Frederick J. Brown | Agence France-Presse | Getty Images
Mega Millions players can let their daydreaming continue.
With no one ever reaching all six numbers pulled on Friday, the grand prize jumped to an estimated $ 376 million. And Powerball, with the next drawing set for Saturday Night, at $ 341 million.
Of course, given taxes, these reported amounts aren’t what you would end up with if you could beat the astronomical odds of winning a single ticket (1 in 302 million for Mega Millions and 1 in 292 million for Powerball).
However, experts say that sudden gains in your life will likely feel overwhelming. And while you may be eager to claim your winnings, experts say it’s best not to rush to the lottery site the day you discover your good fortune.
In other words, take a deep breath.
“The first thing I recommend is to build a team of professionals to handle the many aspects of making this kind of money,” said Certified Financial Planner Doug Bonbarth, President of Bone Fide Wealth in New York.
This team should include an accountant, financial advisor and attorney. Here are some other considerations if you win the jackpot.
You can choose between having your earnings as either a lump sum or a pension payable over 30 years. For the $ 376 million Mega Millions prize, the cash option is $ 287.4 million. For the $ 341 Powerball, that is $ 262.5 million.
Experts usually recommend getting the money in one go – which is what most winners go for.
“The preference would be to distribute the lump sum,” Bonbarth said. “Doing so puts you in greater control of money.”
But he added a caveat.
“If you are not disciplined, or are afraid of how to invest it even with help, a pension might be the best option,” Bonbarth said.
Before the money reaches you, 24% of federal taxes will be withheld. For a Mega Millions cash option of $ 287.4 million, that means about $ 69 million will come out of the top leaving you with $ 218.4 million. For Powerball’s $ 262.5 million lump sum, the cutoff would be $ 63 million, with $ 199.5 million remaining.
This is not the end of it. The highest marginal rate of 37% applies to income over $ 518,400 for individual tax folks ($ 622,050 for married couples filing together), which means more will be owed at tax time. There may be government taxes withheld or due.
“In some places, when you think about city, state and local taxes, you might think about that [close to] 50% goes to taxes, “Bonbarth said.
There may be strategies to reduce what you pay in taxes, which is why it is important to have a tax advisor on your team.
If you can’t claim your award anonymously – it depends on the state – you may want to skip town for a while. The unwanted attention can come from both the public and the extended family.
“Your fifth uncle who has been removed might catch you,” said Bonbarth. “Find a comfortable place and get away.”
Plus, if you want to share some money with family or friends, plan those gifts in advance, Bonbarth said.
He said, “You want to avoid being hit repeatedly.” “You can set expectations early. That’s when planning goes into effect.”
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