Few people think that they will ever be the recipients of a massive amount of money at once. However, it does happen on occasion; and when it does happen, it’s usually either the result of a lawsuit settlement, or even a lottery. As such, it’s no surprise that many recipients of this kind of cash don’t know exactly what to do when given a choice between two possible options. The first option is to receive your money in a lump sum. The other option is to have your money doled out in an annuity; in the case of a settlement, these may be called structured settlement payments, and in the case of lottery winnings, you can receive lottery annuity payments. Often times, people end up choosing a lottery annuity or structured settlement despite the fact that it’s not always the best option for everyone. Some believe that they can secure a financial future through their lottery annuity or settlement. However, there is more to these payments than what might initially meet the eye. Luckily, if you have an annuity and don’t want it anymore, there is a way out. You can sell your annuity payments, or for that matter sell your structured settlements for the lump sum that you need. Let’s look into how these systems work, and why a lump sum might be a better option for your future.
A Lottery Annuity: How It Works
When given a choice, some people choose a lottery annuity over a lump sum simply because they don’t know better. Who would? Essentially, an annuity of any kind involves having a large sum of money paid out in installments, often on a yearly basis. The Mega Millions annuity, for example, involves an initial payment followed by 29 annual payments. Each payment continues to grow by another 5% until the money is paid out in full. The Powerball, on the other hand, has 30 annual payments increasing in size each year, and is therefore somewhat similar. An immediate annuity requires that the first payment is made within 30 days. Obviously, the amount involved in lottery winnings are usually very high. Structured settlements can be fairly high as well, with the average structured settlement amount being $324,000. Ultimately, it seems as if you would get your total amount of money, whether it’s made up of lottery winnings or a structured settlement. However, there is much more to this kind of system than what meets the eye. The drawbacks often lead people feeling frustrated and even cheated — and ready to sell their annuity or structured settlement.
Selling Annuities: Why People Choose This Option
There are many reasons why people choose to sell their lottery annuities and structured settlements. However, one big reason is that they end up feeling as if they’re missing out some of the money they’ve won or earned. First of all, winning the lottery doesn’t mean gaining millions without any strings attached. In fact, the lottery holds 25% off the top. Depending on your tax bracket and state, another six to nine percent is then withheld. Even after that is taken care of, many find that annuities have them feeling confused about where their money is going, and frustrated by the fact that they don’t have access to all of it when they need to. And yes, there are times when you will need a large amount of money at once; then, a lottery annuity or structured settlement will probably feel far from ideal.
Lump Sums: What You Can Do With Them
Let’s look at some of the practical reasons why people might want a lump sum rather than an annuity or a structured settlement. For one thing, many Americans today find themselves dealing with a lot of debt. This could be credit card debt, or medical debt. Very often, this debt has to do with school. It can be difficult to pay off this kind of debt, or even staggering. This is why many seek out lump sums rather than annuities; they don’t need some of that money. They need all of it.
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