottery winners.

one of the very first decisions What a winner must do, whether to accept the jackpot as a lump sum or as an annuity, often ends up being their undoing, Stoltmann said.

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the jackpot because Monday night’s drawing is now the largest lottery jackpot in history at an estimated $1.9 billion, if you opt to take your windfall as an annuity spread over three decades. The cash up front option, which most jackpot winners choose, for this drawing is $929.1 million.

These days, the annuity option is bigger than ever, relative to the cash option, thanks to higher interest ratesthat make it possible for the game to fund larger annualized prizes, according to the Multi-State Lottery Association, which administers Powerball.

Still, “over 90% of the winners walk away with the immediate lump sum,” Stoltmann said. “That’s usually a big mistake.”

Not just an annuity offer more bang for your buck But spreading the payments also gives you the opportunity to build an experienced team, including an accountant, financial advisor and attorney to protect the money and your best interests, according to Stoltmann.

“Few lottery winners have the infrastructure to manage a lottery windfall,” he said.

That ensures a level of financial security that a lump sum doesn’t offer, even with the inevitable rush of applications, excessive purchases, or bad investments.

“Making a mistake with the first year’s earnings is not catastrophic if the winner is going to get paid for another 29 years,” Stoltmann said.

Annuity Payments vs. Lump Sum Payments Explained

Of course, you’ll also pay taxes on annuity checks, but maybe not so much on investment income if the government is doing the work for you (essentially putting the earnings into a bond portfolio instead of how you would). have invested it).

Although you could probably earn more by investing in the market over the same time horizon, there is much less risk since the annuity payments are guaranteed. even if you diefuture payments become part of your estate, like any other asset.

“Don’t get caught up in nickels and dimes,” said Susan Bradley, CFP and founder of the Sudden Money Institute in Palm Beach Gardens, Florida.

Either way, “the payouts are huge and you’ll never be the same again,” he said.

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