Be Prudent
Part 1
A $1 million jackpot is not a $1 million prize: You're a thousandaire
-- not a millionaire.
Many people are surprised to learn that lottery jackpots are paid
over 20 to 25 years and the IRS withholds 28 percent federal income
tax from each check. If, for example, you win $1 million, most
states pay you $50,000 a year for 20 years less 28 percent federal
withholding
tax, leaving you with $36,000 a year. You may also have to pay
additional income taxes when you file your retum, depending on
your overall
financial situation. The problem is that the $36,000 you receive
today will only buy an $11,225 lifestyle 20 years from now, when
the checks stop. There are no cost-of-living increase provisions
for lottery payouts.
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