Lottery jackpots can grow to billion-dollar prizes, which drive lottery sales and create free publicity for the games. But the oversized jackpots also make lottery organizers less inclined to make their jackpots harder to win.
The odds of winning a lottery jackpot are pretty low, even when you play it frequently, according to Michael Matheson, a professor at the University of Illinois at Urbana-Champaign. People are generally good at developing an intuitive sense for how likely risks and rewards are, but that skill doesn’t translate very well to the immense scope of lottery games.
One of the most important decisions players must make when they win a jackpot is whether to receive their prize in a lump sum or as an annuity over time, says David Nadelle, executive director of the National Association of State Lotteries. Choosing a payment option depends on several factors, including your current and future earnings, how much you expect to spend and your financial goals.
Taking your prize in a lump sum lowers your total payment amount and may result in expensive tax consequences, such as when you sell your annuity payments. Annuity payments are a better choice for winners who want to collect their jackpot over time and pay taxes on it as they come due, Nadelle says.
When a winner chooses to take his or her prize in a lump sum, the winning ticket must include a legible, complete and accurate claim form. Failure to do so could cause delays in receiving the prize, which is why it’s important for players to read their lottery win forms carefully before they sign them.