Taryn Vanoff, Nerd Wallet
The Mega Millions jackpot swelled to an estimated $1.02 billion before the next draw on Friday, July 29. A billion dollars is no easy feat, and it has only happened twice before in the history of Mega Millions.
If you want a chance to win 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 tickets for $2 as they want. Each ticket requires you to choose five numbers between 1 and 70, and a sixth number between 1 and 25 (or you can let the lottery people generate the numbers for you). The jackpot goes to the person (or people) who correctly chooses all six numbers.
The odds of doing so are roughly 1 in 303 million.
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Although it is a national game, each participating country has its own rules on how to claim a reward. In fact, the length of time you have to file your claim can range from 90 days to a year from when the numbers are drawn. Be sure to check the rules in the country where you purchased your ticket.
How much can you earn?
Every Mega Millions jackpot winner has the option to take cash now all at once, all at once or receive a significant portion of the winnings annually for 30 years.
For the $1.02 billion jackpot, the cash option is $602.5 million.
If you take the annuity option instead, you could get close to $15.3 million for the down payment. Then each one after that increases by 5%. If you die before all the annual payments are made, the remainder will be sent to your heirs.
Each option has its pros and cons, said Lisa Kirchenbauer — founder and president of Omega Wealth Management in Arlington, Va., and a certified financial planner.
Kirschenbauer also said that anyone finds himself Suddenly rich It should form a team of professionals, including a lawyer, accountant, and financial planner.
“Your team will help you decide which option is best for you,” she said. “It’s not a one-size-fits-all decision.”
How are lottery winnings taxed
If you win a billion dollars in the lottery, you definitely owe federal income tax on it. To start, according to the IRS website, 24% of your earnings are withheld. How much it depends on whether you go for the cash or annuity option, since you only pay taxes on what you receive in a given year.
If you take the cash all at once — remember, that’s about $602.5 million — you’ll 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 do you do if you win
While it’s something we may have all dreamed of, no one is ready to win the jackpot. If you do, protect your ticket. Anyone who owns a winning lottery ticket can apply for the prize.
Next, consider anonymity. Each state has its own laws about whether lottery winners should be publicly disclosed. 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 call back.
The key, Kirschenbauer said, is slowing down. “Don’t start spending money before you have time to plan and think.”
Is a $790 Million Ticket Worth a $2 Mega Million? It depends
an introduction
Is 790 Million Dollars Worth $2?
That’s a good question, given the $2 cost to buy a Mega Millions lottery ticket that could pay off with a $790 million jackpot, the fourth-largest jackpot in the country, after the game’s next draw Tuesday night.
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Isn’t that an obvious question?
Not right.
First of all, your chance of winning the jackpot is slim, at a rate of 1 in 302.5 million. You have better odds for a smaller reward, like winning a million dollars for matching five regular numbers but missing the huge ball. But even that is one in 12.6 million. To put that in perspective, your chance of dying in a car accident—something to consider while driving to a minimart for a lottery ticket—is about one in 101 over a lifetime, according to the nonprofit National Safety Council.
As lottery officials have noted, players should consider their $2 bet as a chance to dream while accepting the fact that they likely won’t enter a new income tax bracket on Tuesday night.
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However, a shot of $790 million seems to be worth $2
Ah, but even if you somehow beat the odds, you won’t get $790 million.
First, this is the amount allocated to winners who make the annuity option, and make more than 30 annual payments. But the winners always choose cash, which will pay for this drawing an estimated $464.4 million.
Then there are the federal taxes, which will deduct 37% of that cash prize, leaving less than $300 million, although state taxes can be reduced to that amount as well, depending on where the winner lives. It’s still a fortune, but it’s a smaller fortune. This also does not explain the probability that someone else will match the winning numbers, which means that they will need to split even those small winnings in half or more, depending on the number of lucky players.
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Nearly 300 million dollars is not a small change
It’s definitely a great salary.
To put that into perspective, consider that the median American household income in 2020 was $67,500, which means that a working life at that rate would be less than 1% of even the smallest after-tax jackpot.
Unfortunately, if you had won the same prize a year ago, before the nation endured a year with an inflation rate of about 9%, your purchasing power would have been much higher.
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But someone will win
Ultimately, though, the reason the jackpot has grown so much is that no one has matched all six numbers since April. That’s 28 drawings in a row with no one winning the jackpot.
With so many people playing now that the potential jackpot is so big, it’s increasingly likely that one or more players will eventually finish that streak. However, previous jackpots have grown even larger, with the biggest payday being the $1.586 billion Powerball jackpot in 2016.
Mega Millions is played in 45 states plus Washington, DC and the US Virgin Islands. The game is supervised by state lottery officials.
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So, is it worth gambling $2?
If you enjoy dreaming about massive unexpected wins that likely won’t actually come your way, buy a ticket. But if you need to keep an eye on your finances, consider keeping $2 in your wallet.
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What are the 10 biggest US lottery jackpots you’ve ever won?
Des Moines, Iowa (AFP) – Mega Millions Jackpot Award to $1.1 billion, making it the fourth largest lottery prize in the country. Here’s a look at the top 10 jackpots won in the US and the countries where the winning tickets were sold out:
1. $1.586 billion, Arsenal, Jan. 13, 2016 (three tickets, from California, Florida, Tennessee)
2. $1.537 billion, Mega Millions, October 23, 2018 (one ticket, from South Carolina)
$3.05 billion, Mega Millions, January 22, 2021 (one ticket, from Michigan)
4. $768.4 million, Arsenal, March 27, 2019 (1 ticket, from Wisconsin)
5. $758.7 million, Arsenal, August 23, 2017 (1 ticket, from Massachusetts)
6. $731.1 million, Arsenal, January 20, 2021 (one ticket, from Maryland)
7. $699.8 million, Arsenal, October 4, 2021 (one ticket, from California)
8. $687.8 million, Powerball, October 27, 2018 (2 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 (2 tickets, from California and Georgia)
The article originally appeared on Mega Millions: How a Billion-Dollar Jackpot Actually on NerdWallet.