I’m sure by now you’ve heard about the largest jackpot that has ever been won by a single U.S. winner. This jackpot totaled to a whopping $758.7 million dollars! The winner is a 53-year old woman named Mavis Wanczyk of Chicopee, Massachusetts.
Talk about being the luckiest person on earth!
With all the excitement around her and her winnings, one thing that I noticed circling the internet was the slight misinformation around these winnings. For starters, you see everywhere that this woman won $758.7 million dollars and that her take-home payout (assuming she elects to take a large lumpsum upfront instead of annual payments in the form of an annuity) is $480 million or $336 million after taxes.
I honestly don’t know who calculated these numbers and why they decided to stop there because this doesn’t show the true picture. Here are some facts about lottery winnings to consider:
- In Massachusetts, 25% of all prizes greater than $5,000 will be automatically withheld and sent directly to the IRS
- In addition, 5% is required to be withheld and sent to the Massachusetts Department of Revenue if your prize is more than $600. This percentage depends on where the winner resides
- Interestingly, you can deduct your losses on federal taxes up to the amount of the winnings
- If you decide to make donations with your winnings you can further deduct your charitable contributions
- Finally, you will be required to file federal taxes. Lottery winnings are taxed as ordinary income
If you want more details on the Massachusetts Lottery, click here.
Taking the above into consideration, you can see how the $336 million was calculate (25% to IRS and 5% to the state of Massachusetts… a total of 30% in immediate withholdings before the winner even gets a penny).
30% of $480 million is $144 million in withholdings. $480 mil – $144 mil = $336 million
$336 million would be Ms. Wanczyk’s take-home pay and NOT $480 million!
However, we don’t stop there, Ms. Wanczyk still needs to pay her income taxes. WAIT a minute… I thought we were told that $336 million was “after taxes” … doesn’t after taxes mean that all taxes have been paid?… Well my friends, you have been slightly deceived. It isn’t actually “after taxes” because she still needs to pay her income taxes to Uncle Sam.
Assuming she doesn’t donate any of her winnings to charity, she will be taxed at the highest tax bracket which for 2017 was 39.6% (we are simplifying slightly here but due to rounding, we will end up with the same answer either way). At 39.6%, her income taxes would be $133.1 million allowing her to put $202.9 million into her bank account. Now $202.9 million is a LOT of money but YIKES!! Of the $758.7 million, Ms. Wanczyk only took home 26.7% of the total pot?.. Yes, yes she did!
73% of Ms. Wanczyk’s winnings went to the government and only $202.9 million went in her pockets!
Lucky for her, she didn’t have to work for this paycheck but I’m willing to bet that her stomach dropped just a bit when her accountants told her the “bad” news. I’m curious to know what my bulls think about this…. Please comment below to tell me your thoughts. Do you think this is ok? Personally, I wouldn’t care because I did not have to work for that big fat paycheck (assuming I was the winner) but… I’m sure some of you may have differing opinions.
The $759 (I mean $202) million-dollar question… is Mavis Wanczyk actually lucky?
I mean she did just win over $200 million dollars and is set for life…
I would argue that she is not. As soon as she won, the same thing that happens to every lottery winner started happening to her. In her own words, she says “I’m scared, but I’ll be OK, I just want to be me and just be alone and figure out what I want to do. I couldn’t drive anywhere. I couldn’t do anything.” Based on what has been happening to her, she has the right to be scared.
Apparently, there were instances involving people knocking around the neighborhood trying to find her. They were knocking on doors asking where she lives. It got so bad that the Chicopee police had to be stationed in her driveway to “keep a close eye out”.
Read this article from the Daily Mail to further understand my point.
That is not the way to live. You don’t hear instances of people walking around Warren Buffet’s neighborhood knocking on doors and asking where he lives. I think that when people win the lottery, those around them feel that it is ok to solicit because they didn’t work for it, also the lottery winners haven’t accumulated that wealth over time so they haven’t been able to create a safer environment around them to be able to handle this new-found wealth.
Anyway, I hope that Ms. Wanczyk is able to adapt to this quickly otherwise, being a multi-millionaire overnight will not be as fun as it seems to the rest of us non-millionaires.
If I was to be a millionaire, I would rather become one through hard work and not through winning a lottery
It’s not because I think I would end up losing it all just like every other lottery winner that has ever lived…
In fact, I think I would actually be able to multiply my winnings through different savvy business investments. This is not because I think I am better than anyone else. This is because I have already developed the necessary skills over time to know how to invest. I have a strong entrepreneurial background and work in the financial sector.
I also know that I’m not smart enough to fully manage that kind of money on my own. So I would research and find the right money management company that would assist me in properly managing my winnings. One of the best advice I’ve ever been given: know what you don’t know. I would create a budget for myself and every year, assess the budget to make sure that my finances will last me beyond my life expectancy.
I believe that anyone who takes the time to learn how to invest, or learn how to manage their money and to NOT live paycheck by paycheck, these are the type of people that would know how to handle their winnings.
This does not imply that anyone who does live paycheck by paycheck and doesn’t have a good history of managing money… that they would be broke overnight. It just means that they would be more likely to mismanage the winnings when compared to those with a better track record with managing smaller amount of money.
Remember guys… educate yourself, learn how to invest, work hard, save, save, then save some more!
Becoming a millionaire through hard work would be more gratifying for sure. Also, those around you will respect your hard-earned money more than if you had just won it. Yes, you will still have people coming to you for handouts, but the average millionaire, unless they are in the top 10 are usually anonymous.
No one knows them unless they look in Forbes’ top 40 under 40 wealthiest people. Even then, none of us would recognize them if they sat next to us on a plane. But, if you win the lottery, your name, address all your information is now all over the internet. EVERYONE knows you. You have now become a target for harassment and solicitation.
That is why I would not want to win the lottery… It would be nice, but I know I wouldn’t be happy. Call me crazy and honestly… maybe I am!