There’s a chance that you’ll never have to worry about an annuity in your life. Perhaps you think that you’ll never have to think of an annuity. After all, aren’t annuities things that come with lottery payments or settlements? When will you ever have to deal with either of those? In fact, winning the lottery happens more often than you’d think it would; it’s not a fairy tale hypothetical for a number of reasons. It is far more likely that you could find yourself as the recipient of settlement. Settlements happen every day. Many settlements are the result of malpractice lawsuits. Some result from workplace misconduct or the mismanagement of wages. What is often the case is that settlement end up paying out a lot of money. In fact, the average structured settlements comes in at $324,000. That’s a lot of money, and many are thrilled when they find themselves the recipients of lottery winnings or settlement money. The trouble is that there is a difference between instant cash and this kind of payout. Many people, unfortunately, remain confused about the difference, or even that there is an alternative to taking payments when what you want is a lump sum. The annuity and lump sum differences are great, and you deserve to know them. They, among other things, are what we will examine here.
Annuity And Lump Sum Differences: What You Need To Know
With annuity and lump sum differences being so varied, it’s easy to get confused about which is which, and what option may be better for your situation. A lump sum, as the name suggests, is one large amount of money that you receive at once. As we’ll explore, this can be beneficial for many different reasons. A lump sum is more of what you’ll probably imagine when you picture yourself as the recipient of a large amount of money, whether that money is coming from a settlement or a lottery win. An annuity, on the other hand, means having the money paid out over the course of years — possibly many, many years if the amount of money is large enough. This can be an option whether you win the lottery or are the recipient of a large settlement. The Mega Millions jackpot, for example, doles out money in one immediate payment, and then 29 annual payments, with each payment being 5% larger than the last. The Powerball, similarly, consists of 30 annual payments that increase over time. One thing that occurs whether or not you take a lump sum or an annuity is the change in your tax bracket. In the case of the lottery, 25% is automatically withheld for federal taxes, while depending on your state and tax bracket, six to 9% is further taken for state taxes. These leaves many “winners” feeling frustrated, and can increase the appeal of a lump sum. The annuity and lump sum differences are certainly great enough that you shouldn’t automatically choose or the other. With that being said, if you are unhappy with your annuity, you do have options. Selling your annuity or structured settlement can be the game changer you need.
How Selling Your Annuity Can Change Your Life
Many choose an annuity for ill-informed reasons, only to find themselves regretting it later. An annuity can be sold for a lump sum, and there are many benefits to doing so. For one thing, with a lump sum in hand you no longer have to worry about managing annual payments. For another, those who receive a lump sum can automatically pay off their debts, rather than gradually doing so over the course of a long period of time. They then can invest or save their money as they choose — choice is a major selling point of this practice. Whether you’ve won your money through the lottery or earned it through a settlement, it is yours. You should be able to have it when you wish, and control it as you want.
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