There’s a whole lot of money up for grabs this week in two national lotteries.
Powerball’s jackpot is an advertised $420 million for Wednesday night’s drawing. Mega Millions’ top prize is even more: $494 million for the next pull, set for Friday night.
Of course, the chance of a single ticket matching all six numbers drawn in either game is tiny: 1 in 292 million for Powerball and 1 in 302 million for Mega Millions. And buying multiple tickets doesn’t move the needle much.
Nevertheless, it’s worth giving thought to what you’d do if you were to beat the odds and land such a windfall. It’s not as simple as picking up a check and carrying on with your life.
“Understand that this might be a wonderful event, but people are caught off guard by how stressful it is,” said Susan Bradley, a certified financial planner and founder of the Sudden Money Institute in Palm Beach Gardens, Florida.
If you are lucky enough to win a life-changing amount of money, there are four key things to do right out of the gate to protect your winnings and alleviate some of that stress.
1. Push ‘the pause button’
You don’t have to rush to lottery headquarters right away. Depending on the state where you bought the ticket, you get anywhere from as little as 60 or 90 days to as much as a year to claim your prize.
“Where do you begin? I think by pushing the pause button,” said CFP Janet Stanzak, founder and partner of Financial Empowerment in Burnsville, Minnesota.
In other words, take a deep breath. The process of figuring out how to handle a huge amount of money can take several months, Stanzak said.
2. Keep your win a secret
Additionally, share information about your windfall with as few people as possible. News has a way of traveling, and long-lost friends or family — or scammers — could show up on your doorstep.
“It’s hard for even your inner circle of people not to say anything,” Bradley said. “This is an emotional experience and it’s hard not to blurt out.”
3. Tend to your ticket
It’s important to keep your ticket safe. Experts recommend taking a photo of yourself with the valuable slip of paper and then storing it somewhere safe, such as a lockbox.
It’s also generally recommended that you sign the back of the ticket as proof that it belongs to you. However, before you do so, it’s worth making sure you know the rules for claiming your win in the state where the ticket was purchased.
Some states allow you to remain completely anonymous. But if you bought the ticket in a state that requires the winner’s name to be publicly shared, you may be able to avoid identifying yourself by claiming the prize in the name of a trust or other legal entity.
4. Build a team of advisors
Be aware that some pretty weighty financial decisions lie ahead of you, which makes it worthwhile to have a team of pros assisting you. That group should include an experienced attorney, financial advisor, tax advisor and insurance expert.
For starters, you’ll have to decide whether to accept your prize as a reduced lump sum or as an annuity paid in yearly installments over three decades. Either way, the IRS will take a slice before the money reaches you.
The cash option — which most winners choose — for this $420 million Powerball jackpot is $215.2 million. A mandatory 24% federal tax withholding would reduce that amount by about $51.6 million. For the Mega Millions $494 million jackpot, it would mean $59.7 million being withheld from the $248.7 million cash option.
However, because the top marginal rate is 37%, winners should anticipate owing much more at tax time. Additionally, state taxes typically are withheld or due, depending on where you live and where the ticket was purchased.