Lottery games have a long history. The first recorded lottery slips date back to the Chinese Han Dynasty, between 205 BC and 187 BC, and were used to fund major government projects. The game is also mentioned in the Chinese Book of Songs, where it is referred to as “drawing of wood” or “drawing of lots.”
Lottery payouts not always in a lump sum
A lottery payout, whether a large jackpot or smaller one, may come as a lump sum or an annuity. A lump sum payment provides a large sum of cash that can be immediately used for lifestyle improvements or debt elimination. However, if you’re lucky enough to win a large lottery jackpot, you might also be interested in a lottery annuity that can grow over time and potentially form the basis of a substantial estate. If you’re interested in this option, you’ll need to consider the risks involved and seek professional help from a Certified Financial Planner.
One-time payment is smaller than advertised (annuity) jackpot
While a huge jackpot may seem like a lifetime’s supply of money, this can actually run out faster than you might expect. An annuity will only pay out a fraction of the amount you win, and you’ll be required to pay taxes on the difference.
Annuities for 20 to 30 years
In the event that you win the lottery, it makes more sense to opt for a lump sum rather than an annuity for the first 20 or 30 years after your winnings. Although a $1,000,000 annual allowance may not seem exciting, consider that it’s equivalent to a 3% to 4% annual return.
How to avoid them
There are several ways to protect yourself against lottery scams. One of the easiest ways is to never give out your personal information through an unsolicited email. Moreover, never click any links in the emails you receive from lottery scammers, since they may download viruses to your computer.