A LOTTERY player has instantly lost several hundred thousand dollars after a life-changing win.
They recently came forward to claim the prize from a Powerball drawing on August 3.
A Powerball player has lost hundreds of thousands from their prize pot (stock image)[/caption]
They landed a $2 million payday from an August drawing (stock image)[/caption]
New York Lottery officials confirmed that Brooklyn native Roy Norman matched all five white balls, narrowly missing the red Powerball, per an October 23 press release.
Winning numbers for the August 3 drawing were 13, 33, 40, 60, 61, and a Powerball of 20.
While the Match 5 would’ve only gotten Norman a $1 million prize pot, he elected the additional $1 Power Play option on his ticket to double it for a whopping $2 million payday.
Norman also bought his ticket at a Lucky Choice convenience store in Brooklyn ahead of the drawing.
Given that the prize pot was well over $600, Norman had to either head to a New York Lottery Customer Service Center or Prize Claim Center or send in his ticket with a signature and form by mail.
He was also presented with the most crucial decision in the lottery-winning process — how to collect the funds.
Lottery players in the United States are given the option to collect the cash through a one-time lump sum distribution or have it split up through annuity payments over several years.
There’s been debate among lawyers and experts over which option is the best for years, but there are advantages to both.
PAYMENT POSITIVES
Annuity payments allow for reliable, consistent income for an extended period, have tax benefits, and can prevent lottery winners from spending all their money too soon.
If you make a mistake one year, you have more coming in the next.
With the lump sum, the immediate cash is great and can create ample investment opportunities so that money can bring in more for the rest of the winners’ lives.
Although when the prize pot amounts in the millions, it can be challenging to properly manage, and it’s recommended to seek the assistance of a financial planner.
Additionally, lump sums come with significant tax implications.
That’s what Norman found with his $2 million win.
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.
TAX TURMOIL
Along with the federal government’s tax of 24% on all lottery winnings above $5,000, states determine their rates.
New York’s was a whopping 8.82% last year and is even higher this year, per Wisevoter.
That means, along with other fees, $775,520 was taken out of the August 3 Powerball win before Norman saw any cash.
He still walked away with $1,224,480, a pretty significant return on the investment for the Powerball ticket.
Other players encounter a similar situation all the time.
A Florida resident recently lost $300,000 after winning $1 million on a scratch-off game.
The winner of a $478 million Powerball jackpot in Georgia earlier this month will also lose about half of their winnings to taxes.
