Between Uncle Sam and the winner’s home state, that figure could be cut in half by the time it reaches their hands.
Landon Buzzard
Associate wealth advisor at Grant Street Asset Management
Eight states do not tax lottery winnings. These are California, Florida, New Hampshire, South Dakota, Tennessee, Texas, Washington and Wyoming.
The next Powerball drawing will take place on Monday at 10:59 p.m. ET, and the odds of winning the jackpot are approximately 1 in 292 million.
Lump sum distribution could be ‘a mistake’
“Virtually everyone who wins the lottery chooses the lump sum distribution,” Andrew Stoltmann, a Chicago-based attorney who has represented several lottery winners, told CNBC. “And I think that’s a mistake.”
Without a team of experts, or “infrastructure,” such as a financial planner, tax advisor and attorney, a big winner could easily mismanage that lump sum, he said.
“Any big lottery win will often result in a huge lifestyle change,” said Houston-based CFP Crystal McKeon, chief compliance officer at TSA Wealth Management. “People buy houses, boats, planes, invest in bad deals or give away money because they think they have more than enough.”
The 29-year annuity could offer safeguards, which could suit some winners, experts say. Of course, the opportunity cost of the annuity represents less money to invest up front.
The latest Powerball jackpot comes less than a week after a single ticket purchased in New Jersey won the fifth-largest Mega Millions prize of $1.128 billion.
This grand prize came in at $36 million and the odds of winning are approximately 1 in 302 million.
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