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Originally Posted by wp169
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That is referring to an Illinois state lottery, not the big national lotteries; powerball or Megamillions. The big lottery annuities are backed by an insurance policy. They are reliable.
There is a lot of misinformation and bad math in this thread. Most people take the lump sum but they should take the annuity because most do not know how to handle money or say no to people trying to weasel money out of them. If you take the annuity it helps in a few ways including learning how to handle and manage it, working with tax advisors to minimize your tax exposure and learning to say no to all the dead beat cousins, scammers, charities with boo hoo pitch lines and one of the best of all......your church if you go to one. It is amazing how much money lottery winners get scammed out of by people they think they can trust.
As mentioned, Powerball and Megamillion annuity payments increase each year by 5% to cover inflation. They started doing that a number of years ago. You have to pay 24% federal taxes off the top before you even receive the payment. Each year, you have to file taxes and pay additional taxes depending on your tax bracket. Knowing this, you can work to minimize your tax exposure. If you live in a state that taxes lottery winnings, you will also have to file and pay those taxes. So if you win and you live in one of those states, MOVE!
I am in the camp that believes that our government running lotteries and using the profits to fund government programs and then also taxing the winnings to claw some of that money back and use it again is complete nonsense. The money that bought the lottery ticket was taxed as income to begin with and then it is being taxed and taxed and taxed again which is absurd.
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