What should you do with a billion dollars?
The giant lottery jackpot of $810 million has already risen to $1.02 billion after none of the six numbers matched and won the first prize on Tuesday night.
Advisers say that demanding too much money is also likely to attract taxes and that people will have sex with friends, family and friends.
All this attention means that the first and most important financial advice is probably what you should do Not Do if you hold the winning ticket.
“Don’t shout your victory from the rooftops,” Rob Burnette, a financial and investment advisor at Outlook Financial Center in Troy, Ohio. “If you are lucky enough to win the lottery, keep calm. Be organized and make a plan. Consider anonymity, if possible.”
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How big is the jackpot, when is the draw and what are my chances of winning?
The $1.02 billion prize is for winners who choose the annuity option, which is paid out annually over 30 years. Most winners choose the cash option, which is estimated at $602.5 million for next Friday night’s drawing.
The only probability of matching all six numbers is about 1 in 303 million. Mega Millions tickets, which cost $2 each, are sold in 45 states as well as the District of Columbia and the US Virgin Islands.
Why don’t you tell everyone?
“Some of these scammers falsely identified themselves as belonging to Mega Millions,” Mega Millions said. “All these scams have one thing in common: they’re trying to trick you into sending them money or personal information by claiming you’ve won a big lottery.”
Mega Millions stated that no Mega Millions representative will call, text or email anyone about winning a prize.
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Also remember that “there is no real lottery that tells winners to put their own money in to collect a prize they have already won.”
Steve Azoury, owner of Azoury Financial in Troy, Michigan, said he has advised several lottery winners, including one $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?
“Get a tax attorney and tax accountant right away and then a financial advisor,” Azoury said. “They will work hand in hand to figure out the plan. ”
The plan will include a payment option to choose from:
- The installment option pays 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 payment equal to all cash in the Mega Millions jackpot pool.
Azoury said the plan should also include “The Fallen Man.” “It is the person or adviser who stops you from making loans to anyone, who tells people that all the money tied up in investments is not available. We have nothing available to help you, nor are we interested in your project.”
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Should you take the lump sum or installment payments?
This decision depends on your goals, your age, and what the lottery rules are for beneficiaries to continue receiving payments, or if you’re likely to waste a lump sum.
Mark Stepper, chief tax officer at Jackson Hewitt, recommends the following:
- Lottery winning size: This can serve as a guideline to determine the taxes you may owe and the financial security you can get from them. If the amount is on the smaller side, the lump sum may be easier.
- Current and Projected Earnings: Consider your earning capacity and tax rates over your lifetime.
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How much do you bring home?
It depends on how you decide to take your money and the complex state laws.
If you win the Mega Millions lottery, you will likely be pushed to the top of the federal tax bracket. Your state of residence and where you buy your winning ticket can greatly affect how much you pay in state taxes.
For example, if you’re a California resident and you buy your ticket there, you pay the 37% federal tax rate, but you’re lucky because California doesn’t tax lottery winnings, Stiber said.
Despite this, New York has the highest tax rate on lottery winnings.
But if you’re a California resident vacationing in Rhode Island and decide to buy a ticket there, you’ll need to include your lottery winnings on your federal and California tax returns and file a non-resident Rhode Island tax return to claim the to get jackpot. He said you should claim a Rhode Island tax deduction on your California return so you don’t get double taxed on the same income in two states.
“This is where a tax professional comes in very handy,” Stiber said. “State taxes can be very challenging.” (Just to show you how complicated state taxes are and why you really need to hire a professional, Steber originally said in this story that California will tax lottery winnings if you live there. He helped explain that for our update .)
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“How long does it take to get your money back if you win Mega Millions?”
Once you claim the prize, it won’t take long, Azoury said. “Maybe two weeks,” he said.
Remember that most people will not claim their winnings right away because they will take time to make their plan. Claim periods vary by jurisdiction, so people should check the lottery in the state where the ticket was purchased for the applicable claim period for that ticket.
The lottery said Mega Millions claim periods range from 90 days to one year from the date of the drawing.
Medora Lee is USA TODAY’s money, markets and personal finance correspondent. You can reach her at firstname.lastname@example.org and sign up for her free Daily Money newsletter for personal financial advice and business news every Monday through Friday morning.
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