What Is a Lottery Payout Calculator?

How to Use a Lotto Payout Calculator?

A lottery payout calculator is an online program used to determine how much of a lottery jackpot you will see, instead of the lump sum advertised as the jackpot.

Most lotteries offer an advertised jackpot that is hard to get your head around, if you’re an average working person who is used to thinking of money in terms of hundreds and thousands, and not the millions. Figuring out how much the government is going to withhold in taxes, or how much an annuity is going to pay, is hard to figure in your head.

Instead, you use a lottery payout calculator tool. All you have to do is go to a website with a lottery calculator, put in the amount of the lottery winnings you expect to have, and in a fraction of a second, the lottery jackpot calculator spits out the information you’re seeking.

Cash After Taxes

What Is a Lottery Payout Calculator?

One number calculated is “cash payout after taxes”. While tax rates vary from one state to the next, you can get a good general idea of how much of the lottery proceeds you’re going to see, and how much the government is going to see. Let’s take a look at an example.

Imagine you win a lottery with a jackpot of $10,000,000. Then imagine you decide to take theĀ  “cash option”, where you get a lesser percentage of the jackpot up front, instead of an annuity for the next 30 years. All you have to do is put in the percentage the cash payout is (which you can find on the lottery’s official website) to see how much money you’ll actually take in-hand.

Percentage of Cash Payout

Let’s continue with this example, assuming the percentage of the cash payout you get in a lump sum amount is 55.4% (which is about average). The cash payout is therefore $5,540,000, which is what you really win with the cash option.

Taxes Withheld when Winning the Lottery

But that’s not all yours, of course. If you want to enjoy your big lottery win, you want to keep the state and federal governments happy. So you have to calculate how much of your cash payout you have to give to the government in taxes to make yourself legal. Let’s assume this amount is somewhere around one-third – we’ll say 32%.

If you take out 32% of $5.54 million, you give $1,772,800 to the various state and federal authorities. That leaves $3,767,200 in lottery cash payout after taxes.

Lottery Cash Payout after Taxes

So when you win a $10 million jackpot and take the cash option, you’re probably going to see a little over a third of that money in your checking account. Don’t be too upset, though. Somewhere between $3 million and $4 million should be more than enough to live on for the rest of your life, if you use good sense.

The problem is, many people who win the lottery don’t practice good sense. That’s why it’s good to have a firm idea in your head how much money is going to be yours. $3,700,000+ is a ton of money, but it’s not an infinite amount. If you blow your money on big houses and a fleet of cars, and then you make a few bad investments, you’re going to burn through that money real fast. So understand you have to have good sense.

Annuity Calculator

Any good lottery payout calculator is going to come with lottery annuity payout calculator, too. This is the full payout over a longer period of time, usually 25 to 30 years time. Going back to our example, you see the full $10,000,000, but it gets paid to you in annuities over a long period of years.

Let’s imagine the full jackpot annuity is paid over 25 years. Then a lottery annuity payout calculator is going to give you the amount of the annuity you are paid each year, until the lottery has entirely paid you the ten million dollars. Lottery annuities tend to start paying one amount, and the amount goes up over the course of the years. For instance, it’s common for the first year’s payment to be in the $250,000 range.

If you assume the amount starts at $250,000 and continues to increase in gradual yet steady increments over the years, you are likely to get two-hundred and fifty thousand dollars in the first year, over $300,000 by year 7, over $350,000 by year 11, over $400,000 by year 14, over $500,000 by year 21, and all the way up over $597,000 in the 25th and final year of your annuity. So it’s like you have a really well-paying job for the next 25 years of your life, with raises every year.

Should I Take the Cash Payout Option or the Annuity?

That’s a great question. Most people choose the one lump sum payout, and if you are a good business person and you save your money well, you can turn that $3.7 million into more than you’ll receive over the course of the annuity. That’s “if” you are those things.

The fact is, most “rich” people who are polled do not live in mansions, drive expensive cars, wear designer clothes, and eat gourmet foods. Most millionaires polled claim they drive nice cars, live in reasonable (yet nice) homes, prefer jeans and t-shirts to double-breasted suits and Paris fashions, and avoid the obscenely expensive restaurants.

That is, rich people conserve their money. They know how hard it is to come by money, so they keep as much of it as they can. They don’t go on spending sprees. They don’t invest in whatever investment opportunity that pops into their knucklehead friends’ heads. Instead, they live comfortably, but not extravagantly, get a stock portfolio and a stock broker who helps them diversify their investments, then find a business they know and understand (or can learn) and invest the rest of their cash in their own business ventures, and otherwise handle their finances like someone with a perishable amount of money.

If you don’t think you’ll do that with on lump sum jackpot amount, then you should take the annuity. But that’s my two-cents worth. Let’s discuss lottery payout calculators again.

Calculating Jackpot Wealth

The lottery calculator helps you start to visualize what you’ve won in the lottery, or how much you hope to win. Instead of a vast amorphous amount of money, you see what the realistic figure after all the hype has died down and the I.R.S. has taken its share of the jackpot. A good jackpot payout calculator also offers you a breakdown of the kind of money you’ll see yearly as part of an annuity, and eventually lays out before you both options in easy-to-imagine terms. This lets you make a clear-minded decision about which lottery payout you need to take: an annuity or the lump sum payout option.

This post is part of a series of posts we’re publishing about the lottery. Other posts in the series include:

  1. What Are Power Ball Numbers?
  2. How to Check Lottery Numbers
  3. What Are Megamillions Numbers?