What is the difference between an annuity and a lump-sum?
An annuity pays you a certain amount every year over a set amount of time. A lump-sum provides you with an up front payment based on today’s value of your future payments. For example, if you win a million dollar lottery prize and choose the annuity option, you would get paid $40,000 every year over 25 years (before taxes). If you decide on a lump-sum, you would receive one lump payment for your prize.
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