It’s Not Just Another Jackpot March 31, 2012 by Chris LeBrun

Someone is waking up this morning with a brand new life!

A winning ticket was sold in Baltimore County, Maryland in Friday’s record-breaking $640 million Mega Millions lottery jackpot. California lottery officials are reporting that 29 tickets were sold in that state matching 5 of the 6 numbers, but payouts of those should be less than $150,000 each; not nearly enough to ruin the day of the winner in Maryland!

So you just won the lottery, now what? If you’re smart, the first thing you do is hire a tax attorney and an accountant and let them handle the whole process. And for Pete’s sake, keep your mouth shut! If you think half a billion dollars will change your life, try telling someone about it and see how it REALLY changes your life!

Over the last couple days, no matter where you turned, people have been talking about the Mega Millions jackpot. The most common conversation of course is what would you do with the money if you won. But this jackpot is so huge, so life-altering that you can’t even talk about in “normal” lottery terms. We’re talking almost $150 million MORE than half a billion dollars! And really, wouldn’t we all be fine with just the $150 million? Forget the half a bill that we haven’t even touch yet!

When you talking this much money, the conversation changes from “I’m going to buy a house and take all my family on vacation” to “What private island can I buy in the Caribbean and bring my family to visit me on?” You’re no longer thinking in terms of setting up a college fund for the kids; you’re looking at buying a whole college for them to attend! And don’t even talk about paying off your bills. Even if you were $1,000,000 in debt, that’s still only 15% of 1 percent of your winnings! And to my knowledge I don’t know of anyone who’s a million in the red.

A more sophisticated “what if” conversation is would you take the lump sum or that cash annuity. Typically I’ve always been on the annuity side of the equation for the simple fact of getting a nice tidy sum of money each year for the next 25 or so years. That essentially gives you the ability to know you’re financially secure even if you blow all the money the first year or two. You’ve got a back up plan for the next 23 years!

The argument for the lump sum is that you can put that money to work for you and actually earn more than the total jackpot because you invested it effectively. I’m always skeptical of this theory because investments can go down and if you lose this nest egg there’s no safety line of credit ready to bail you out next year. If it sinks, it’s sunk!

But $640 million is a game changer! If you take the lump sum we’re talking $462 million and I know Uncle Sam is going to get his hands on a chunk of that but even after the government takes its cut you’ve got some major capital to invest. Again, we’re not talking maxing out on your Roth IRA contributions for the year; I’m talking about being the majority owner of a pretty decent sports franchise!

Of course the wife and I got into an argument about the annuity or the lump sum! She still firmly believes you take the $24.6 million a year for 26 years and get the whole amount rather than take the $462 million lump sum and, as she put it “throw away $100 million dollars!”

I hate to say this but when you put it like that…..she may be on to something!

The fact is, these amounts are so staggering it’s hard not to just start laughing during these conversations because they’re beyond anyone’s imagination. The idea that if you got $24.6 million tomorrow and had to give Washington half, you might burn through that money pretty quickly with bills and a house and college tuition and helping out family, etc. But this lucky sap has the opportunity to have that for the each year for the next quarter century! It’s unreal!

So to whoever won the jackpot, God bless you — you’re going to need it! In all truthfulness I wouldn’t want to win that much money because of the enormous pressure you would have from every family member and person you ever said hi to in school! I wouldn’t want to have to deal with making decisions about who I was going to help and who I wasn’t! So I hope whoever won is a stronger individual than I am!

I also hope they’re related to me!

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