Seven Things You Should Know About Winning a Lottery Jackpot

Photo of a man throwing money up in the air in celebration

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published 1 March 2022

1. Your Chances of Winning Big are Itty Bitty. You might not be surprised to learn that you’re more likely to get elected to Congress than to strike it rich in the lottery. With the Powerball jackpot, the odds of winning any prize are about one in 25, but the chances of winning the big money jackpot are less than one in 292 million. With Mega Millions, the odds are even worse: less than one in 302 million for the jackpot. Still, the allure of a multimillion-dollar jackpot tempts. Who hasn’t fantasized about how they’d spend the money? (At least, what’s left after you pay the taxes on your lottery prize.) And so the tickets keep selling.

2. Lottery Scams Abound.

Sadly, you’re way more likely to lose to a lottery scammer than you are to win a jackpot. According to FBI statistics, more than 8,500 victims lost a total of more than $61 million to scams involving lotteries, sweepstakes and inheritances in 2020. In these scams, victims are typically contacted about winning lotteries or sweepstakes they never entered. The Federal Trade Commission warns that victims are told they have to pay money (often for fees, taxes or even customs charges) or provide personal financial information to collect their prize or increase their chances of winning. “If you pay,” the FTC says, “you’ll lose your money and find out there is no prize.”

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Even in states without such laws, however, some winners have found ways to remain anonymous, such as by claiming their prize through a trust or other legal entity, such as a Limited Liability Company (LLC). In these cases, the trust's name, and sometimes the name of the representative collecting the prize on its behalf, will be disclosed to the public, but not the name of the real winner – assuming they’ve gotten good legal advice..

You’ve probably heard plenty of stories about people who won big in the lottery and died penniless. And to be sure, this has happened. Some people’s unbelievable good luck was canceled out by subsequent, really bad luck. Plus, as we mentioned, scammers are ubiquitous and taxes have to be paid. But a study by the National Bureau of Economic Research suggests that overall, people who win big money are likely to hold onto their wealth for years and to be both happier and more financially secure over the long run.

If you do beat the crazy odds and hit it big, you should take your time cashing in your ticket until you’re ready. Lotteries give you a few months, and it’s not a bad idea to use at least some of that time to prepare. Take a picture of your ticket stub, put it somewhere safe and start assembling your financial dream team. No, your cousin’s brother’s tax guy won’t suffice. If you’ve won serious money, start out right by lining up an array of experts in handling large sums of money: consider hiring an investment adviser, estate-planning lawyer, certified public accountant and a certified financial planner or private banker. You might even consult an insurance expert.

Large jackpot prizes usually offer a choice between collecting your winnings as a lump sum (minus taxes) or receiving disbursements over 20 years or more (30 years for Mega Millions.) There are pluses and minuses to each. A lump sum, if properly invested, will grow in value. If you’re a smart money person, the jackpot could grow a lot. An annuity, on the other hand, can protect you against any problems you might have with self-control. Even if you blow through all the money you receive one year, you’ll be getting more the following year. Unless you sell your future payments at a discount or get a loan against them (don’t do that), the funds will keep rolling in as long as the annuity continues. But if you die before your payments end, a lottery annuity could create tax issues for your heirs; they may be required to pay estate taxes on your remaining winnings. Somehow, they’ll manage, though. There are worse problems to have than figuring out how to pay taxes on an inherited windfall.

Remember how we said news of your good fortune will likely lead to a potentially overwhelming number of asks? It’s tempting to hand out wads of cash But that kind of charity can wreak havoc on relationships and your bank account. At the same time, hoarding your big win like Scrooge McDuck might also not be good in the long run. Setting up a trust or family foundation can simplify the giving process. Your advisers can help you set up donations of tax-smart assets.

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Elaine Silvestrini has worked for Kiplinger since 2021, serving as senior retirement editor since 2022. Before that, she had an extensive career as a newspaper and online journalist, primarily covering legal issues at the Tampa Tribune and the Asbury Park Press in New Jersey. In more recent years, she's written for several marketing, legal and financial websites, including Annuity.org and LegalExaminer.com, and the newsletters Auto Insurance Report and Property Insurance Report.