So you wanna be a Powerballer?

Powerball, for those of you who are even more disciplined about news consumption, is an interstate American lottery that has not had a winner since November and currently has a jackpot of $806 million (reported confusingly as 1.3 billion).  It is literally all that anyone is talking about.

Like millions of other Americans, I have been roped into a pooled buying situation with some friends.  If anything, it allows us a new venue to insult and mock each other for the roughly the same reasons we have done so for the last 30 odd years.  To that end, I have been putting these tickets under the Recreation budget line, as opposed to Investment, as one friend advised.  We played on Saturday and shockingly, we failed to win anything.  So here we go again for Wednesday, slightly bigger pool, more intense discussions on exactly how to divide up and spend our winnings.

But here's the thing about all of lottery madness-- it is winning actually terrifies me.  All I can think about is some dystopian, Hunger-games-Victor-misery type situation. Enough to consider not playing again.  Seriously? Am I that risk averse?  Here are some issues going through my head:

Annuity or Lump Sum?

Classic question.  I have to go lump sum here.  Time value of money, don't trust the solvency of the lottery commission, better return on my own, etc.  About $480 million after taxes can buy a lot of things that can generate a return sufficient for today's expenses.

However, the major advantage of annuity would be that it is much easier to learn how to handle $26,000,000 (rough calculation) at a time than $480 million all at once.  Kind of like not taking out too much cash from the ATM, it is just less to lose.  That sad, after 1-2 years it would be really nice to take out the lump.  Is that an option?

How do I receive the money?

Simply put, where does one put half a million dollars received all at once?  Big mattress?  Several thousand savings accounts? Large brokerage?  I don't even mean an investment strategy, I mean, you get a check tomorrow, where the hell do you cash it?

Taxes?

So everyone complains about their huge tax bill on found money.  Honestly, this is found money, this is not where you complain about over taxation.  Taxing wages on labor is far more cruel than government taking a bite of money you didn't have yesterday and did almost nothing to earn.

Tax consequences of Splitting?

That said, how does splitting work, tax-wise?  If my friends and I do split, do we have to pay taxes on each successive transfer?  That is-- does the winner give Uncle Sam his 40% cut as does each subsequent recipient?  If so, taxes will eat a massive amount of winnings.  Do we incorporate before buying tickets?  How about gifts to friends and family (separate issue)?  Does the "lucky" winner just have to keep to the gift limit and start a bunch of 529s?

Keeping it?

How the hell does one hold on to that much money, acquired that quickly, without having developed any of the financial muscles to hold on to it.  How does one avoid the temptations of travel, frivolous or extravagant purchases, the claims of creditors (real or imagined), long lost relatives and old friends suddenly in need, sycophants, leeches, and hangers on?  How does one avoid the attention of thieves and con artists?

How does a winner spending wisely, take care of friends & family without ruining them?

The most conservative and thoughtful of us assume that we would make a series of rational purchases-- debt reduction, homes, set up financial products to assure the security of our loved ones.  But how does one do this without all of the potential pitfalls of found money-- how to not alienate friends and loved ones through too much or too little generosity?  How to avoid fueling drug, alcohol and gambling addictions in those around you?  How to make every interaction in your life, the way you process every conversation with every person, not entirely about this huge pot of money you effectively found?  How to raise children well, avoid the spoiled-sociopath continuum?  How to disprove the axiom that wealth never lasts more than 3 generations?

Growing it?

This has a little to do with how to receive the money, but one wonders how to effectively grow that much money.  I guess this is why we have really large financial institutions who would line up to "manage" that money for our lucky winners.  (See "Keeping it")

Giving it all (or some) away?

So then people think about to what charities or other causes they ought to contribute?  Whose student loans would you pay off?  For those of you in the Give it away camp, is it just because you don't have really good answers to the questions above?  Is there a responsibility that a lottery winner has to distribute found wealth?  To what end?

So that's what I am thinking about while everyone else is plotting their island escape.  Maybe I'm just boring, I don't know.  So I'll ask again, given all that-- You still wanna be a Powerballer?


UPDATE:  I did not win.