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Is taking a lottery lump sum payment the best or worse choice? This is an important question. If you are a regular lottery player at some point in time you have to engage in a little daydreaming about what you would do if you won. Even though the odds are heavily stacked against you; it would not be a good idea to win and not have a plan. The question is should you take the lump sum payment or the annual payment? Most people lean towards the lottery lump sum, but is that the best or worst choice?

How Lump Sum Payment Work

If you choose the lump sum payout option when you win the lottery you will not receive the total amount that you one. The taxes that must be paid out are going to be enormous and of a million dollar lottery win, you may only see 600 to 800,000 dollars. Before you begin complaining about how much the government takes from your winnings, consider that you didn’t have that money before and you haven’t really done anything to earn it. Even if the government took all but $20,000 dollars you would still have more money than before.  Look at that amount as a small price to pay for the life changing amount of money you won.

How Annual Payments Work

The annual or lifetime payment option spreads the payments out over the course of 10 to 20 years. It is almost like receiving a guaranteed salary. You still pay taxes on your winnings, but the taxes will be slightly less because the sum is less.  Even if you die; your beneficiaries in most cases will continue to receive the annual payments until they are fully paid out.

The Benefits of  Taking The Lump Sum

Receiving all that money at once has some serious benefits. For one, you can go on a massive bill paying spree and get rid of a lot of your financial stress immediately. You also have the chance to invest the money on a significant level. Being able to purchase several hundred thousands dollars of stock at once has a chance for a much higher return than buying several hundred dollars of stock. You can also start trust funds for  your children's college education and contribute more monies to your retirement accounts easily.  You can also help out a few people and do some charity work.  This will make you feel good as well as help numerous others.

The Horrors of a Lump Sum

As easy as it is to go on a bill paying spree, it is even easier to go on a shopping spree and you would be surprised how easy it is to quickly run through money. What many lottery winners don’t think about is that all the houses and cars they buy for themselves and others in their family all come with yearly taxes and maintenance costs. It is far too common to hear of lottery winners who chose a lump sum and then end up homeless.  The other downfall is that money attracts greed. It never fails that once you win a large sum of money you discover that money can truly make or break a relationship. It also attracts family and friends that you never heard of before your win.  Many of those new found  associates in your life will feel that they have a right to share in your windfall. This can prove extremely dangerous to your health.

Now, Lottery Lump Sum – Best or Worst Choice?

If you can handle it, a lottery lump sum may be the best choice for a payout. This gives you the opportunity to make all of your dreams come true immediately.  But if you are not well organized financially and capable of strong self-control, then it could be the worst choice ever. Many people, once they think it through, decide that they prefer the annual/lifetime payments because it gives them something they have been missing – financial security. While a blast of money can do a lot for your life, financial security can do even more.