CLEVELAND — Despite the unlikely chance of winning the lottery, people still buy tickets, even if only to dream about being filthy rich.
However, there are financial decisions that happen after winning the lottery.
Winners have a choice between receiving the money in a lump sum or annuity. Corbin Blackburn, a financial advisor for Cleveland Wealth, explained the benefits and drawbacks to both.
“The biggest benefit (with a lump sum) is you get it right away, which sounds silly, but you get to now have that money work for you the way that you need it to. You don’t have to wait to receive that money; you just have more options at your disposal,” he said.
On the flip side, Blackburn said winners could be tempted to blow through their winnings all at once, and an annuity, which is paid out over several years, would prevent them from doing that.
“You do get a guaranteed interest rate while you’re waiting, so those payments are going to equate to more money for you long term. Another big benefit of the monthly installment option is you’re spreading out the tax liability,” he said.
Blackburn’s big piece of advice is to be financially disciplined and to surround yourself with people that can support you.
“Getting the right investment advisor, financial planner, estate planning attorney, accountants, insurance agents. All of those people lined up and working together for you, making sure they’re people you trust, that will help aid you with those decisions,” he said.
Whichever choice a winner decides, lottery winnings are still considered taxable income by the IRS and the state.