This 20-year-old lotto winner refused $1M in cash and chose $1,000/week for life. Now she’s getting slammed for it
Would you rather be a millionaire or have a lifetime of safe, reliable passive income? This is the difficult choice that many lucky lottery winners often face. Although the prospect of a seven-figure payment was tempting, 20-year-old Brenda Aubin-Vega from Quebec, Canada, recently decided to opt for the recurring payment option instead.
After Aubin-Vega scratched three piggy bank symbols onto his Gagnant à Vie ticket, he was stunned to realize he had won the game’s top prize. “I couldn’t believe my eyes! I checked my ticket over and over again,” he told Yahoo News Canada (1).
After calling her father and taking time off from work, Aubin-Vega reached out to Loto-Québec to inform him that he would receive his prize in the form of a $1,000 weekly annuity instead of the current $1 million lump sum.
The decision drew ridicule on social media, with Reddit commenters insisting that paying it forward was a sensible move. The reaction underscores a broader debate about whether large windfalls are superior to guaranteed income.
Here are some pros and cons of Aubin-Vega’s annuity approach.
If you’re faced with a choice between a big windfall or an annuity, taxes are perhaps the most important factor you need to consider. According to the Internal Revenue Service (IRS), income from gambling is fully taxable (2). Many American winners also face state and local taxes on their lottery winnings.
The winner of the $1.5 billion Powerball jackpot on December 17 would receive only $516.7 million before federal taxes, and perhaps even less depending on his or her state (3).
Fortunately, Aubin-Vega is Canadian and is not taxed on lottery winnings (4). In other words, he could claim $1 million without any taxes or penalties. But then he would face a difficult decision about investing this lump sum.
Aubin-Vega received weekly payments of $1,000, earning a 5.2% annual return on the jackpot. Since the payments are provided by the Canadian province of Quebec, this annual return is almost as safe as the government treasury bond return. Canada’s 10-year bond currently yields 3.4%, making Aubin-Vega’s move more financially savvy (5).
