As has been mentioned elsewhere in the thread, the difference between the lump sum and 30-year payout is based on the time value of money. Basically, the Lottery invests the money with a financial institution that promises to pay out the higher number over 30 years. By taking the lump sum, you're betting that you can invest the money at a higher return than the annuity purchased by the lottery, which can be a fairly safe assumption since the annuity company will take a cut of the return for themselves.
US federal taxes are, IIRC, 37.5% on all income over $120,000. Add on state taxes, and you can be reasonably assured to pay out 45-50% of the income in taxes. Incidently, another argument in favor of taking the lump sum payout is the expectation that tax rates will be higher in the future than they are now. |
