Annuity vs Lump Sum

Last updated: 2026-07-14

Compare lottery annuity vs lump sum after taxes. See 30-year payment schedules, investment projections, and which option puts more money in your pocket.

Lump sum wins
$928M
Lump sum wins by $928M if you can earn 7% a year investing it.
7%
Includes NYC tax for NYC residents
Lump sum invested 7%/yr for 30 years
$1.2B
Annuity total after tax
$262M
Difference
$928M

How Does the Lottery Annuity Work?

Both Powerball and Mega Millions annuities pay 30 annual installments over 29 years (the first payment is immediate). Each subsequent payment increases by 5% over the previous year. The total of all 30 payments equals the advertised jackpot. This structure provides inflation protection and growing income over time.

The Investment Argument for Lump Sum

The lump sum is worth approximately 60% of the advertised jackpot. If you invest that amount and earn returns exceeding the annuity's implicit interest rate (typically 4-5%), the lump sum grows larger than the annuity's total payments. At a 7% annual return, a $300M lump sum grows to approximately $2.3B over 30 years — far exceeding a $500M annuity total.

Tax Considerations

The annuity spreads tax liability over 30 years, with each payment taxed at that year's rates. The lump sum is taxed entirely in one year at the highest marginal rate. If tax rates increase in the future, the annuity's lower annual income could result in lower total taxes. Use our Payout Calculator for state-specific tax analysis.

Frequently Asked Questions

Should I take the lump sum or annuity for lottery winnings?
It depends on your financial discipline and investment ability. The lump sum gives you approximately 60% of the advertised jackpot immediately. If you can invest it at a return exceeding the annuity implicit rate (~4-5%), the lump sum is mathematically superior. The annuity provides guaranteed income for 30 years with built-in 5% annual increases.
How much is the lottery annuity per year?
Lottery annuities pay 30 annual installments that increase 5% each year. For a $500M jackpot, the first payment is approximately $7.5M before taxes, growing to about $32M by year 30. Total payments equal the advertised jackpot amount.
What percentage of lottery winners take the lump sum?
Approximately 80% of lottery winners choose the lump sum over the annuity. Financial advisors generally recommend the lump sum for winners who have access to professional wealth management, as the invested lump sum typically outperforms the annuity over 30 years.
Can you change from annuity to lump sum after winning?
In most states, you must choose between lump sum and annuity at the time you claim your prize. Once selected, the decision is irrevocable. Some states give winners 60 days to decide. A few states allow selling future annuity payments to a third party at a discount.

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