Shopper scoops $6million after spending $50 – but going down particular path meant $1.9m vanished straightaway
A LOTTO player scooped $6 million on the game of chance but saw almost a third of his prize vanish straightaway before walking away with the cash.
The gambler, from Michigan, struck gold when he landed the bumper prize pot.
He tested his luck on a $50 scratch-off ticket that had a top prize of $300 million, as reported by the Michigan Lottery.
The lotto player, 36, revealed that he wasn’t an avid scratch-off ticket player, playing the games “here and there.”
But he was taken aback when he scratched the numbers inside the BP store in Farmington Hills before scanning the ticket.
“When I saw it was a $6 million winning ticket, I kept saying ‘I’m going to fall over!” he said.
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But the gambler was forced to make a decision on how he wanted to receive his new windfall.
He could either receive his entire fortune as a lump sum or in the form of an annuity—staggered payments paid over a period of time.
This is a conundrum jackpot winners who come up trumps on the Mega Millions or Powerball often face.
The decision over which path to go down has sparked debate among lottery lawyers and financial advisers.
Attorney Andrew Stoltmann strongly warned against winners taking the lump sum in an interview with The U.S. Sun.
He said selecting the option is a mistake around 90% of winners apparently make.
Mega Millions warning as $1.1bn prize still remains unclaimed – and the ticket was bought at a chain store (1)
Wealth adviser Robert Pagliarini also warned players to think twice about taking the lump sum.
He told The U.S. Sun that winners only have one check rather than an annual payment.
Pagliarini explained that there are risks for players who take the lump sum.
He explained that they are unable to afford to make poor investments.
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.
The gambler, who hasn’t been identified, opted to receive his prize as a lump sum.
But this choice had an impact as it meant that $1.9 million vanished straightaway.
The lump sum was worth $4.1 million before taxation.
Gamblers in Michigan who win over $5,000 are subject to federal and state taxes on their prize.
They must pay a rate of 24% to the Internal Revenue Service and 4.25% to the state.
But, the state taxation rate is not the highest in the country.
Gamblers in New York are penalized more heavily as the state lotto tax rate is more than 10%.
Maryland and the District of Columbia have taxation rates of 8.9% and 8.5% respectively.
Read More on The US Sun
Lotto players in certain states, however, have a reprieve.
This is because California, Florida, and Texas lotto players do not have to pay a tax on their winnings.
Responsible gambling
Remember to gamble responsibly
A responsible gambler is someone who:
- Establishes time and monetary limits before playing
- Only gambles with money they can afford to lose
- Never chase their losses
- Doesn’t gamble if they’re upset, angry, or depressed
- National Council on Problem Gambling – https://www.ncpgambling.org/
- Gamble Aware – www.begambleaware.org
For help with a gambling problem, call the National Gambling Helpline on 1-800-522-4700 or go to ncpgambling.org/chat
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