The choice between a lump sum payment or an annuity payment

Now, lots of the time when you win a major jackpot, you’re just paid out the amount you won. It’s easy and simple and most casinos, and online gaming rooms, pay out like this. Some of them however and there are lots of ways you can win or receive large amounts of money that this advice is valid for and which don’t payout in lump sums, will offer the option to payout in an annuity. This means that rather than receiving a cheque for the amount you won, you receive instead an annual amount, rather like a pay cheque. Now, there are some advantages to both. The main advantage that most people see to the annuity payment method is that it is sort of like forced savings. It leaves you no other option than to spend your winnings wisely, which can be tempting if you think you are the kind of person who might have the tendency to spend all of your winnings at once, to blow them on unimportant things straight away and be left with nothing in a year, or a few years, or whenever. Now, this makes sense, and it is a good idea in some ways. However, the fact is, that financially speaking it is nearly always better to accept a lump sum payment rather than an annuity payment. This is purely in terms of how much money you will have at the end of whatever period is set.

There are a number of reasons for this. Firstly, money now is worth more than money in the future due to factors like inflation. Think about it like this: if you had a thousand dollars a hundred years ago you could have bought a house. Whereas nowadays you couldn’t even afford a mortgage down payment with  $1000. The same amount of money was worth more in 1900 than it is now. And the same goes looking forward to the future. $1000 is worth more today than it will be in twenty years. So it s better that you receive the money you have won now rather than wait and receive it in pieces over the next twenty (or however many) years.

There’s another factor that makes it better to receive your money now in one big deposit than in increments over a period of a number of years. That reason is, in a word, investment. If you have for example, $100,000 now, you can deposit that into an account where it will earn interest, or invest it as shares in various companies where it will, you hope, gain value and enable you to sell the shares for a profit. If you receive $100,000 in annual installments of $10,000 over the next ten years, while that money will make a valuable and helpful addition to your regular salary, it will not be able to earn the same amount of interest or return the same possible profit as the $100,000 would be able to.

Now, we recommend meeting and speaking with your financial planner (if you don’t have one when you win the jackpot, make sure you get one quick smart) about your options. It might be that your particular circumstances mean that accepting an annuity is the better option for you – we can’t foresee all possible situations. What we’ve provided here is good general advice. This should never be considered as an alternative to seeking professional advice from someone who is both an expert in financial matters and familiar with your personal circumstances.

When you are looking for a financial advisor, make sure you end up choosing wisely. There are a lot of financial planners and investment analysts out there, and some are better qualified and more trustworthy than others. Ask your friends and family if they have trusted financial advisors that they can recommend to you. Meet with the advisor first before making your decision. Look at the way that they get paid – are they receiving payment for you making a certain type of transaction, or investing with a particular company, or do they accept a fee in return for providing objective advice? Examine the advisor’s educational qualifications and license, as well as any professional qualifications they have received – these things should not be difficult to find if you are dealing with a reputable professional. Basically, do your research and make sure you are trusting your money to someone who is worthy of your trust.