It’s common wisdom that you’re more likely to be struck by lightning than to win the jackpot playing online casino games. Yet, many people have had the extraordinary good fortune to win big.
When it happens, there are two common methods by which the casino will pay out: lump sums and annuity payments. In this post, you’ll discover more about the differences between them as well as some of the key factors to consider before choosing your payout method.
Understanding Annuity Payments
When a person wins a substantial sum playing casino games, they’re likely to be offered annuity payments according to which the total prize money is broken into chunks and paid out annually over a number of years. In most cases, an initial payment is made, followed by annual installments.
To ensure that your winnings will continue to be paid out annually, the casino invests most of it in interest-generating ventures. There are also graduated annuities. These increase by a given percentage at the end of each year until the funds are disbursed. Most payments like this are made over a period of 20–30 years, depending on the casino’s policy or the specific game rules.
Differences Between Lump Sum and Annuity Payments
With big casino wins comes big responsibilities, particularly with regard to financial decisions. For most players, taking a lump sum sounds appealing because it changes your financial status immediately. You can now take that dream vacation, buy a house or whatever your heart desires.
But other players prefer annuity payments because of their longevity and consistency. The primary differences between these payment methods are their structure, the payment duration and tax implications.
Lump sum payments grant you immediate access to your winnings. But that can increase your tax liability because such a payment moves you into a higher tax bracket. On the other hand, annuity payments provide a fixed income stream and may reduce the overall tax burden.
Benefits of Annuity Payments
Here are some benefits worth considering should you wish to receive your casino payouts annually.
1. Consistent Stream of Income
The predictability of the income stream alone is a good enough reason to choose annuity payment. With annuities, you’ll have guaranteed financial stability, reducing the stress and anxiety associated with worrying about making ends meet.
2. Tax Advantages
Before you embark upon your gambling journey you should find out whether casino winnings are taxable or not. The answer depends on your particular state and will impact the payment option you choose.
Taxes on annuities are paid on each installment rather than on the one lump sum. The benefit here is that the overall tax burden will be less since, as a casino winner, you’re likely to end up in a lower tax bracket.
3. Restrictions on Impulsive Spending
Annuity payments should be a no-brainer for gamblers who are prone to impulsive spending or betting. No matter how massive your win is, it can disappear in the blink of an eye if you’re not careful. One effective way to curb this is to take advantage of annual payments.
Not everyone gets to experience the good fortune of landing one of the biggest bets in casino history. The least you can do is ensure the benefits last as long as possible.
4. Potential for Higher Overall Payout
Two jackpot winners offered the same reward may not end up with the same payout. How so? A lump sum winner receives a significant cut, usually in taxes, compared to the annuity winner. So if you want to grab as much of your winnings as possible, accepting annuity payments is the way to go.
Things to Consider Before Accepting Annuity Payments
There is more to choosing a payment structure for your casino wins than meets the eye. Here are some important factors to help you decide whether to opt for annuity payments.
1. Your Current Financial Situation
With an objective assessment of your financial needs you’ll be able to determine whether the annuity payment method is right for you. Though it may seem attractive in the long run, it isn’t ideal when there are urgent financial needs and debts to settle.
2. The Payment Structure
Each online casino has rules that guide its payment of annuities. Confirm what is obtainable in order to avoid any issues later on. For instance, you should verify whether the annuity payment is a fixed or variable type.
3. Duration of Payment
Another key consideration is how long it will take to receive all your money. The number of years for payments may vary with alternatives such as fixed-term payments and lifetime payments. Some casinos offer a combination of both.
Potential Drawbacks of Annuity Payments
Not everything is sunshine and roses with annuity payments. Here are some drawbacks to keep in mind.
1. Limited Access to Funds
Winning jackpots at online slots makes you richer in theory. But annuity payments restrict your access to that cash. You’re only entitled to the specified annual reward, meaning emergencies and unexpected expenses may remain difficult to deal with. This feature, in itself, can be a blessing and a curse.
2. Risk of Inflation
Inflation is usually the enemy of fixed annuity payments at online casinos. This is because market conditions can reduce the purchasing power of your money so that, in real terms, you end up with less money. The amount can remain the same while its value drops due to inflation. Your best bet to avoid this is to choose annuities with inflation protection.
3. Loss of Investment Opportunities
Lump sum payouts create far more investment opportunities than annuity payments. The lack of flexibility of the latter means you may miss out on profitable ventures that could further increase your newfound wealth. Many annuity providers would rather opt for low-risk investments that may not yield as much.
4. Lack of Estate Liquidity
Fact is, 30 years is a long enough time for all sorts of things to happen, including death. Sadly, in most scenarios the remainder of your payment isn’t simply transferred to your next of kin. Usually, it’s integrated into your estate before being shared as stipulated in your will.
Make Your Winnings Work For You
Luck may have played a significant role in helping you land your once-in-a-lifetime jackpot. But there’s no good fortune when it comes to making the most of your win. It’s now up to you to make a responsible decision.
Thankfully, you can choose to receive annuity payments as your life-changing financial strategy. Safeguarding your funds this way also means you can continue to play your favorite casino games without the temptation to up the stakes.
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