A MAN has ended up with less than half of his $1 million winnings after he chose to receive a lump sum payment.
Ethan Benedict of Petersburgh claimed his $1,000,000 prize on the New York Lottery’s Pink Panther Diamond 7’s scratch-off game.
Ethan Benedict won $1million on Pink Panther Diamond 7 scratch off game[/caption]
However, he was left with a sum of $455,700 after the required withholdings.
The lucky ticket was purchased at Stewart’s Shops located at 2 River St. in Hoosick Falls.
The New York Lottery announced that as of Wednesday there is one remaining Pink Panther Diamond 7’s top prize.
Winners have to report their windfall, which means they could be pushed into a higher income tax bracket, but this depends on the sum.
If they win such a large amount, they could pay up thousands of dollars in state tax.
In New York, for example, gamblers have to pay a rate of 10.9% on top of the tax owed to the federal government.
State such as Florida don’t charge a tax on lottery winnings.
It is one of the few states where gamblers don’t have to pay a tax on their fortune.
The rules are the same for players in California and Texas.
New Hampshire, South Dakota, and Tennessee are also among the states that don’t have taxes for lottery prizes.
Gamblers in Maryland, New Jersey, and Oregon must pay a rate of 8% or more.
The amount of taxation a winner has to pay on their prize is among the factors they consider before deciding whether to take the lump sum or annuity.
The annuity is a less popular option but means players receive staggered annual payments over decades.
Mega Millions winners, for example, will receive one payment, then 29 annual checks.
Each payment is 5% bigger than the previous one.
JACKPOT RISKS
Financial expert Robert Pagliarini told The U.S. Sun that taking the lump sum option brings its own risks.
If you take the lump sum, you have to realize that if you start making mistakes, or bad investments, there’s no do-over,” he said.
“It’s not like you are going to win the lottery again. You have one shot at this.”
He explained that taking the annuity gives winners more room or flexibility to make potentially bad decisions in the immediate years after their success.
Lotto lawyer Andrew Stoltmann told The U.S. Sun that around 90% of winners make the mistake of taking the lump sum option.
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.
