Difference between lump sum and annuity

You beat the odds and you were one of the few people who actually won the lottery. You double checked your lottery ticket, before realizing that you actually had won the lottery. You protected the ticket, until you were able to turn it in. You were given two payout options. One, would allow you to take a large payment at once, but you would lose a percentage of your winnings. The other one, you would receive smaller monthly payments, and you would lose fewer winnings. You were likely encouraged to choose the second option.

Years later, you realize that you are struggling financially, and you wonder, why am I struggling when I won the lottery? If only you had all of the money that you deserved. If only you had chosen the first option, you would likely be in a better financial situation. You now wonder, can I sell my annuity now? Are there options to change your mind, and choose the larger payment instead?

Fortunately, there are ways to sell your annuity payments. There are many benefits over annuity vs lump sum lottery winning payments. When selling your annuity, you are opening up all of the options that will allow you to save money and use your lottery winnings to increase your funds. Each lottery payout differs, depending on the specific lottery winning. The Mega Millions annuity, for example, is paid out as one immediate payment followed by 29 annual payments. Each payment is 5% bigger than the previous one.

If you have decided to get cash for annuity now, you will want to find an annuity payment company that is willing to purchase your monthly annuity payments. You are likely to come across different payment options. It is important to take great care in calculating structured settlement payments with the company. You do not want to lose a higher percentage of your lottery winnings that you agree to pay.

It is important to remember that different annuity companies will charge different fees, in different ways. The exact lottery winning that you win is less, because of taxes. Off the top, the lottery withholds 25% for federal tax, then, depending on where you live and your tax bracket, another 6 to 9% for state taxes. After the taxes are calculated, you will need to figure out how much more money you have coming. When you sell your monthly payments to a structured settlement company, they are likely to take a percentage each month, or one total fee off the cash given. However, the small fee is often worth the financial benefits that receiving all of your money at once can provide.

Selling your annuity payments can allow you to pay off all of your outstanding debt. Consumers vastly underestimate or underreport how much debt they have. In fact, as of 2013, actual lender reported credit card debt was 155% greater than borrower reported balances. Paying off debt can increase credit scores. Increased credit scores can provide buyers with lower interest rates on purchases such as vehicles and homes. Just a few point reductions in interest rates can save a buyer thousands of dollars in interest charges. Selling your annuity provides many benefits financially.

When you won the lottery, you imagined that you would be financially set for life. However, this is generally not the case. Most lottery winners receive smaller, monthly payments. Smaller monthly payments can make it difficult to pay off debt, purchase high cost items like houses and cars and take dream vacations. There are structured settlement companies that will purchase your annuity payments off of you. When selling your annuity, you want to pay careful attention to the calculations and decide if it is a fair deal.

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