The Powerball jackpot has once again topped the 10-figure mark, marking the third billion-dollar lottery prize of the year and promising potential winners riches beyond their wildest imaginations. While such awards can help recipients realize many of their dreams, there are some basic rules they should follow.
The $1.2 billion Powerball jackpot comes just days after a California ticket holder won $1.08 billion in July, and a $1.6 billion Mega Millions jackpot was drawn in August. winners.
For Wednesday’s drawing, the one-time cash prize is worth $551.7 million before taxes, while the average annual one-time payment over 30 years is worth $40 million before taxes.
Thanks to changes in Powerball and Mega Millions rules (and recent interest rate hikes by the Federal Reserve), multi-billion dollar jackpots are becoming increasingly common. Before 2017, no jackpot had ever reached $1 billion.
Such large sums of money provide a wealth of opportunities – both good and bad. Here are the three biggest mistakes successful people make, according to financial planners.
1. Quit your job
One mistake might be to immediately quit your job or make other life-changing changes without taking a few days or weeks to truly process your newfound wealth.
Assuming your job is tolerable, it makes sense to stick with it, at least at first, says Emily Irwin, managing director of consulting and planning for Wells Fargo Wealth and Investment Management. wealth.
“Don’t make any significant life changes. Don’t quit your job, don’t go out and buy a Ferrari,” Irving said. “Maybe you have student loans you want to pay off, and that makes sense. But try to avoid large purchases.”
This is true, not only so that you don’t rush into anything you might regret (see below), but also to protect yourself. Start by taking the time to hire a tax attorney and a trusted financial advisor.
2. Buy a luxury home
Speaking of big purchases: Buying an expensive home is one of the most common mistakes wealthy people make.
Sure, you may be able to pay off your mortgage now, but you’ll be paying taxes, maintenance, and other fees for years. If you spend all your money quickly like some lottery winners do, you won’t be able to afford the upkeep of your home.
Paul Karger, Co-Founder and Managing Partner, Wealth Consulting dual focusThe firm, which manages more than $7 billion in assets for ultra-high-net-worth families, advises his clients to wait six months to a year before making big purchases when they strike rich. Give your emotions some time to calm down.
“I’ve seen clients buy large homes in faraway places that they eventually realize they won’t use very often, and it ends up being a significant ongoing financial burden that takes years to sell,” Karger told wealth.
For example, there is nothing necessarily wrong with buying an average house in the neighborhood. Kaag is more specific about luxury homes as well as second or third vacation homes.For the latter, no The market is huge Just like a primary residence, this can lead to trouble.
You can expand your luxury home into other large, illiquid purchases and investments. Take some time to think about the implications for the future. It’s one thing to pay off your credit card bill; it’s another thing to invest in your friend’s business now that you have the money.
3. Choose a one-time payment
Of course, it’s easier to pay for the ongoing costs of housing and other necessities if you have an annual income. That’s one reason why some experts recommend recipients receive an annuity rather than a lump sum cash.
Most lottery winners receive a cash prize—which does make sense, assuming human nature is not a variable. By investing, this money has the potential to grow even more.
Of course, humans don’t always do the “right” things with their money. Accessing $500 million in one fell swoop is a daunting task even for a company with a professional team to manage it, let alone someone with potentially limited money management experience. Annuities — in this case, paying out an average of $40 million per year before taxes — are a great way to protect against losing everything.
That said, whether you choose cash or an annuity, there’s no bad choice. What really matters is what you do with it.
Here’s a rundown of the billion-dollar Lotto prizes.
1. $2.04 billion: Powerball
The largest prize in lottery history is the November 2022 Powerball jackpot, although lottery officials did not reveal the name of the winner until February of this year. It was sold to a bearer in California. It is also the closest jackpot to have a one-time cash value of $997.6 million.
2. $1.602 billion: Mega Millions
Just two months ago, a Florida lottery holder won a $1.602 billion Mega Millions jackpot, the largest Mega Millions jackpot in the United States. game history. The total one-time amount was valued at $794.2 million before tax.
3. $1.586 billion: Powerball
The three winners of the second-largest jackpot in history each purchased their tickets from different vendors in California, Florida and Tennessee. The numbers were drawn in January 2016.
4. $1.537 billion: Millionaire
A winner from South Carolina received Biggest millionaire jackpot everdrawn in October 2018.
5. $1.348 billion: Mega Millions
In January, a Maine lottery holder won the jackpot.
6. $1.337 billion: Millionaire
A winner in Illinois won the jackpot, which was drawn in July 2022.
7. $1.2 billion: Powerball
The current jackpot is worth $1.2 billion.
8. $1.08 billion: Powerball
The most recent billion dollar jackpot was won by a California single ticket holder. The award has a pre-tax cash value of $558.1 million.
9. $1.05 billion
A team from Michigan won the award in January 2021.
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