What to do with a billion dollars?
The already giant Mega Millions lottery jackpot of $810 million soared to $1.02 billion after no one matched all six numbers on Tuesday night and won the top prize.
Claiming that much money will also likely result in taxes, scammers, friends and family members, advisers say.
All this attention means the first and most important financial advice is probably what you should not do if you hold the winning ticket.
“Don’t shout your victory from the rooftop,” said Rob Burnette, financial and investment adviser at Outlook Financial Center in Troy, Ohio. “If you are lucky enough to win the lottery, keep silent. Get organized and make a plan. Consider remaining anonymous, if possible.
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How much is the jackpot, when is the draw, what are my chances of winning?
The $1.02 billion prize is for winners who choose the annuity option, paid annually over 30 years. Most winners opt for the cash option, which for the next Friday night draw is estimated at $602.5 million.
The only chance of matching all six numbers is approximately 1 in 303 million. Mega Millions tickets – which cost $2 each – are sold in 45 states, plus the District of Columbia and the US Virgin Islands.
Why not tell everyone?
“Some of these scammers have falsely identified themselves as affiliated with Mega Millions,” Mega Millions said. “These scams all have one thing in common: they try to trick you into sending them money or personal information by pretending you’ve won a big lottery prize.”
No Mega Millions representative would call, text or email anyone to win a prize, Mega Millions said.
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Also, remember that “no real lottery tells winners to put in their own money in order to collect a prize they’ve already won,” he said.
Steve Azoury, owner of Azoury Financial in Troy, Michigan, said he’s advised many lottery winners, including an $181 million winner “who said ‘If I didn’t know you before, I don’t want to know you now.”
If you can’t tell everyone you’ve won, what can or should you do?
“Get a tax lawyer and a tax accountant upfront and then a financial adviser,” Azoury said. “They will work hand in hand to come up with the plan.”
The plan will include the payment option to choose from:
- An annuity option makes an initial annual payment followed by 29 annual payments. Each payment is 5% higher than the previous one.
- The cash option is a one-time lump sum payment equal to all the money in the Mega Millions jackpot prize pool.
The plan should also include a “fall guy”, Azoury said. “It’s the person or the adviser who prevents you from giving loans to anyone, who tells people that all the money is tied up in investments, not available. We have nothing available to help you and we are not interested in your project.
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Should you take the lump sum or installment payments?
This decision depends on your goals, age, and lottery rules for recipients to continue receiving payments, or if you’re likely wasting a lump sum.
Mark Steber, tax manager at Jackson Hewitt, recommends considering the following:
- Size of lottery winnings: This can be used as a guide in determining the taxes you may owe and the financial security you can gain from it. If the amount is smaller, a lump sum may simply be easier.
- Current and projected income: Consider your ability to earn money and tax rates over your lifetime.
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How much do you take home?
It depends on how you decide to take your money and the complex state laws.
If you win the Mega Millions lottery, you’ll likely be pushed into the highest federal tax bracket. Your state of residence and where you purchased the winning ticket can have a significant impact on what you pay in state taxes.
For example, if you’re a California resident and buy your ticket there, you pay the 37% federal tax rate and owe the state 11%, Steber said.
But, if you are a California resident and you are on vacation in Rhode Island and you decide to buy a ticket there, you will have to pay the federal tax, but maybe not the California state tax. , because you bought it out of state.
“That’s where a tax professional really comes in handy,” Steber said. “State taxes can be very tricky.”
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“How long does it take to get your money if you win the Mega Millions?”
Once you’ve claimed the prize, it shouldn’t take too long, Azoury said. “Maybe a few weeks,” he said.
Remember that most people won’t claim their winnings right away as they will take time to work out their plan. Claim periods vary by jurisdiction, so people should check with the state lottery where the ticket was purchased to obtain the applicable claim period for that ticket.
Mega Millions claim periods range from 90 days to one year from the date of the draw, the lottery said, but vary by jurisdiction. Winning ticket holders should check with the state lottery where the ticket was purchased.
Medora Lee is a money, markets and personal finance reporter at USA TODAY. You can reach her at [email protected] and sign up for our free Daily Money newsletter for personal finance tips and business news Monday through Friday mornings.
Contributed by the Associated Press