Find out the terms of both options. Determining which option is better depends a lot on the interest payment that your annuity option pays.

Find out what type of annuity is being offered. An annuity certain is a determined amount of money paid yearly for a fixed number of years; a life annuity is a payment that is made every year for the lifetime of the winner.

Find out what interest rate is given for the annuity payments being offered by your lottery. Typically, in state lotteries, the amount you’ve won is the the amount of the annuity payment with interest. The cash value is about half that amount.

Take the cash amount offered and divide it by the 20 years typically paid to individuals (or the amount of years that your lottery has offered), then add in the annual interest rate, and you end up with the advertised amount won. For example, if you have won $1,000,000, a state lottery will typically offer you $500,000 as a lump-sum payout. However, the annuity would be an annual payment of $48,000 plus an additional 5 percent interest (or whatever the going rate is for savings accounts); $48,000 multiplied by .05 equals $2,400. Therefore $48,000 + $2,400 equals $50,400, or $1,008,000 given out over a 20-years period.