Lottery Winners Should Choose Annuity, Not the Lump Sum

Every few months our country goes through “Power Ball Fever” where the uninformed, the uneducated, the dreamers, and my father stand in line to be the one who wins the jackpot. I gasp in amazement every time I see those long lines. It is a fact that you have a better chance of getting hit by an asteroid or getting killed driving to the convenience store to buy a ticket than actually winning the lottery. So what gives? Are we a land of idiots and people who ignore the simple math of probability? The unfortunate answer is probably yes on both of those points.

Winners Who Choose the Lump Sum Instead of Annuity Payments End up Bankrupt

I live in the state of Florida where lottery fever happens on a daily basis. There is a ping pong ball drawing on TV every night, and I’m sure there a ton of dreamers who tune in with a ticket in hand. There is a dark side to this lottery madness because most lottery winners end up squandering away the money. It’s pathetic. People win, take the lump sum, and then file bankruptcy a few years later. It’s actually predictable when you see the interview as they hold up the over-sized check. You can hear the bankruptcy clock ticking.

Here’s the mistake that most people make: they take the lump sum instead of the ​lifetime payout! It’s the dumbest move ever. Let me explain.

Annuity Lottery Payments Protect Assets From Beggars (I.E. Family & Friends)

When someone wins the lottery, I can only imagine the line of family and “friends” at the door with their hands out. That’s how the march to bankruptcy begins. When you take the annuity lifetime income stream instead of the lump sum, you are placingannuity handcuffs on these ungrateful beggars. Yes, they will show up every year for the rest of your life when your annuity payment arrives, but at least that will be a contractual filter.

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