How Much Do You Really Get if You Win the Powerball? - MrLiambi's blog

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Friday, 4 November 2022

How Much Do You Really Get if You Win the Powerball?

So, who wants to be a billionaire?

There have been nearly 40 Powerball drawings in a row with no grand prize winner, so Saturday night's jackpot has ballooned to $1.6 billion. That's the all-time record.

Now, as professional Penny Hoarders, we generally advise against spending your hard-earned money on lottery tickets. (Invest it instead!) Your chances of winning Powerball are 1 in 292 million, which is lower than your chances of being struck by lightning â€" twice.

But it's still fun to think about, isn't it? We all deserve to dream a little, and a tidy $1.6 billion would go a long way toward clearing up any pesky little financial problems you might have.

How much of those winnings would you actually get, though?

How Much of That $1.6 Billion Would You Take Home?

Let's say you win. (It is fun to think about, after all.)

First you'd have to choose whether to collect your winnings in 30 annual payments over three decades, or to take a smaller lump-sum payment, which in this case would be about $745.9 million, according to Powerball administrators.

Then there are taxes. (There are always taxes.)

If you took the lump sum, you'd immediately get hit with federal taxes of 24% that's collected on any prize exceeding $5,000 â€" so that's about $179 million right off the top. You'd also owe more when you file your income taxes next year since you'd be in the top tax bracket â€" so 37%, or about $97 million, according to popular lottery-news websites like USA Mega and others.

That brings your theoretical winnings to about $470 million. You'd also pay state taxes. How much obviously depends on which state you're in.

If you chose the annual-payments option, your $1.5 billion jackpot would get split into 30 payments that averaged out to just over $50 million each. Those would be subject to an immediate 24% federal tax, plus the 37% income tax each year, so you'd be getting a little over $31.5 million per year. After 30 years, you'd have collected between $782 million and $945 million, depending on what you're paying in state taxes.

Which to choose? Financial advisors always say it depends on your age, your goals, and various tax reasons, and blah blah blah.

But realistically, nearly everyone takes the one-time cash payment. Seriously, almost everyone. Simply put, you can earn more over time by investing the lump sum, and nobody wants to wait 30 years to collect all their money.

You've Won Powerball. What Now?

No matter how you count it, a $1.6 billion grand prize is certainly a lot. The biggest Powerball jackpot before this one was $1.586 billion, shared by three winners in 2016.

Even if you took the lump sum and paid taxes on it, the $470 million you'd have left is still no chump change.

If you won, financial advisers would strongly recommend that you get a tax attorney and a tax accountant and make a plan before you collect your winnings. You'd have 90 days to a year to claim your jackpot, depending on where you bought the winning ticket.

They also recommend that you employ someone whose job it is to say 'NO' to everyone and their brother who'll suddenly want you to invest in their once-in-a-lifetime business opportunity, their newly invented revolutionary gizmo, their super-sweet NFTs, or their miscellaneous harebrained scheme.

Powerball is played in 45 states as well as Washington, D.C., Puerto Rico and the U.S. Virgin Islands.

If a lucky winner claims the $1.6 billion grand prize in Saturday night's drawing, the next Powerball jackpot automatically drops back down to a mere $20 million â€" practically pennies in comparison, right?

So think about it. Powerball tickets cost $2. Maybe spend a little money on that dream.

Or you could, you know, invest it.

Mike Brassfield (mike@thepennyhoarder.com) is a senior writer at The Penny Hoarder. He never wins anything.

This was originally published on The Penny Hoarder, which helps millions of readers worldwide earn and save money by sharing unique job opportunities, personal stories, freebies and more. The Inc. 5000 ranked The Penny Hoarder as the fastest-growing private media company in the U.S. in 2017.



Source : https://www.thepennyhoarder.com/taxes/powerball-taxes/?aff_id=178&aff_sub3=MainFeed__taxes/powerball-taxes/

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