Personal Finance

Here are key decisions to make if you win the Powerball or Mega Millions jackpot

Key Points
  • The next drawings are Wednesday night for the $282 million Powerball jackpot and Friday night for Mega Millions' top prize of $548 million.
  • If you win in either game, one of the big decisions you'll have to make is whether to take an immediate cash payout or spread your winnings over three decades.
  • You'll also need to figure out when and how to claim your prize, pick experienced professionals to help you navigate your sudden wealth and, if you have a job, whether to keep working.

For all you wannabe Powerball or Mega Millions winners, there are 830 million reasons you can keep daydreaming about hitting pay dirt.

After no one picked all the winning numbers for Mega Millions in Tuesday night's drawing, the jackpot has surged to $548 million. Between that and Powerball's $282 million haul, $830 million is up for grabs in the next drawings — Wednesday night for Powerball and Friday night for Mega Millions.

If you're lucky enough to hit the jackpot in either game, you should take a deep breath and resist the urge to tell the world about your exciting news, experts say.

A woman jokingly holds up her Mega Millions Lotto tickets she purchased from Baycrest Wines & Spirits in Costa Mesa and proclaims, 'I've got the winning ticket.' (Photo by Leonard Ortiz/Digital First Media/Orange County Register via Getty Images)
Leonard Ortiz /Orange County Register | Getty Images 

Instead, consider what suddenly becoming one of the country's wealthiest people means. When you come into a life-changing amount of money, there's more involved than just putting it in a bank account and deciding what kind of new car to buy or where you want to vacation.

"With great wealth comes great responsibility," said certified financial planner Jim Shagawat, president of Windfall Wealth Advisors in Paramus, New Jersey.

Here are some key decisions you'll need to make if you discover you're holding the winning ticket for either jackpot.

Figure out when and how to claim your winnings

There's no need to rush over to lottery headquarters the day you win.

For both the Powerball and Mega Millions jackpots, winners get anywhere from three or six months to one year to claim their prize, depending on where the winning ticket was purchased.

Experts recommended taking a deep breath and using as much time as you need to prepare for claiming your winnings.

"The time between the day you win the lottery and the day you claim is your last period of normalcy," said Jason Kurland, a partner at Rivkin Radler, a law firm in Uniondale, New York.

Make sure you find out whether you can remain anonymous when you claim your prize, because laws governing lottery wins vary from state to state.

In some places, you can easily shield your identity from the public. In other states, it's impossible. And in some states that require the winner to be announced, the law allows a trust or other legal entity to claim the prize on your behalf, thereby keeping your name out of the public eye.

Also, the standard advice is to sign the back of your winning ticket in case you are separated from it. However, if you end up having the trust-claiming option to protect your identity, your signature could interfere with your ability to easily go that route. This makes it important to know your claiming options first.

Choose between a lump sum or annuity

You also get to decide whether to take an immediate lump sum or spread your winnings across several decades. Either way, Uncle Sam will take 24 percent before it reaches you.

For the $548 million Mega Millions jackpot, the cash option is $309 million. For the $282 million Powerball win, it's $161.1 million.

The 24 percent federal tax withholding would reduce Mega Millions' cash option by about $74.2 million, to $234.8 million, and Powerball's by $38.7 million, to $122.4 million. You also should anticipate owing more to Uncle Sam at tax time.

Additionally, you'll pay state taxes on the money unless you live where lottery wins are untaxed. For states that do take a piece, the rate ranges from a high of 8.82 percent in New York to a low of 2.9 percent in North Dakota, according to lottery site

This is what you do if you win the lottery

Many experts recommend taking the lump sum, because if it's managed and invested properly, you could end up with more money over time than if you took payments spread out over several decades.

However, it's important to evaluate your own circumstances before making the choice.

"If you know you have trouble with compulsive spending or know that certain family members will be after your money, you may want to go the annuity route," Shagawat said.

More from FA Playbook:

Pick pros to help you

Your ability to properly handle your windfall will only be as good as the advice you are given. This is why it's best to turn to experienced professionals for guidance.

Before you claim, you should assemble a team that ideally includes an attorney, accountant, insurance consultant and financial planner. An experienced attorney should be your first call.

"Make sure you're comfortable around each team member, and make sure they have the proper accreditation for their field," Shagawat said. "You need a team around you to guard against being taken advantage of."

Someone on the team also will need to serve as your gatekeeper. That is, they can field requests from moochers or scammers or even friends and family members who want a piece of your windfall.

Whether to keep working

There are always the stories of people who win big in the lottery and quit their job the same day. Other winners continue working with long-term intentions, yet end up leaving anyway.

"For larger jackpot winners, although many of them have a desire to keep working, it ultimately becomes impossible," Kurland said. "As winners emotionally grow into their newfound wealth, they realize all of the new opportunities afforded to them."

(Correction: An earlier version of this story had the wrong days for the next drawings.)