When someone wins the lotto or a lawsuit, it seems like they’ll never need to work again. However the key to being rich is not just having lots of money but knowing how to use it wisely. The tales of lotto winners using up their winnings in a matter of years are backed by research. One way to invest your money wisely is to sell fixed annuity in exchange for a lump sum, which can be used to finance a business, buy a house, pay off debts, create an investment portfolio or for other financially sound purposes.
Investing your money wisely
Whether the lottery payment is $500 million or $1 million, studied have found that around 70% of lottery winners mange to lose or spend all the money within five years. Most people understand that even with huge amount of money coming their way, the best way to make changes is slowly. This may be why as many as 48% of all lottery winners don’t give up their old jobs after winning the lottery.
For many people the choice to sell fixed annuity comes down to one of the time frame within which they are able to access their money and to use it productively. While a structured settlement annuity which pays an annual amount has the advantage of an overall lower tax rate as compared to a lump sum payment, for some people it may be better to have a lump sum to invest by selling lottery payments.
Comparing lump sum versus annuity
Not only can people achieve a better rate of return on their investment if they invest a lump sum safely, their money grows over the years. An annuity on the other hand is subject to inflation and it is common sense that one million or even 500 million dollars will not have the same value thirty years from now as they do today. In real terms, it will be much less money.
For those who do choose to get cash for settlements, it is best to deal with a reputable firm that will advise you honestly about the pros and cons of selling your annuity.