Many believe that after wining the lottery, the only tough choice you’ll ever have to make again is whether to receive your winnings as a lottery annuity settlement, or as a lottery lump sum payout.
That, unfortunately, is not true. There are still many other things that winners need to be cautious of. Here are just a few.
If your state allows you to, you’re going to want to remain anonymous if you win the lottery. Nothing will make you a more obvious target for burglars than an announcement that you’ve recently come into some very large lottery payments. It won’t matter if you get an annuity or a lump sum if you wind up getting robbed, after all.
Seeing a Tax Pro.
Before you choose between a lump sum, and an annuity, you’re going to want to see a tax professional. If you take a lump sum, you’re going to have to pay all the taxes right then and there. If you choose an annuity, you’ll have to pay taxes on each installment. The thing is that tax rates change from year to year. If they remained constant, you’d wind up paying the same in taxes no matter what you chose. If the tax rates decrease, however, then you’ll get more of your winnings if you chose an annuity, and vice versa if they increase. The amount of taxes you pay also depends on the state you live in, and the tax bracket you fall into, which is why you should see a tax pro before deciding between a lump sum and an annuity.
Paying Off Debts.
One of the smartest things lottery winners can do is use the money to make an investment. That way, they can literally make money with their money. Before doing that, however, you should pay off your debts. When you’ve paid off a dollar of debt, you no longer owe that dollar. When you invest a dollar, there’s no telling if that dollar will even come back or not. In other words, pay your debts with your winnings before you do anything else.
If you have any questions, feel free to share in the comments.