If you win the lottery is the lump-sum cash option better than the structured annuity option?

Answer 1

In general, yes.

You see, while it's "less", it's really the same or more, depending on the exact figures per individual case - see an accountant in your area to be sure.

The reason why states like to pay a $20 million lottery at a rate of $1 million per year is because by the end they are paying you much less in "real" money. That is to say, inflation makes the value of the dollar less each year, and while taxes go up to reflect this, your lottery payment does not.

I charted one twenty year period where a fast food jobthat paid me $3.15 when I was 16 would pay $6.50 when I was in my mid thirties! Which basically tells you that the dollar dropped by a value of one half, as the job was certainly no harder.

You take those payments, and that million a year at the start will wind up being $750,000 after five to ten years, then $500,000 during the last few years. Neverminding the tax bites.

Take the lump sum, and the lump sum tax bite - though if you were smart, you incorporated and accepted the prize in the corporation's name leaving you tons of options for tax avoidance. Tax avoidance is legal, it's tax evasion that's a crime.

Check with a local accountant.