Is the annuity really bigger than the lump sum?

The headline jackpot represents around 30 future annual payments. The lump sum is the present value paid immediately. Both are taxable; the better choice depends on your goals and plan.

Do I pay more taxes with a lump sum?

Not automatically. With a lump sum you pay taxes on the upfront amount; with an annuity you pay taxes each year on each payment. Total tax depends on brackets, timing, charitable planning, and investment income.

Who should consider the annuity?

People who want built-in guardrails, predictable income, and less temptation to overspend early. Graduated payments can help match long-term lifestyle needs.

Who should consider the lump sum?

Those with strong discipline and a fiduciary team who prefer flexibility and control over investing, giving, and major purchases.

Lump Sum vs Annuity: What Lottery Winners Should Know

You’ve got options. The advertised jackpot is the annuity (paid in ~30 annual installments). The lump sum (cash value) is smaller up front, but you control the money immediately. Your best choice depends on taxes, discipline, goals, and risk tolerance.

Tip: First, estimate your take-home using our Lottery Tax Calculators. Then come back to weigh the trade-offs below.

Quick Definitions

Annuity: ~30 payments over ~29 years, typically graduated (smaller at first, larger later). The headline jackpot reflects this stream.
Lump Sum (Cash Value): The present value paid immediately. It’s lower than the headline jackpot, then taxed when you receive it.

Pros & Cons at a Glance

Lump Sum

Control now: Invest, give, or spend on your timeline.
Flexibility: Easier to fund big purchases or trusts immediately.
Tax planning: Pay taxes up front; future growth can be managed tax-efficiently.

Trade-offs: Requires discipline and a solid investment plan; market risk is yours.

Annuity

Built-in guardrails: Payments arrive annually—harder to overspend early.
Income smoothing: Helps match long-term lifestyle needs.
Graduated checks: Payments typically rise each year.

Trade-offs: Less flexibility; estate and tax planning can be trickier if your needs change.

Taxes: What Actually Hits Your Bank

Both choices are taxable. With a lump sum you’re taxed on the large initial amount; with an annuity you’re taxed as each payment arrives.
There’s typically 24% federal withholding at payout, plus any state taxes. Final liability may be higher depending on your bracket.
Work with a CPA/CFP® to model multi-year scenarios (charitable giving, trusts, and investment income all affect the final bill).

Run scenarios: Powerball & Mega Millions Calculators

Decision Checklist (5 Fast Questions)

Discipline: Do you have (or will you hire) a fiduciary planner and an accountability plan? If “no,” annuity can help protect you from yourself.
Debt & obligations now: Need major liquidity soon (mortgage payoff, gifts, buyouts)? Lump sum gives flexibility.
Risk tolerance: Comfortable investing large sums through market cycles? Lump sum may suit you.
Estate plan & privacy: Coordinating trusts, anonymity, or staggered gifting? Either can work—get counsel.
Behavioral fit: If a guaranteed annual raise calms you, annuity’s rising payments are a feature, not a bug.

How Annuity Payments Typically Grow

Lottery annuities usually start smaller and increase each year (for ~30 total payments). That can feel like a built-in “raise,” matching inflation and lifestyle creep. Check your game’s official schedule for exact percentages, then compare with our calculator’s example payments.

See examples on your numbers: Lottery Tax Calculators

Common Misconceptions

“Annuity is always worth more.” The headline number is the sum of future payments; the lump sum is the present value. Neither is “free money”—both are trade-offs.
“Lump sum means worse taxes.” Not necessarily. It’s about timing and planning. A smart plan can make either path efficient.
“Annuity removes all risk.” You still have inflation, policy, and personal-situation risks. It simply shifts investment decisions away from you.

Build Your Team Before You Claim

Get experienced lottery counsel and a planning team in place:

Tools & Helpful Resources

Lottery Tax Calculators (Powerball & Mega Millions)
Personal finance reads (Amazon):
The Simple Path to Wealth,
Bogleheads’ Guide to Investing,
Sudden-wealth planning

Information on this page is for general guidance only and is not legal, tax, or investment advice. 18+ (or 21+ where applicable). Play responsibly. Call 1-800-GAMBLER. In NY, call 1-877-8-HOPENY (467-369) or text HOPENY (467369).