In January of 2016, the Powerball jackpot exceeded $400 million dollars. While millions of Americans flock to their nearest lottery center in the hopes of picking up the winning ticket, it might be handy to familiarize yourself with the ins and outs of the lottery so that hopeful winners know what to expect.
The Hope of Lottery Winnings
In theory, winning $400 in the lottery sounds like an easy way to become an instant millionaire; in practice this is only partially true. Right off the bat, the government will withhold up to 25% of your winnings for taxes while the state government may take up to 9% for state taxes. Unfortunately the trouble only starts from there as the lottery typically takes the form of annuity payments. The Mega Millions and Powerball both pay out an initial payment followed by annual payments that increase incrementally year-by-year over the course of 25 years or longer.
Hidden Annuity Fees
There are hidden fees associated with annuities as well. Simply maintaining your annuity can cost maintenance fees that can cost up to 3% of your winnings annually. There are early withdrawal fees too: those who make withdrawals from typical annuities before the age of 60 are subject to additional taxes on top of a 10% penalty to their annuity. Those who make withdrawals within the first five to seven years after establishing an annuity could face surrender charges reaching up to 7% of that annuity. For these reasons, lottery winners feel all but helpless to sit and watch their winnings fly away.
Why Sell Your Annuity Payments?
Selling your annuity payments may be the best way to get the most out of your lottery winnings. Many companies specialize in turning annuities from lotteries, structured settlements, and poor investments into a lump sum. Around 92% of those who sold their lottery payments or structured settlement annuity were happy they did so. You’ve already beat the odds by winning the lottery, don’t just sit by and let your winnings diminish — use your money on your own terms.