The lump sum pays $283,900,000 today. The annuity pays $674,000,000 over 29 years. After federal tax that is $178.9M now versus $426.1M spread across three decades — and the decision is locked when you claim.
Calculate your take-home
The two payouts, side by side
| Lump sum (cash value) | Annuity | |
|---|---|---|
| Gross | $283,900,000 | $674,000,000 |
| First payment | $283,900,000 | $10,144,667 |
| Last payment | — | $41,756,826 |
| Federal tax (no state tax) | −$104,988,856 | −$247,880,007 |
| Net | $178,899,944 | $426,119,992 |
| Inflation risk | Yours | Shared with the 5% step-up |
| Investment risk | Yours | None (nominal) |
| Estate treatment | All yours immediately | Remaining payments to estate |
The break-even return
To turn $283,900,000 into the annuity's $674,000,000 over 29 years, you need about 3.0% a year after tax. Historically a 60/40 portfolio has cleared that; a savings account has not. But the comparison is not purely arithmetic.
- The annuity's 5% step-up is nominal. At 3% inflation it is roughly 2% of real growth, which is below what a conservative portfolio has historically returned.
- The lump sum is taxed once, immediately. The annuity is taxed 30 times, at whatever rates exist in those years. If rates rise, the annuity looks worse after the fact.
- State tax can change. Move to a no-tax state and the later annuity payments escape state tax entirely — impossible with a lump sum taxed in one year.
How winners actually decide
Three questions usually settle it:
- Can you say no to people? A lump sum attracts requests. An annuity gives you a socially acceptable reason to decline.
- Do you have a plan you trust? Not an idea — a written allocation, a fee-only adviser, and a spending limit. Without one, the annuity is the safer default.
- How long is your horizon? A 30-year-old with a 60-year horizon can reasonably take the cash and invest. A 75-year-old may prefer the guaranteed rising income and the estate treatment.
Many states require the choice within 60 days of claiming, and some as little as 30 in practice. Sign nothing until your adviser has modelled both options with your actual state rate.
What the numbers look like in a high-tax state
In New York the lump sum leaves about $148M. The annuity's total drops by a similar proportion, but it also spreads state tax across 30 years — and if you move to Florida in year five, the remaining payments stop paying New York anything, subject to residency rules. That optionality is invisible in a single-year comparison.
Run your own state through the state tax index, or see the year-by-year schedule on the annuity chart.
Questions
Is the lump sum always smaller than the annuity?
Yes, on paper. The annuity pays the full $674,000,000; the cash option pays $283,900,000, about 42%. The gap is the time value of money, not a penalty — the lottery is indifferent between the two by design.
What return do I need to match the annuity with the lump sum?
About 3.0% a year after tax for 29 years to turn $283,900,000 into $674,000,000. That is achievable with a diversified portfolio, but only if the money stays invested through a windfall, taxes and life.
Does the annuity protect me from myself?
Partly. You cannot spend payments you have not received, which is why advisers often recommend the annuity for winners without financial experience. The counter-argument is that 29 years of inflation erodes the later payments, and you cannot reallocate the money if your circumstances change.
Can I take the lump sum and buy my own annuity?
Yes, and it is often cheaper. A commercial immediate annuity or a laddered bond portfolio can reproduce a rising income stream without the lottery's fixed 5% schedule. The comparison is worth running with a fee-only adviser before you claim.