Now that you’ve won your jackpot prize, one of the questions that might ask yourself is the mode through which you receive the amount. As regards the answer to the above question, you’ve two payment options. Depending on which one you find the best, you can either choose an annuity or lump sum payment. Although companies are different and can offer one method, Powerball offers both annuity and lump sum jackpots. Continue reading to discover the advantages and disadvantages of each of the above methods.
The lump-sum method enables you to take your entire prize amount. You don’t expect to be paid in bits. An annuity, on the other hand, comprises of payments that are made regularly at specific times. The annuity amount can either be paid monthly, after three months, semi-annually or annually.
Perks and downsides of taking an annuity amount
There are various advantages of choosing to be paid through an annuity. These are as follows:
- Assured income throughout your life-taking an annuity means that you’ll have an income throughout your life.
- Beneficiary-you can propose your spouse or any other beneficiary to continue receiving the payment even after your pass on.
Downsides of taking an annuity
- Limits you-you may not accomplish specific goals that require vast amounts if you make an annuity.
- Death-in case you’re elderly, you may die before taking your entire value. Worse still, specific annuities may not pay the beneficiaries that you nominated upon your demise.
- Social welfare-some pensions may be too meager to cover particular expenses like your medication.
The following are the perks and downsides of taking a lump sum amount:
- Payment of debts-in case you’ve huge debts, you may use part of your lump sum amount to clear them.
- Inheritance-after accomplishing your projects, you can pass on the remaining amount as an inheritance to your loved ones.
- Significant investments-the lump sum amount enables you to perform huge investments that may take time to achieve with a small amount.
The main downside of a lump sum amount is that you may mismanage it and find yourself in financial difficulties before you die.
How to select the best method
There are various factors that you need to take into consideration before deciding the plan that suits you. These are as follows:
- Life expectancy-your health status should determine the best method that you should apply to receive your jackpot prize. In case your wellbeing is weak, it would be wise to take the lump sum amount so that it assists you with medication and other needs. On the other hand, if you’re healthy and expect to live for a long time, you can take an annuity.
- Return on Investments-you may need to take the lump sum amount and invest it on behalf of your loved ones in case you’ve other sources of retirement income.
Before deciding whether to get a lump sum or an annuity from your jackpot, it’s critical to understand the pros and cons of each of the methods before choosing the right one. You may find the tips covered above helpful in assisting you in making the right decision.