Lottery Annuity vs Lump Sum Calculator
Compare lottery annuity payments vs lump sum after federal and state taxes.
Find the present value of annuity payments and decide which option is worth more.
Lottery: Annuity vs Lump Sum
When you win a lottery jackpot, you typically choose between two payout options: a lump sum (cash value) paid immediately, or an annuity that pays out over 20–30 years. Neither is automatically better — it depends on taxes, investment returns, and personal circumstances.
Key definitions:
| Term | Meaning |
|---|---|
| Advertised Jackpot | The annuity value — total if paid over many years |
| Cash Option (Lump Sum) | Typically 50–65% of the advertised jackpot |
| Annuity | Equal or growing annual payments over ~29 years |
Powerball and Mega Millions annuity structure:
- 30 payments over 29 years
- Each payment is 5% larger than the previous year (growing annuity)
- First payment made immediately; rest annually
Tax treatment (US Federal):
- Lottery winnings are ordinary income
- Federal rate: 37% on amounts above the top bracket threshold
- Most states also tax lottery winnings (0%–13%)
Present Value of Annuity:
PV = Σ [Payment_t / (1 + discount_rate)^t]
If PV of annuity > after-tax lump sum: annuity is better at your assumed return rate. If PV of annuity < after-tax lump sum: take the lump sum.
When lump sum wins:
- You are a skilled investor who can earn high returns
- You want to control the money immediately
- You have immediate large needs (business, real estate)
When annuity wins:
- You might spend a lump sum too quickly
- You want guaranteed income for life
- You live in a no-income-tax state
- You expect to live for 30+ years