How Mega Millions and Powerball Winners Can Protect Their Windfall

Mega Millions players can just let the daydream continue.

Since no one hit all six numbers drawn on Friday, the jackpot has risen to an estimated $ 376 million. And Powerball, with its next draw for Saturday night, is at $ 341 million.

Of course, due to taxes, those advertised amounts are not what you’d get if you manage to beat the astronomical odds of winning a single ticket (1 in 302 million for Mega Millions and 1 in 292 million for Powerball).

Nonetheless, the sudden windfall in your life would likely feel overwhelming, experts say. And while you may like to claim your winnings, experts say it’s best not to rush to lottery headquarters on the day you discover your luck.

In other words, take a deep breath.

“The first thing I would recommend is to put together a team of professionals who can handle the many aspects of that kind of money coming in,” said certified financial planner Doug Boneparth, president of Bone Fide Wealth in New York. .

That team should include an accountant, financial advisor and attorney. Here are some other considerations if you hit the jackpot.

You have the choice between your profit as a one-off sum or an annuity that will be paid over 30 years. For the Mega Millions jackpot of $ 376 million, the cash option is $ 287.4 million. For the Powerball prize of $ 341, that amount is $ 262.5 million.

Experts usually recommend getting the money all at once – which is what most winners are up to.

“It would be preferable to take the payment all at once,” said Boneparth. “Doing that will give you more control over the money.”

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However, he added a caveat.

“If you’re not disciplined, or you’re afraid to invest it, even with help, the annuity may be the better option,” Boneparth said.

Before the money reaches you, 24% is withheld for federal taxes. For Mega Millions’ cash option of $ 287.4 million, that would mean about $ 69 million coming off the top, leaving you with $ 218.4 million. For Powerball’s lump sum of $ 262.5 million, the withholding would be $ 63 million, with $ 199.5 million remaining.

However, that is not the end. The top marginal rate of 37% applies to earnings in excess of $ 518,400 for single tax applicants ($ 622,050 for married couples filing jointly), meaning that much more would be due at the time of tax. And state taxes can be withheld or payable.

“In some places, when you look at city, state and local taxes, you could look at [close to] 50% goes to taxes, ”said Boneparth.

There can be strategies for reducing the amount you pay in taxes, so it’s important to have a tax advisor on your team.

If you can’t claim your prize anonymously – it depends on the state – you may want to skip town for a while. Unwanted attention can come from both the public and the family.

“Your fifth uncle, once removed, can get you,” said Boneparth. “Find a comfortable place and leave.”

Plus, if you want to share some of the money with family or friends, plan ahead for those gifts, Boneparth said.

“You want to avoid getting hit repeatedly,” he said. “You can set expectations in advance. Then planning really comes into play.”