Joe’s Service Center in Altadena, California was the retailer that sold the largest lottery jackpot in human history. The drawing was held on Tuesday, November 8, 2022. The advertised amount of this drawing was a whopping $2.04 billion, and unlike past super jackpot drawings, this prize was won by one player. As of this writing, the winner has not yet come forward to claim the prize. However, my hope is that this person has been reading my articles and is actively seeking all of the legal and financial advice possible.
Now, one of the main questions you may have about this drawing is, does this person have to publically identify as the winner in the state of California? The short answer is “yes.” This person must be named publically according to California law. Now, is there any workaround, like establishing a blind Trust to remain anonymous? I don’t know California law, but I do know trusts can be formed in some states under certain conditions. Maybe that is what this person is looking into right now.
Next, how much did this person actually win? That’s a little easier to figure out.
After three months of drawings were held with no winners, this jackpot topped out at $2.04 billion. But this is not the amount that this individual will walk out the door with when the prize is claimed. If this person chooses the lump sum payment, the amount before taxes would be $998 million dollars. Note that this is before taxes. After taxes, this person would be walking out with about $620 million. It’s ironic that, compared to $2.04 billion, $600 million sounds small. But this income boost in and of itself is enough cash to sustain this person’s family for generations.
Now, if the person took the annual payments, over time the amount would actually get closer to the $2 billion advertised prize. In fact, when you see these jackpots posted, the prize is calculated based on the 30-payment annuity, not the lump sum amount (most people don’t realize that). Calculations have the first payment at about $28 million as you walk out the door. Each year for the next 29 years, the payments will increase slightly higher. For example, the second payment would be in the ballpark of $30 million, and each year they get slightly higher, topping out at about $117 million for the last payment.
The government also plays a role in what your money will look like over time, as the money you don’t get immediately is invested in things like bonds. You, as the owner of this money, would receive interest on these investments as well. All told, at the end of the 30 years, your total earning income would be right around $2 billion.
The winner of this jackpot has up to a year to claim this prize. That includes deciding which payment type is preferred. By far, most winners choose the lump sum option. But it’s also worth considering that 90% of people choose the lump sum, and 70% of people go broke after only a few years of getting wealthy. Something to think about.
Personally, I had already decided that if I were to win a sum of money that large, I would opt for the 30 annual payments. Knowing that millions will be coming once a year, every year for 29 years gives me a sense of security. I can blow the whole first check, learn my lesson, and then be a little wiser with the second check, the third, and so on. Also, I know that if I don’t live long enough to see the last few payments, I can rest easy knowing that the remaining payments will go to my son. (Yes, your heirs are eligible to receive your winnings should you pass on).
But this is just my opinion. What would you do?