This is the state that last summer temporarily stopped paying out money to lottery winners of large prizes (over $25,000), and then in October stopped paying out prizes worth more than $600, until finally in December when the legislature passed a special law that would allow them to pay out lottery winnings before the budget was passed.
Let me emphasize that: Illinois is so financially and politically dysfunctional that they disincentivized people from participating in that government cash machine called “the lottery.”
This state has a huge pension crisis and budget crisis.
Assume that you have won the powerball, and all other things being equal, you would prefer to take the annuity rather than a lump sum.
Does the mere fact that you reside in Illinois and would be dependent on the Illinois government reliably issuing you a check for roughly $50 million dollars annually for the next 26 years dissuade you from taking the annuity?
BTW: Me: Not a chance do I entrust Illinois with the money.
I have no idea what would happen to the obligation to pay out lottery winnings in the event that Illinois were to declare bankruptcy, but I do know that if I had been extremely lucky enough to win a large prize, I would not want to risk losing it that way.
But then again, federal rules could be modified to allow it sometime in the next couple of decades, and there is still the whole aspect of Illinois can’t pay it if the money isn’t there, so I’m going to stick with “I wouldn’t let Illinois be in control of any money due me for any longer than I had to.”
Under current law, a state government can’t file for bankruptcy. It sure can run out of money and be unable to pay bills, though. Nobody knows exactly what will happen when a state really, truly doesn’t have enough money to pay legal obligations and the bare necessities of government. The people of Illinois fill find out soon enough, I’m afraid.
I don’t think you need to rely on Illinois continuing to pay the annuity, I believe the multi-state lottery group that runs Powerball buys securities to guarantee the payouts.
I’m upset enough that both my husband and I depend on the state for our pensions, which means we are one lawsuit away from the state not paying, so no annuity for me.
Even if the state isn’t the actual entity paying me, I can see them doing something screwy to get the money from me somehow.
FYI, this article from The New York Times suggests taking the annuity option if you were the winner. One reason is that if you take the cash option and then invest the money, the amount you can invest is reduced by the amount you pay in taxes. But with the annuity option, the entire amount is invested and earns the equivalent of 2.843% securely. Yes, it’s possible to do better but it’s also easy to do worse.
Interesting read. I know the common wisdom is always to take the money and run but figured there might be a point of winnings where you’re just as well (if not better) with the annuity. If nothing else, $22 million a year should be enough of a lifestyle leap for most people.
Obviously the correct answer would be to go over it with a skilled adviser who can evaluate your own circumstances.