You’ve probably heard that the Powerball jackpot is up to $425 million, but you can practically be assured that by the time millions of people flock to buy tickets for Wednesday’s drawing, the jackpot will have grown larger.
The winner, if there is one, will probably quickly adopt a Warren Buffet mode of thinking and declare that he’d be happy to pay more than the current 35 percent in federal income tax, or about $110 million.
That’s what happens to people’s brains when they get absurdly rich. They suddenly get generous when it comes to taxes and they, and a lot of other people, get this idea that because they’re willing to pay more, then people who have less than one ten-thousandth as much can do the same thing.
But that’s taxes, and I’d rather talk about just how big a $425 million jackpot really is – and how big it isn’t.
If the winner elects to take 30 annual payments, the payout will be $14,150,000 a year, thereabouts, or about $8.5 million a year after federal, state and local taxes. That’s a paltry $163,000 a week, only one-quarter to one-third of what top-paid actors make. But when you consider that’s $163,000 a week, after taxes, for the next 30 years, it’s livable.
If you take a lump sum payment, you’ll only get $278 million, and after federal, state and local taxes that shrinks to about $168 million.
So what do you do with $168 million? Well, if you invested it in Walmart, which pays a 2.3 percent dividend and announced it would make its latest dividend payment a little early this year to avoid a possible tax increase, you could earn $3.86 million a year, or about $74,000 a week. Of course you’d have to pay taxes on that, so your income would quickly shrink.
Realistically almost anyone should be able to live on somewhere between $45,000 and $65,000 a week after taxes, but I can name a few people who have burned through hundreds of millions of dollars in relatively short careers.
That’s what hangers-on will do to you. So it would be wise to think twice before buying a collection of half-million-dollar cars or the most expensive home in L.A. or New York City – or making new “friends.”
If you were to win the $425 million jackpot, would that make you a celebrity, someone people would ooh and ahh about when you showed up somewhere?
Ever heard of Kenny Troutt or Alexander Rovt? They’re on the Forbes 400 list of the richest Americans, albeit near the bottom, and though they might be well known in their hometowns, I have to be honest, I’ve never heard of them, even though they are billionaires.
So don’t get a swelled head if you do win the jackpot. The $168 million you would get after taxes would leave you about $1 billion short of the amount needed to make the Forbes 400 list.
That will leave you as a relative nobody among the very rich. Chances are good that after a few months, or even weeks, most people won’t even remember your name.
How sad; $425 million just isn’t what it used to be.