[Feature] What I'm Going to Do After I Win the Mega Millions Lottery

You probably don't know this about me, but I'm a future winner of the Mega Millions lottery. Yep. I've known this for about five years and I've already planned out how I'm going to handle winning. So today, I'm going to share my pseudo-knowledge with you.

Yes, I am a freak. But for what it's worth, I am a prepared freak....



The insanity that is the odds of you actually winning.
The Mega Millions Lottery is a 12 state lottery that has produced the largest lottery jackpot in the world (a whopping $390 million dollars was up for grabs on March 6, 2007!). In order to win the jackpot, you need to be the lucky person to pick out all six numbers (five normal balls and one "Mega ball") from the ball pit. Falling short of picking the all six numbers will get you anywhere from $2 to $250,000.

Today, the jackpot is at $34 million dollars.

The chances of you winning that big jackpot are 1 in 175,711,536. Or in relative terms, 70 times the chances of you getting struck by lightning.

...

Okay, the odds aren't great. But then again, somebody has to win, right? Why can't it be you? Aside from the fact that it's actually going to be me, that is.


How much you actually end up winning
The first thing you have to know about winning the lottery is that you never get what they say you're going to get. That's because the Feds come up and grab 25% of your winnings before you even get a chance to look at it. Then, usually, your state government gets their turn and will take it's 3%-8.5% piece of the pie. However, if you're lucky enough to buy your ticket in New Jersey, Texas, California, or Washington, the state doesn't touch it.

So what started out as $34 million dollars goes down to anywhere between 22.6 million - 25.5 million. Still a lot of money... but you can't help but feel a little robbed. Damn you, government!
Lump Sum vs. Annuity
You are given two choices as to how you want to receive your not-so-hard-earned-money: in a lump sum or in annual payments. If you choose the annuity option, you'll receive a payment every year for 26 years that will add up the jackpot, minus the federal and state taxes. In the case of a $35 million, you'd receive $869,615 - $980,769 a year.

If you choose the lump sum, you get all your money in one gigantic check. However, you have to first lop off 40% to your jackpot. So your $35 million takes another hit, bringing you down to $13.3 million - $15 million in one payment.

On face value, many people would think that getting the annuity payments would be more cost-effective. But in reality, conventional wisdom says that grabbing the lump sum is a better bet.

Why, you ask? Think about the numbers. If you take the lump sum, in order for you to feel good about your decision, you need to somehow net a return of $980,769 a year. With $15 million, that is looking for a 6.54% return on your money. Even with conservative investments like CDs and savings accounts, you can get a decent 4% return. Not exactly 6.54%, but close enough.

But more importantly, with having all of your money immediately, you are given much more flexibility. With that much money, you can take a couple of risks in your investment portfolio, which can yield much more than 6.54% returns. Your money can go into venture capital or starting up your own business, both things that would be severely limited on 980,769 a year. Or consider this: if you want to buy a $1 million dollar house, you'd be better off paying it in full then taking out a money draining mortgage.

So in the end, the lump sum has much more potential and flexibility than waiting 26 years to collect all of your money. Especially because you'll be rich enough to hire a fancy-shmancy number-cruncher that will make sure you get the most out of your investments.


After finding out that you've won
Surprisingly enough, you should know how you want your money (lump sum or annuity) even before you buy your ticket. States like New York and Texas don't let you change your mind after your ticket has been printed, so that decision is a big one.

Of course, after getting through the small hurdle of actually winning, there are about a million other things you need to figure out. Rule #1, however, should be to get out of town and change your number. You need to disappear for a while before even claiming the prize to get all of your ducks in a row. That means hiring a tax attorney that specializes in lottery winners and getting a good financial adviser, hopefully one recommended by a successful friend you have.

At the same time, you should make sure that you write your name, address, and signature on the back of your lottery ticket and put it in a safety deposit box. Because, hell, if you lose that, you lose your chance of getting a dime.

After making sure that you know what you're doing with your money, then you can claim your ticket and deal with the family members you've never known about and charities asking for money. Of course, that is something that you can't give advice to. Just one of the things you need to deal with as a huge lottery winner.

Conclusion
In the end, winning a big lottery prize can be a blessing or a curse. The most important thing is to keep your head on straight and avoid diving too deep into vices. Seriously, most of those lottery horror stories seem to end up with somebody getting involved with drugs, alcohol, gambling, or a combination of all three.

If you avoid drama and stay smart, you'll be one happy millionaire, just like the future me.


Sources
USA Mega - Great lotto resource. Helped me with all the numbers and taxes
Bankrate - Another useful lottery site. Gives advice and has a neat little "Lotto Savvy" quiz
Mega Millions Wikipedia
Mega Millions Official Website
Advice on Winning the Mega Millions @ AJC.com