Mega Millions: How a billion dollar jackpot actually works | Personal finance
Taryn Phaneuf, Nerd Wallet
The Mega Millions jackpot has soared to around $1.02 billion ahead of the next draw on Friday, July 29. A billion dollars is not an easy number to understand, and it has only happened twice before in the history of Mega Millions.
If you want a shot at winning the jackpot, here’s what you need to know.
How to Buy a Mega Millions Lottery Ticket
Mega Millions can be played in 45 US states, as well as Washington, DC and the US Virgin Islands. Players can buy as many $2 tickets as they want. Each ticket requires you to pick five numbers between 1 and 70, and a sixth number between 1 and 25 (or, you can let the lottery folks generate the numbers for you). The jackpot goes to the person (or people) who chooses all six numbers correctly.
Your chances of doing so are about 1 in 303 million.
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Although this is a national game, each participating state has its own rules on how to claim a reward. In fact, the time you have to file your claim can range from 90 days to a year from the date the numbers were drawn. Be sure to check the rules of the state where you purchased the ticket.
How much could you earn?
Each Mega Millions jackpot winner has the option of withdrawing money now in a one-time lump sum payment or receiving a portion of the winnings every year for 30 years.
For the $1.02 billion jackpot, the cash option is $602.5 million.
If you chose the annuity option instead, you could get about $15.3 million for the first payment. Then each then increases by 5%. If you die before all annual payments have been made, the remainder will be sent to your heirs.
Each option has its pros and cons, Lisa Kirchenbauer — founder and president of Omega Wealth Management in Arlington, Va., and a certified financial planner — said in an email.
Kirchenbauer also said anyone who suddenly finds themselves rich should build a team of professionals, including a lawyer, an accountant and a financial planner.
“Your team will help you decide which option is best for you,” she said. “It’s not a one-time decision.”
How lottery winnings are taxed
If you win a billion dollars in the lottery, you definitely have to pay federal income tax. For starters, according to the IRS website, 24% of your earnings are withheld. The amount depends on whether you opted for the cash or annuity option, since you only pay taxes on what you receive in a given year.
If you take the money all at once – remember, it’s about $602.5 million – you would see $144.6 million taken off the top, leaving you with $457.9 million.
In April, you will likely owe additional federal income taxes, as well as state income taxes, depending on where you live.
What to do if you win
Although it’s something we’ve all probably dreamed of, no one is ready to hit the jackpot. If you do, protect your ticket. Anyone with a winning lottery ticket can file a claim for the prize.
Next, consider your anonymity. Each state has its own laws about publicly identifying lottery winners. Keeping your name out of the news and telling as few people as possible protects you from scammers and long-lost “friends” who want to reconnect.
The key is to slow down, Kirchenbauer said. “Don’t start spending money until you have time to plan and think.”
Is $790 million worth a $2 Mega Millions ticket? It depends
Isn’t that an obvious question?
Still, a $790 million shot seems worth $2
Almost 300 million dollars, that ain’t change
But someone will win
So, is it worth playing $2?
What are the 10 biggest US lottery jackpots ever won?
DES MOINES, Iowa (AP) — The Mega Millions jackpot has soared to $1.1 billion, making it the fourth-largest lottery prize in the nation. Here is an overview of the 10 biggest US jackpots that have been won and the states where the winning tickets were sold:
1. $1.586 billion, Powerball, Jan. 13, 2016 (three tickets, from California, Florida, Tennessee)
2. $1.537 billion, Mega Millions, October 23, 2018 (one ticket, from South Carolina)
3. $1.05 billion, Mega Millions, Jan. 22, 2021 (one ticket, from Michigan)
4. $768.4 million, Powerball, March 27, 2019 (one ticket, from Wisconsin)
5. $758.7 million, Powerball, Aug. 23, 2017 (one ticket, from Massachusetts)
6. $731.1 million, Powerball, Jan. 20, 2021 (one ticket, from Maryland)
7. $699.8 million, Powerball, Oct. 4, 2021 (one ticket, from California)
8. $687.8 million, Powerball, Oct. 27, 2018 (two tickets, from Iowa and New York)
9. $656 million, Mega Millions, March 30, 2012 (three tickets, from Kansas, Illinois and Maryland)
10. $648 million, Mega Millions, December 17, 2013 (two tickets, from California and Georgia)