With the 14 million-to-1 odds of a win in the average lottery game, it probably doesn't matter. Should you beat those odds, however, choosing between a lump sum and annual payments does make a difference and depends largely on your personal needs and goals. In either case, you'll pay federal taxes and in some cases state and local taxes, according to the prize amount and your existing financial status.

Lotteries usually pay out 40 to 50 percent of the jackpot in a lump-sum disbursement. Depending on the state and lottery rules, your payout option may be selected before or after your win. If you select the lump-sum option, you'll receive a large chunk of cash for your immediate use. You may spend or invest it as you like.

There are big benefits to taking the cash in a lump sum. Used judiciously, it can improve your finances by eliminating debt and improving your lifestyle. If invested wisely, it can grow dramatically and become the basis for a significant estate. If you average a 10 percent return on your investment, you'll double your money every 7.2 years. At about the 20-year mark, you may have increased your investment by a factor of eight. Even if you invest only part of your winnings, this may be more than you originally won. Of course, you'll need to consider the inherent risks of investing and get some professional assistance.

The annual-payment option gives you less money that can currently be put to work. Even if you invest a large part of your annual payout, the growth will be limited by the size and incremental nature of each investment. You will receive more money by the final payout (usually 20 years), but your spending power will actually have decreased due to inflation.

The annual-payment structure, however, offers the possibility of a budget-based approach to your winnings. You'll be less able, and therefore less likely, to spend it all in one extravagant spree. Depending on your goals and financial position, this can be the safer option. With discipline, you can create a solid estate as well.