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Mega Millions players can let the dream continue.
With no one hitting the six numbers drawn on Friday, the jackpot jumped to around $ 376 million. And Powerball, with the next draw scheduled for Saturday night, is $ 341 million.
Of course, due to taxes, these announced amounts are not what you would get if you managed to beat the astronomical odds of winning a single ticket (1 in 302 million for Mega Millions and 1 in 292 million for Powerball).
However, the windfall in his life would likely seem overwhelming, experts say. And while you may be eager to claim your winnings, experts say it is best not to rush to the lottery headquarters the day you discover your good luck.
In other words, take a deep breath.
“The first thing I would recommend is to form a team of professionals to deal with the many aspects of making that kind of money,” said certified financial planner Doug Boneparth, president of Bone Fide Wealth in New York.
This team must include an accountant, financial advisor and lawyer. Here are some other considerations if you hit the jackpot.
Annuity or lump sum?
You can choose to receive your earnings as a lump sum or an annuity paid over 30 years. For the Mega Millions $ 376 million jackpot, the cash option is $ 287.4 million. For the $ 341 Powerball prize, that amount is $ 262.5 million.
Experts generally recommend getting the money in one go – which is what most winners do.
“Taking the lump sum distribution would be the preference,” said Boneparth. “Doing this puts you in greater control of money.”
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He added a warning, however.
“If you are not disciplined or are afraid to invest, even with assistance, annuity may be the best option,” said Boneparth.
The fiscal coup
Before the money reaches you, 24% will be withheld for federal taxes. For the Mega Millions $ 287.4 million cash option, that would mean about $ 69 million coming out of the top to leave you with $ 218.4 million. For the Powerball lump sum of $ 262.5 million, the retention would be $ 63 million, with $ 199.5 million remaining.
But that is not all. The maximum marginal rate of 37% applies to income above US $ 518,400 for taxpayers (US $ 622,050 for couples filing jointly), which means that much more would be due at the time of tax . And, there may be state taxes withheld or due.
“In some places, when you consider municipal, state and local taxes, you may be looking [close to] 50% go to taxes, “said Boneparth.
There may be strategies to reduce what you pay in taxes, so it is essential to have a tax consultant on your team.
Other things
If you cannot claim your prize anonymously – it depends on the state – you may want to escape the city for a while. Unwanted attention can come from both the public and the extended family.
“Your fifth uncle, once removed, can take over you,” said Boneparth. “Find a comfortable place and escape.”
Also, if you want to share some of the money with family or friends, plan these gifts in advance, said Boneparth.
“You want to avoid getting hit repeatedly,” he said. “You can set expectations in advance. That’s when planning really comes into play.”