09 Sep Why So Many Lottery Winners End Up Regretting Their Luck
One man in the Bay Area of California finished out the summer on a pretty high note when he found a $20 bill on the sidewalk outside San Francisco International Airport, used the money to play the California lottery, and then won $1 million.
Hubert Tang, a bartender at the airport, purchased two scratch-off tickets on Wednesday, August 26, according to a Reuters article. He stated that he hadn’t played the lottery in over a decade but decided to purchase some tickets anyway. After scratching off the tickets outside, he realized that he had just won a million dollars. Needless to say, he was pretty happy after that.
From now on out, Tang has it made — right?
Actually, if recent studies on lottery payments shed any light on the matter, Tang may actually be facing quite a few hurdles after becoming a millionaire:
- For starters, he won’t actually be a millionaire because of his lottery payments alone. The government typically takes about 25% of jackpot lottery winnings in taxes, and if the lottery winner chooses a lottery annuity rather than a lump sum lottery payout, annual annuity settlement fees can be as high as 3%.
- Lottery winners also tend to blow through their money very, very quickly. Almost half (48%) of all lotto jackpot winners end up going back to work (or just never leaving in the first place), and a shocking majority of people lose all of their lottery winnings within just five years.
- When you win the lottery, you get to choose between a lottery annuity settlement or a lump sum lottery payout. Neither option is really a great choice — and it’s designed to be that way. If you choose the lump sum payout, you end up drowning in taxes because these lottery payments are considered income, and income taxes can be as high as 35%. With the annuity, you end up having your money stored away in an account, slowly dwindling away over a period of 10, 20, or even 30 years.
- If you choose the annuity and you decide you’d like to have control over your money now, be prepared for some super-high early withdrawal fees. Many companies charge anywhere between 7% and 10% for withdrawing an annuity too early. This means if you’re hoping to make a big investment or take a big vacation, you’ll still have to scrimp and save.
- Last but not least, there are actually a ton of security issues that lottery winners risk when they publicly accept their lottery payments. Not only does the financial disparity strain personal relationships, but it also makes the winner a target for thieves and cyber hackers.
So now that you know a little bit more about what it’s like to win the lottery, do you still think that Tang is lucky? Let us know what you think!