Cash vs Annuity

If you win the jackpot in Illinois Lotto, Powerball or Mega Millions, you have two payout options. You can take annuity payments over 29 years, or a single lump sum. Find out more about the Illinois Lottery’s payment system and assess whether it works out better for you to take the lump sum or the annuity.

Lottery Winner

Cash Option

Most winners have historically favored the cash option, as it gives their bank balance a big boost immediately rather than getting a series of smaller payments over the course of three decades.

The cash option represents the market value of the prize, so it will always be significantly lower than the advertised jackpot amount. For example, if the Illinois Lotto jackpot is advertised as $6 million, the lump sum payout would be approximately $3.52 million. It is also subject to tax withholding, so the final payout would be around $2.5 million.

However, it may be possible to get a bigger long-term return by taking the lump sum rather than the annuity, if you invest a lot of the money and generate more. This is by no means guaranteed, though, and the Illinois Lottery will always urge winners to seek expert financial advice regardless of which option they choose.

Deadline for Cash Option

While the deadline for claiming prizes in Illinois is one year after a draw date, you must come forward within 60 days if you intend to choose the cash option for payment of a jackpot prize. If you do not stake your claim in the first 60 days, it will default to the annuity payments.

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Did you know?

The winners of the record $1.3 billion Mega Millions jackpot from July 2022 came forward just a few days before this 60-day limit, allowing them to accept the lump sum of $780.5 million before taxes.

Lottery Winner

Annuity Option

If you choose the annuity option, you will receive the full advertised jackpot amount for Lotto, Powerball or Mega Millions. However, it will be split into 30 annual payments over the course of 29 years. Each payment will be 5 percent larger than the one before.

The annuity option is always considerably larger than the lump sum. The payouts are also guaranteed. While winners may theoretically be able to earn more by taking the cash option and investing well, this is done at their own risk. With the annuity option, the Illinois Lottery purchases bonds and it is the interest accrued on these investments that will be paid out yearly. Even if they do not perform as expected, the Illinois Lottery will pay out the amount that has been pre-agreed.

Most winners reject the annuity option in favor of the cash. As it takes 29 years to get paid fully, the annuity may be regarded as a more worthwhile option if you are young rather than in later life. However, the Illinois Lottery will always pay out the entire prize – even if a winner dies before they have received all the money that is due to them, the remaining balance will be given to their estate.

Annuity payouts also provide guaranteed financial stability. With a lump sum, there is a chance that you could spend it all very quickly and then it would be gone. If you get annual installments, you have a regular income. The payments are still subject to taxes, but you may avoid being in the top bracket this way.