What is an Annuity?
When a person wins the lottery, often an annuity is paid out as an immediate payment followed by annual payments for a set amount of years. Annuity payments can be structured as 5% bigger than the one before it to account for inflation and rising costs of living. Surprisingly, the average structured settlement payout is only $324,000. Federal taxes can take 25% or a lottery payment, and then dependent on the state another 6 to 9% for state taxes. If cash is needed sooner, with an “immediate” annuity a lottery winner can generally start receiving payments in approximately 30 days.
Selling a Structured Settlement
If money is needed immediately, an annuity can be sold to get cash for settlements. If a person decides to sell an annuity, they can be liable for a fee of up to 10%. However this will allow for a cash payment for their structured settlements. If money is needed immediately, selling your annuity may be a smart financial decision, although it does come at a financial loss because of fees associated with selling a structured settlement. Even so, 92% of individuals who sell a structured settlement are satisfied with this decision.
