POWERBALL: Should you take the lump sum payout?

Published On: Nov 28 2012 04:27:25 AM EST   Updated On: Nov 28 2012 04:28:03 AM EST

With 60% of the tickets still to be purchased, officials with Powerball are estimating the top prize for Wednesday’s drawing will top $500 million. Even if you take the lump sum payout you will walk away with $327.4 million before taxes.

But is the lump sum your best option? It may depend on your financial literacy and discipline.

Taking the lump sum payout will yield a bigger payout overall, but getting all of your money at once might increase your likelihood of blowing your new found wealth. Studies have found about 1% of lottery winners go bankrupt each year.

Lump Sum Benefits

All Your Money Now
Eliminates Uncertainty
Higher Taxes

20 Yr. Payout Benefits

Reduced Taxes
Steady Income Stream
Less likely to “blow” your winnings.

Taxes are another issue. Generally, getting your payout over 20 years will lower your tax burden. But with the uncertainty in Washington over future tax rates and the “fiscal cliff”, you might choose the Lump Sum Benefit.
Taking the Lump Sum Benefit eliminates any questions over distributing your wealth should you die before collecting the entire amount.


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