Jackpot lottery winners, such as in the Multi-State Lottery Association’s Mega Millions and the Powerball, must make an important decision, pick one of two payment structures to receive their winnings. The winner can either select to receive their prize winnings as an annuity payment or a lump-sum payment.
If the winner chooses the annuity payment option, they are guaranteed to receive a series of thirty progressive payments over a period of twenty-nine years.
These annuity payments pay are on an annual installment basis, which increases by five percent after every annual payment until the thirtieth and final payment. Added up, all thirty payments equal the value of the advertised jackpot prize.
After the prize winner receives the initial installment, the lottery commission takes the remaining prize money and invests it in a conservative investment. The preferred investments are low risk, highest rated credit quality government bonds. These investments generate a low-interest but yield steady and consistent yearly payouts. Enough to cover the winners promised installments over the next twenty-nine years.
Advantages of Choosing A Lottery Annuity Payment Option