Many Iowans like to fantasize about becoming an instant millionaire, and with tonight’s Powerball jackpot estimated to be worth one-billion dollars, many more people are dreaming of hitting it big.
Say the dream becomes reality, Des Moines CPA Jeff Strawhacker says one of the first decisions a newly wealthy person would need to make is whether to go with the lump sum or the annuity.
“You’ve got to weigh the option of having that money up front and then being able to do with it as you please, or invest it as you please, spend it as you please, versus getting a payout over 30 years,” Strawhacker says. “Personally, I’m a fan of the lump sum just because I want to have my hands on the money and I don’t want to wait 30 years to get all my money, but that’s just my personal feeling.”
The billion-dollar jackpot sum only applies to the annuity option, while Iowa Lottery officials say the cash option is actually closer to $497-million.
“My understanding is that is pre-tax, the same as the billion would be,” Strawhacker says. “When you’re looking at the tax amount, you almost have to factor about 40 to 45% of that’s going to go to federal and state taxes based on Iowa tax rates, so it’s a pretty large sum that’s going to come out for the government.”
Suddenly, that billion-dollar jackpot is closer to a quarter-billion, but it’s still a huge sum, and a jackpot winner would absolutely need to consult with a financial expert before taking the ticket to Iowa Lottery headquarters to collect.
“Obviously, the big thing is planning for the taxes,” he says, “but the second part is, how does it impact their life, how does it impact their estate planning, what goals do they have for this newfound money that they’ve come into?”
The odds of winning the Powerball are roughly one in 292-million, and nobody’s won the jackpot in almost three months.
So does Strawhacker play the lottery? Only occasionally, he says, adding, he might just as well leave the two-bucks on the counter for someone else as he says he’s never won anything.