Safe Retirement Income

Your Retirement Depends on It

Tim Barton, Chartered Financial Consultant

Pepin Wisconsin
715-220-4866

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Winners of $1.4 Billion Lotto: What now? How to get your money?

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Once the initial euphoria wears down and you are “Snoopy Danced” out.  Sorry I have no idea how long that takes.  The moment will come when you have to make some decisions about how to receive your lottery winnings.

Everyone seems to assume the winner or winners, (yes brace yourself you are likely going to have share the jackpot with other winners) will take the jackpot as a lump sum.  The biggest winner of all is government at all levels.  Each state involved gets a cut of the ticket sales and the state or states where the jackpot winners live get to tax the jackpot.  Yesterday State Senator Tim Carpenter (D) WI put out a press release about his plans for spending the estimated $65,790,000 tax windfall if a Wisconsin resident won the $1.4 billion.   This windfall of state income tax pales in comparison to federal tax take at 39.6% ($343,728,000).

If the winner is a Wisconsin resident who decides to take the estimated lump sum payout $868,000,000 they would realize a net after tax payment of $458 million ($458,482,000.)  This is only 33% of the $1.4 Billion.  That’s right if a winner takes the jackpot in a lump sum they only get a check for 33% of the winnings.  Of course that is still a life changing amount of money.

Almost all financial advisors, lawyers, accountants, bankers and other investment advisors tell the winner to take the lump sum because they will quickly make back the annuity reduction and tax bite.  A client with $458 million is big in the financial and legal industry.  Inside they are referred to as whales or elephants.  So it’s hard for many advisors to tell this potential client to take the larger $1.4 Billion as an annuity payment over 30 years.

Annual annuity payment is about $46.7 million ($46,666,666) State and federal tax each year is $22,049,999 this nets the winner $24.6 million ($24,616,667) after taxes each year for 30 years.  That is a seriously nice income payment which would leave a substantial amount to invest each year after all the celebratory spending.  Best of all the winner will receive a total $738,500,000 compared to $$458 million net lump sum.

Advantages of annuity payments

  • Minimize taxes
  • Guarantees $24.6 million income for 30 years
  • No investment risk, all investments come with the risk of loss.
  • Helps prevent fraud
  • Spend thrift tendencies will not wipe out winnings in one year

One of the biggest arguments against an annuity is “your money is tied up.”  Wrong. Not these days.  There are investor groups who buy annuities.  They compete against each other because an annuity income is valuable.  If a winner changes their mind later and wants a lump sum for whatever reason they can sell the annuity payments to the highest bidder.  In the current economic conditions this would net the winner about 15-20% more than taking the lump sum payment immediately from the Powerball lottery.

A winner has 180 days to claim the Powerball before their ticket expires. Winner has  60 days from the date of their ticket claim to chose the lump sum.  Then the annuity payment  is mandatory and there is no  changing that from the lottery.  Historically only a handful of winners take the annuity option leaving a pile of cash on the table.  If many of these had waited 61 days they could have sold their annuity and had more money in their account.

How to stay anonymous:

Good luck with that.  These days it’s impossible to keep secrets.  Thanks to the internet and other technology  society gets more and more transparent everyday. So even in the handful of states have laws to allow jackpot winners to stay anonymous they’ll be found out.  Most states require winners to go public.

Changing your name to claim the prize and then changing back again will not work.   All states forbid changing a name when fraud is intended.  If a state requires disclosure of  the winner and they change their name… Sure looks like a fraud.  No reason to go there. Many states require name changes be published in the local newspapers for a period of time. Where are newspapers published these days? Online.

No hope of anonymity so it’s best to make plans to deal with your rock stardom should fate see fit to pick you. And that will be the topic of a future post.

 

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Tips to Win the $1.3 BILLION Powerball Lotto?

A lot of people including those who never play a lottery are asking for tips to win the $1,300,000,000 lottery.  So why are people who have been firm members of the Never Buy a Lottery Ticket Club asking? Because a BILLION DOLLARS is a lot of head turning money no matter the astronomical odds of actually winning…leaving the Never Buy a Lottery Ticket Club with the fastest declining club membership in the world.

Playing a game this large gives every one an equal chance to win. No matter how many tickets one purchases the odds of winning stay the same for everyone of them. A lottery this big becomes a nationwide social event complete with all buzz and camaraderie. It’s human nature to want to be part of a historic event this large.  Even all the losers will have stories to tell about the time…

Much like when a big weather event strikes, people talk about their involvement or closeness to it for years to come.

Is there any way  I can  increase my odds of picking jackpot winning numbers? 

  • Sorry, there is no way to do that.
  • The odds of winning the jackpot are 1 in 292,201,338.00.
  • The odds of getting struck by lightning are about 1 in 280,000 roughly 10 times better than winning $1.3 billion Powerball lottery.
  • Go ahead and get out all your lucky charms or “feelings.”  They might make you feel good and at the very least give you a conversation starter.
Buying more tickets increases my odds, right?
  • This strategy is statistically insignificant.
  • Many people believe their chance of winning is substantially increased by purchasing more than one ticket.
  • A good example is the coin flip. The chance of winning each flip is 50-50. Every time the coin is flipped the chance of winning remains 50-50 no matter how many times it’s flipped.  At the start of each flip it’s 50-50. Same with each lotto ticket sold, each ticket has exactly the same odds 1 in 292,201,338.
  • Another example is the chance of being struck my lightning which is about 1 in 280,000.  No one thinks the chance of being struck increases with the number of times they walk out the door.

If my coworkers decide to pool money to buy a ticket should I participate?

  • Even though this does not increase your chance of winning you’d be foolish not too.  Imagine the feeling of  watching all your coworkers celebrating their winning of millions that you were only $2 away from participating in.  Besides with the lottery this big it’s transformed into a country wide  social event and the price for being a part of it is $2.
  • Also consider it’ll be awfully lonely when all your coworkers retire you are the only coming to work each day.
  • If you are the kill joy who constantly advises against the lottery as an utter waste of time and money.  Human nature being what is… In the very unlikely event a winning ticket is acquired by your coworkers, they are very unlikely to share with you.

 Only buy one ticket

  • Most of the 18,315,365  winners of Powerball lottery have been single ticket purchasers sometimes first time purchasers.  As discussed previously buying multiple tickets does not increase the chance of winning.
Whoa! Wait a minute there have been over 18 MILLION winning tickets!?
  • Yes, 18,315,365 people have won millions of Powerball dollars since the beginning.  So in spite of the steep odds against winning, someone or several people will eventually get a winning ticket.
  • Remember none of this increases anyone’s odds of winning the current lottery or any future lottery.

The only tip: Have fun. Buy a ticket and enjoy talking about all the what ifs. I’ve been doing retirement and financial planning for almost 40 years. I thought about pointing out if the average lottery player purchasing one ticket per week over 40 years saved that money with interest, they’d have more money in the end.  Does anyone really want to hear that now?

Instead read $100 Million Lottery Winner – Now How To Get Your Money this was my first post on AreaVoices regarding winning a lottery.  Have to admit it is the most read.  Thanks to this record Powerball an update is coming soon.