If you’re the lucky, sole winner of the $1.08 billion Powerball jackpot, congratulations! Now, go hide.
On Wednesday night, one ticket sold in California matched all six numbers to win the third largest Powerball jackpot and sixth largest U.S lottery jackpot ever. The jackpot eluded players for three months before it was finally hit in the 39th drawing of the jackpot run, Powerball said. The winning numbers were white balls 7, 10, 11, 13, 24 and red Powerball 24.
The lucky ticket holder will have the choice between an annuitized prize of $1.08 billion or a lump sum cash payment of $558.1 million. Whichever you choose, you should know claiming that much money likely also will draw taxes, grifters, and friends and family members, advisers say. So, the first and most important piece of financial advice likely is what you should not do if you hold the winning ticket.
“Don’t shout your win from the rooftop,” Rob Burnette, financial and investment adviser at Outlook Financial Center in Troy, Ohio, said. “If you’re lucky enough to win the lottery, keep it quiet. Get organized and make a plan. Consider staying anonymous, if it’s a possibility.”
How much was the jackpot, and what were my odds of winning?
The winner will get to choose between an annuitized prize of $1.08 billion or a lump sum cash payment of $558.1 million, both amounts are before taxes. If the winner selects the annuity option, the claimant will receive one immediate payment followed by 29 annual payments that increase by 5% each year.
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The only other two larger Powerball jackpots were on Nov. 7, 2022 at $2.04 billion won in California and $1.586 billion on Jan. 13, 2016 with winning tickets in California, Florida and Tennessee, according to Powerball.
The odds of winning the jackpot on Wednesday were 1 in 292.2 million, Powerball said. To put that in perspective, the National Weather Service says you’re 250 times more likely to be struck by lightning than to win the lottery, but the odds of this exact version of you being born are around 1 in 400 trillion, according to Madison Trust Company, a self-directed retirement account company. “So maybe you really are pretty lucky,” it said.
Why shouldn’t you tell everyone?
Scammers.
Whomever wins “will immediately be deluged with offers from financial planners, scammers, friends and family to invest,” said attorney Andrew Stoltmann who has represented 6 lottery “losers” who lost their winnings to various investment scams or poor management. “The winner is likely the biggest target of banks, brokerage firms, and scammers worldwide. Ultimately, nobody should be trusted. Multiple sets of eyes should be watching everyone who has any access to the funds.”
Powerball also warns its players “lotteries will never ask you to pay a fee to collect a Powerball prize. If you are asked to pay a fee to claim a prize, you are likely being scammed, and you should not share any personal or banking information with those entities.”
Steve Azoury, owner of Azoury Financial in Troy, Michigan Mich., said he has advised many lottery winners, including a $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 won, what can, or should you do?
Buy a safe and keep the ticket safe. “The winner is not a true legal winner until the ticket is presented to lottery officials,” Stoltmann said. “If the ticket is lost or destroyed, the winner is, as a matter of law, out of luck.”
Next, “get a tax attorney and a tax accountant right off the bat and then a financial advisor adviser,” said Azoury. “They’ll work hand in hand to figure out the plan.”
The plan will include which payout option to choose:
- An annuity option makes an initial annual payment followed by 29 annual payments. Each payment is 5% larger than the previous one.
- The cash option is a one-time, lump-sum payment equal to all the cash in the jackpot prize pool.
The plan also should include a “fall guy,” Azoury said. “That’s the person or advisor adviser who keeps you from giving loans to anybody, who tells people all the money’s tied up in investments, not available. We have nothing available to help you out and we’re not interested in your project.”
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Also, because the sum is too large for it to be covered by FDIC insurance, the winnings should be deposited in a brokerage account of a major broker-dealer like Merrill Lynch or Goldman Sachs and initially invested in short term U.S. Treasuries until more concrete investing decisions can be made, Stoltmann said.
Should you take the lump sum or installment payments?
That decision depends on your goals, your age, and what lottery rules are for beneficiaries to continue receiving payments, or if you’d likely squander a lump sum.
Mark Steber, chief tax officer at Jackson Hewitt, recommends considering the following:
- Size of the lottery winning: That can serve as a guide to determining taxes you may owe and the financial security you can derive from it. If the amount is on the smaller side, a lump sum may simply be easier.
- Current and projected earnings: Consider your ability to earn money and tax rates over your lifetime. Would the earnings potential of a lump sum top the money you’d earn over the duration of an annual payment?
Stoltmann advises taking the winnings in installments. “Over 90% of winners take the immediate lump sum, but it is best not to take it, at least at first,” he said. “Spreading the payments out lets the winner over time learn investment lessons and apply those lessons. To make a mistake with the first year’s winnings is not catastrophic if the winner is going to receive another 25 years’ worth of payments.”
How much do you bring home?
That depends on how you decide to take your money and complex state laws.
If you win the lottery, you’ll likely be propelled into the highest federal tax bracket. Your state of residency and where you bought the winning ticket can greatly impact what you pay in state taxes.
For example, if you’re a California resident and purchase your ticket there, then you pay the 37% federal tax rate but are in luck because California doesn’t tax lottery winnings, Steber said. That means this Powerball winner won’t have to pay a state tax!
New York, though, has the highest tax rate on lottery winnings.
But, if you’re a California resident and you’re on vacation in Rhode Island and decide to buy a ticket there, you’ll owe the federal tax and possibly, some California tax, he said.
But, if you’re a California resident on vacation in Rhode Island and decide to buy a ticket there, you’ll have to include your lottery winnings on your federal and California tax returns and file a non-resident Rhode Island tax return for your jackpot. You should claim a tax credit for the Rhode Island taxes on your California return so you won’t be double-taxed ‘ll unlikely pay taxes on the same income in two states, but the inner workings of multi state tax issues can be complicated he said.
“This is where a tax professional really comes in handy,” Steber said. “State taxes can be very tricky.”
How long does it take to get your money if you win?
Once you claim the prize, it shouldn’t take too long, Azoury said. “Maybe a couple of weeks,” he said.
Remember, most people won’t claim their winnings right away because they’ll take time to set their plan. Claim periods vary by jurisdiction so people should check with the lottery in the state where the ticket was purchased to get the applicable claim period for that ticket.
Powerball claim periods range from 90 days to one year from the draw date, the lottery said, but vary by jurisdiction. The expiration date is often listed on the back of your ticket.
Medora Lee is a money, markets, and personal finance reporter at USA TODAY. You can reach her at [email protected] and subscribe to our free Daily Money newsletter for personal finance tips and business news every Monday through Friday morning.
