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Why You Should Avoid the Lump Sum If You Hit the Powerball

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Why You Should Avoid the Lump Sum If You Hit the Powerball

Here we go again! This weekend, lottery fever descends on America. While it’s no billion-dollar Powerball jackpot, the combined jackpots will be worth $735 million! So, as this weekend’s drawing nears, here’s what you need to know:

First of all, the hope of hitting both jackpots is astronomical. According to experts, the odds of hitting both jackpots are about 1 in 75 quadrillion. So, perhaps just put your money on one, although we suppose if you’re going to gamble, go all the way.

If you do beat the odds and win one (or both), though, trust the experts and take the annuity, where you’re paid the prize over thirty years in steadily increasing installments. You see, if you hit the numbers and pick the lump sum, you get the “cash value,” a substantially lower $238 million. And that comes with a large tax bite, as lottery winnings are taxable income, so you’ll owe the government 39.5% of that, 25% of which it takes right off the top. Then there are state taxes, which will probably bite another 10%. So really you’d be collecting a mere $119 million.

Still, it’s worth noting much of the claims that the lump sum is better hinge mostly on the person who wins being able to handle the shock of suddenly coming into hundreds of millions of dollars.

I’ll take that chance, how about you? Would you take the lump sum or the annuity?


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