$1,000 A Day For Life Winner, Smart Over Time, Or Lump Sum?

  • A North Carolina lottery winner won $1,000 a day for life off of a Lucky for Life ticket.
  • Should they take the lump sum, they would be granted $5.75 million before taxes.
  • Taking the annuity will see $365,000 a year before taxes.

CHARLOTTE – In Gaston County North Carolina, a lucky lottery player won $1,000 for life playing the Lucky for Life game.

Should the unnamed Lucky for Life winner take the lump sum prize, they would net $5.7 million before taxes. Taking the annuity option nets $365,000 a year, $7.3 million over 20 years, and $10.9 million after 30 years before taxes.

This raises the question, which payment method is best? Both options have their pros and cons and they may relate differently to each player.

Taking The Lump Sum

Looking at the lump sum option first, players will instantly have access to a large sum of cash and players would only have to pay taxes on the winnings one time.

The federal government will take 37% off of the gambling winnings, which in this case amounts to $2.1 million of the $5.7 million lump sum, leaving players with $3.6 million. North Carolina will also see 5.5% of the initial $5.7 million, meaning another $313,500 will be taken leaving players with $3.2 million after taxes.

After this players will not have to pay any more taxes on their lottery wins and be able to settle with over $3 million. Players can invest this and earn more money over time than if they took the annuity should they invest wisely.

What About Annuity Payments?

The annuity payments of $365,000 would lead to a higher total in the long run, but lottery winners technically will be losing a lot more as they will be taxed at high rates consistently with every payment.

Additionally, the 37% rate set currently could potentially change. The government could raise the tax rate on higher incomes as has been done in the past.

Lottery winners taking the annuity could end up making less over the 30-year period if the taxes increase over 50% before the final payments.

However, for many players, this is the better option. Several lottery winners go broke and lose it all within a few short years of winning the jackpot. Spreading the winnings out over time could save many from themselves.

Additionally, should a lottery winner pass away before the final payments, the annuity payments can continue to the nearest heir or set heir by law. There are pros and cons to both methods, but whatever the North Carolina winner chooses, their life is about to change for ever.