73棋牌If you happen to hit the next Powerball jackpot, brace yourself for the life-changing decisions ahead of you.
With no one matching all six numbers drawn on Saturday, the top prize has jumped to $394 million for Wednesday night's drawing. And while winning such a huge amount could open a world of possibility, formulating a detailed plan for when and how to claim it would be a key part of protecting your windfall, experts say.
"It's exciting to win but, when it gets to numbers this big, you have to take a step back and realize the magnitude of it and plan for it," said David Desmarais, CPA member of the AICPA Personal Financial Planning Executive Committee.
The jackpot has been climbing for nearly three months through twice-weekly drawings. Whoever ends up winning will face options before even heading to lottery headquarters — some of which depend on where the ticket was purchased.
73棋牌For example, you may be able to shield your identity, which experts say is important if it's possible.
While just a handful of states allow you to claim anonymously, others may let you collect your windfall via a trust or other legal entity to keep your name out of the public eye. In other states, though, you might have no choice but to publicly reveal yourself.
73棋牌You also have some leeway on the timing of the claim. You typically get three months to one year, depending on where the ticket was purchased. Generally speaking, the sooner you claim, the better — with a caveat.
"You'd want to get the money as soon as possible so you could put it to work for you," said certified financial planner Jennifer Weber, vice president of financial planning at Weber Asset Management in Lake Success, New York.
"But the more important thing is to get a team of advisors behind you before you claim," Weber said.
That team should consist of experienced professionals — including an attorney, CPA and financial advisor.
73棋牌One of the major decisions that your team can help you with is whether to take the prize as a reduced cash option or as an annuity paid in annual installments over 30 years.
First up is taking an honest look inward and making sure you have the discipline to take the cash option and handle it responsibly, said Howard Pressman, a CFP and partner at Egan, Berger & Weiner in Vienna, Virginia.
73棋牌"If the answer is no, then the annuity may make the most sense, as the payments would be spread out and limit the winner's ability to blow it all," Pressman said. "This may be more important than making the highest-yielding economic decision."
The annuity option is structured in a way that annual payments increase over time (by 5% annually). For this $394 million Powerball jackpot, the first year's payout would be roughly $5.93 million, based on a formula provided by the Multi-State Lottery Association. The 30th (and final) payment would be more than $24 million.
On the other hand, if you take the lump sum, you potentially could earn more over time than with the annuity, depending on how you invested it.
73棋牌"If you can earn 3% [after taxes], you'd be slightly better off than taking the annuity," Desmarais said.
For the next Powerball jackpot, the cash option is $274.6 million. That amount would be reduced by a federal 24% withholding, or about $65.9 million, leaving you with $208.7 million.
73棋牌However, because the top marginal rate of 37% applies to income above $518,400 for single tax filers ($622,050 for married couples filing jointly), much more would be due at tax time — which would be April 2021 for prizes claimed in 2020.
73棋牌State taxes also may be withheld or due. Those levies range from zero to more than 8%, depending on where the winning ticket was purchased and where the winner lives. In other words, you could end up paying more than 45% in taxes.
73棋牌There are ways to reduce your taxable income, although not many. For the charitably inclined, contributing to a donor-advised fund or a family foundation could help reduce your taxable income.
However, any decisions should be made in the context of a full plan that ideally is done with the help of experienced experts to avoid making mistakes in the claiming process.
"The most important thing is to surround yourself with the proper advisers," Desmarais said. "There's still plenty of time in the calendar year to do tax planning."