A wise man once said that there is nothing truly free that is worth having. Every year millions of dollars are paid out as lottery annuity or structured settlement payments, however the details behind this process are rarely disclosed to the general public. When lottery winners learn of the following details, many choose to turn their annuity into a lump sum lottery payout to get the most of their winnings.
Lottery Money
There are many people who expect a lump sum lottery payout; they are often disappointed to learn that their winnings will be dispersed in annual payments. The Mega Millions for instance pays an initial payment followed by 29 annual payments that increase by roughly 5% each year. Furthermore, the government withholds 25% of your winnings for tax purposes and state taxes can cost an additional 9%. As your winnings start shrinking, annual fees and early withdraw fees will leave many lotto winners on the fence as to whether or not it is worth the wait. This is the reality of the lottery and why nearly half of lotto winners continue to work after winning.
Settlement Money
In 2013, $3.6 billion dollars was paid out as structured settlements for medical malpractice lawsuits. Over the last 20 years employee lawsuits including sexual harassment, discrimination, and personal injury cases have risen by 400%. These cases generally settle outside of court up to 92% of the time according to some estimates; the average pay out for an employee lawsuit is around $150,000. The structured settlement annuity benefits are largely the same as lottery annuities when it comes to taxation and payment schedules, leaving many upset and discouraged.
The Hidden Truth Behind Your Money
Although there are some content with the idea of slowly-increasing payments over a period of time, there are many hidden fees associated with maintaining an annuity. a Variable annuity can have ongoing investment management and other fees that can amount to 2-3% of the total annuity’s value per year. Furthermore, making an early withdrawal within the first five to seven years will cause surrender charges that can cost you up to 7% of your investment if not more. The best way to get the most of your money quickly is to sell of your structured settlement or lottery annuity for a lump sum lottery payout. No matter what, you will not get 100% of your earnings back; but you might as well make the most of what you can get.
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