There is a big lottery drawing in the US tonight, over $500 million in the jackpot. DH insisted that if you won a big lottery and took the lump sum, that you would only get about 1/4 of the actual amount. He insisted that if the lottery was say $100 million, that the lottery people would only give you half of that, and of that $50 million, about half would go for taxes. (That part I agree with.) So you would only net $25 million. His reasoning was that if you took the annuity, that let the lottery commission have the use of the remainder of the money over the 30-year payout, so they would give you the whole amount. The tax people still get their share, of course. I read him the FAQ from the lottery's OWN page that you DO get the WHOLE AMOUNT (less taxes), no matter what payout you choose, but he had to read it for himself before he'd admit that maybe he misunderstood.

Your DH isn't entirely wrong - if you take it as a lump sum, you're in a significantly higher tax bracket (for that one year) than if you take it in smaller doses. Let's say you win a million dollars. Also, we'll say you normally make $30,000/year in taxable income - you pay 15% of that back in taxes. If you take a lengthy payout, e.g. $40,000/year for the next 25 years, you'll have an income of $75,000/year. You pay 15% on the first $40K and 25% on the other $35K, so around $15,000 a year in taxes. On the other hand, if you took the million dollars in a lump sum, your income that year is $1,030,000: you pay 15% on the first $40K, 25% on the next $50K, 28% on the next $95K, 33% on the next $220K, and 40% on the rest. Instead of your million dollars being almost entirely taxed at 25% (still a big chunk), $600,000 worth is being taxed at 40% - that's a bite of $90,000. I'm not going to do the math overall for the rest of the brackets, but basically you pay an extra hundred thousand dollars (more, actually) for the privilege of taking your money all at once. Not "half", but any means, but enough to buy a house!

ETA: the difference is even bigger for a $500 million payout - you'd pay an extra

**$75 million** in taxes if you take it all at once (and you don't already earn $400K/year).