Nov 11, 2024
A Powerball jackpot winner, who hit all six numbers, claims he still hasn’t received his winnings more than two months after beating the impossible odds.
Jerry, who has chosen to withhold his last name, bought the winning ticket at a Ralphs store in Orange County, California, on Aug. 19, ABC 7 reported. All five numbers he chose, including the one he selected as the Powerball, were correct.
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"It was exciting in a really subtle way because you don't anticipate ever hitting all six... you'll walk out and get hit by lightning before you win that one," Jerry told the outlet. The odds of winning the Powerball jackpot are 1 in 292.2 million, according to The Associated Press.
Lottery winners in California have to go through a rigorous vetting process, including an investigation from the California State Lottery law enforcement team to see if winners have any unpaid taxes or outstanding child support, reported ABC 7.
On average, lottery officials claim it can take six to eight weeks for a winner to be paid out. But it could take longer, as the California State Lottery processes more than 10,000 claims per month. "The process is really horrible for a winner," Jerry told the news outlet.
But once he receives his payout, how much does Jerry stand to keep after taxes — and what’s the best avenue for collecting on his winnings?
How much does a lottery winner actually receive?
Some people may assume that winning the lottery is relatively straightforward — and that the advertised jackpot would get paid out to the winner in that exact amount.
But lottery winnings are considered taxable income that is subject to federal and (sometimes) state income taxes, depending on where you live.
The IRS requires all lottery agencies to withhold a flat 24% of lottery winnings over $5,000 for federal taxes.
However, since lottery winnings are taxed as ordinary income, a significant windfall would land Jerry in the highest federal income tax bracket of 37%, meaning he must progressively pay additional tax until he meets the brackets threshold.
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While most states have additional taxes on lottery winnings, fortunately for Jerry, California does not.
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Lottery winnings: taking out a lump sum vs. annuity
There are two options to collect lottery winnings: a lump sum payout or an annuity payment plan.
The first option is a cash payout, where the winner is given a lump sum — a payout of typically 60% of the total value, according to State Farm.
With his option, Jerry would have the opportunity (after shelling out his taxes) to invest in growth-oriented assets like stocks and alternative investments like real estate, precious metals, and even artwork.
The second option of an annuity payment plan is ideal for those who may require some structure to keep them from overspending too quickly. An annual payout is a responsible way to ensure you continue to have a steady source of income throughout your adult life.
In Jerry’s case, Powerball jackpots are paid out in 30 graduated installments over 29 years. The structure of the annuity payments vary depending on the state and the rules of the lottery company, but by the end of 30 years you’ll have received the full advertised amount of your lottery winnings — whereas with a lump sum payout you'd receive about half of the total winnings.
But first, Jerry needs to have his jackpot winnings deposited into his bank account — something he hopes to receive soon after more than two months of waiting, he told ABC 7.
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William Koblensky Varela is a Staff Reporter at Wise who has worked as a journalist for seven years covering finance, local news, politics, legal issues and the environment.
