Choosing the annuity spreads the windfall (and the tax) over 29 years and protects against overspending. Taking the lump sum lets you invest it – if your after-tax return beats about 4–5%, the lump sum usually comes out ahead.
How to use the Lottery Annuity Calculator
- Advertised prize (annuity value)
- Number of payments
- Yearly payment increase
- Lump sum as a share of the prize
- Tax rate
- Return if you invest the lump sum
Results update as you type, and every field accepts the units shown in its menu.
How it works
Enter the advertised prize, the number of payments, the yearly increase, the lump sum share, your tax rate and expected return.
Tips
- Use your real spending from bank statements rather than guesses.
- Automate savings so they happen before you spend.
- Revisit your plan once a year or after any big life change.
- Keep an emergency fund before investing for long-term goals.
Common mistakes to avoid
- Underestimating irregular expenses such as car repairs, gifts and annual bills.
- Ignoring inflation for long-term goals.
- Taking on high-interest debt to fund wants.
Inputs explained
| Field | What to enter |
|---|---|
| Advertised prize (annuity value) | Amount in your currency |
| Number of payments | A number |
| Yearly payment increase | In % |
| Lump sum as a share of the prize | In % |
| Tax rate | In % |
| Return if you invest the lump sum | In % |
What each result means
- Last payment (before tax) = [First payment (before tax)]×(1 + [Yearly payment increase]÷100)^([Number of payments] – 1)
- First payment after tax = [First payment (before tax)]×(1 – [Tax rate]÷100)
- Total annuity after tax = [Advertised prize (annuity value)]×(1 – [Tax rate]÷100)
- Lump sum after tax = [Advertised prize (annuity value)]×[Lump sum as a share of the prize]÷100×(1 – [Tax rate]÷100)
- Lump sum invested over the same period (after tax on growth) = [Lump sum after tax]×(1 + [Return if you invest the lump sum]÷100×(1 – [Tax rate]÷100))^([Number of payments] – 1)
- Annuity payments invested as they arrive = gfv([Return if you invest the lump sum]÷100×(1 – [Tax rate]÷100), [Number of payments], [First payment (before tax)]×(1 – [Tax rate]÷100), [Yearly payment increase]÷100, 0)
Example values
How the main result changes when Advertised prize changes and everything else stays at the example values above:
| Advertised prize (annuity value) | Total annuity after tax |
|---|---|
| 50,000,000 | 30,000,000 |
| 75,000,000 | 45,000,000 |
| 100,000,000 | 60,000,000 |
| 125,000,000 | 75,000,000 |
| 150,000,000 | 90,000,000 |
| 200,000,000 | 120,000,000 |
Formula
First payment = prize × g ÷ ((1 + g)^n − 1)Payment k = first × (1 + g)^(k − 1)Lump sum invested: value = lump × (1 + r)^nWorked example
Inputs — Advertised prize (annuity value): $100,000,000; Number of payments: 30; Yearly payment increase: 5 %; Lump sum as a share of the prize: 48 %; Tax rate: 40 %; Return if you invest the lump sum: 5 %.
Results — First payment (before tax) = $1,505,143.51; Last payment (before tax) = $6,195,374.77; First payment after tax = $903,086.10; Total annuity after tax = $60,000,000.00; Lump sum after tax = $28,800,000.00; Lump sum invested over the same period (after tax on growth) = $67,869,086.57; Annuity payments invested as they arrive = $85,552,954.72.
Frequently asked questions
How does a lottery annuity work?
You receive one payment now and 29 more yearly, each 5% bigger.
Is the lump sum or annuity better?
It depends on discipline, taxes and returns; the annuity is safer for many winners.
What happens to annuity payments if I die?
Remaining payments go to your estate.
What formula does the Lottery Annuity Calculator use?
First payment = prize × g ÷ ((1 + g)^n − 1).