THE POWERBALL player currently holding onto a ticket worth $328 million could lose a significant chunk of their prize when they eventually come forward.
One mystery gambler in Oregon matched all six numbers to hit the bumper prize on January 18.
GettyA Powerball winner will have to make a choice when they cash in their $328 million ticket[/caption]The ticket was bought somewhere in Beaverton – around eight miles from Portland – but the name of the store hasn’t been released.
In Oregon, Powerball players have one year to claim their prize so the gambler has time on their side.
But, they will face exactly the same decision that previous Powerball and Mega Millions winners have faced.
They can either choose to claim a one-time payment, known as the lump sum.
Or, gamblers can receive their prize in installments known as the annuity.
The installments are paid out over 30 years and payments increase gradually over time.
Annuity payments increase by 5% year on year.
But, if the player decides to take the lump sum, following the likes of Edwin Castro and other bumper lotto winners, they will face significant losses.
The $328 million pot has a cash value of $146.4 million, meaning the prize will have been more than halved.
And, that is before taxes are taken from the winnings.
If the player takes the lump sum, they will have to pay 24% to the federal government in tax.
This will equate to around $30 million.
And, in Oregon, winners must pay the state 8% in tax for prizes over $5,000.
Because of their win, the gambler could be pushed into the top income tax bracket, meaning they might have to pay up to 13%.
The debate over which option is better continues to rumble and financial experts have even chimed in with their opinions.
Lottery winnings: lump sum or annuity?
Players who win big on lottery tickets typically have a choice to make: lump sum or annuity?
The two payout methods can impact how much money you get from your prize.
Annuities pay out slowly in increments, often over 30 years.
Lump sums pay all at once but in a smaller amount, as taxes are withheld in one go. That means 24% of your prize goes to Uncle Sam right away. Many states tax winnings as well.
Annuities can provide winners time to set up the financial infrastructure required to take in a life-changing amount of money, but lump sums have the benefit of being taxed only once.
Inflation is also worth considering when making a choice, as payouts do not adjust with the value of a dollar. That means that you’ll likely be getting less valuable money towards the end of an annuity.
Each state and game pays out prizes differently, so it’s best to check with your state’s lottery to confirm payment policies. A financial advisor can also help you weigh the pros and cons of each option.
Experts have varying opinions on whether to take the lump sum or take the annuity.
Lawyer Andrew Stoltmann previously told The U.S. Sun that most winners take the lump sum.
He believes gamblers who take this option are making a mistake.
Meanwhile, John Loyd, of The Wealth Planner, in Texas told CNBC that some players might benefit from the fact that installments are smaller payments.
Although he acknowledged taking the lump sum can suit some winners.
This is a developing story…
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