Saturday night, October 31, Powerball draws for an estimated $760 million. Somebody might win it. Nobody will win $760 million — because that number, the one on the billboard, is the most BogusAPY figure in America: an advertised total that no winner ever receives. Before the mistakes, here's the part nobody reads.
First, the number nobody gets
The $760 million is the sum of 30 annuity payments spread over 29 years, each one 5% bigger than the last — the first is about $11.4 million. It is not a check. The actual cash on the table, the lump-sum option, is $326 million: 43 cents per advertised dollar, before anyone mentions taxes.
Then taxes mention themselves. The lottery withholds 24% for federal tax, but the top federal bracket is 37%, and a $326 million prize sits essentially entirely in that bracket — so federal tax takes it to roughly $205 million. State tax depends on where you bought the ticket: zero in Florida or Texas, and in New York, at 10.9%, you're at about $170 million — 22 cents per billboard dollar. (The annuity route totals more nominal dollars — roughly $480 million after federal tax over the 29 years at today's rates in a no-tax state — but it arrives across three decades, at whatever tax rates the future feels like charging.)
The waterfall on Saturday's jackpot, per Powerball's published figures for the October 31, 2026 drawing, checked October 29, 2026.
None of this makes the winner poor. It makes every plan built on the headline number wrong by a factor of three or four — which is where the mistakes start.
Mistake 1: Going public before there's a wall around you
Most states publicize their winners — name, hometown, prize. A handful let winners stay anonymous, and in others a trust or legal entity can claim the prize. Either way, the order of operations matters: winners usually have months to claim, and the careful ones spend that time hiring a tax attorney and a CPA before their name is attached to a dollar figure. The careless ones claim first and meet the world unprepared.
Jack Whittaker was already a wealthy West Virginia construction businessman when he won $314.9 million on Christmas Day 2002 — then the largest single-ticket jackpot in U.S. history. He took the cash option and netted about $113.4 million after taxes, in full public view. What followed: thieves took $545,000 in cash from his car in 2003, then another $200,000 about a year later. He was hit with hundreds of lawsuits and legal claims. His own summary, to ABC News in 2007: "I pretty much lost everything I held dear in my life." He said repeatedly that he wished he'd torn the ticket up.
Mistake 2: Planning around the headline number
This is the waterfall above, lived as a lifestyle. Winners sign purchase contracts, promise gifts, and green-light spending sized to the advertised figure — then discover their actual balance is a third of it, and that the big number was a 29-year payment schedule, not a bank balance. Every commitment made against the billboard number has to be unwound, renegotiated, or defaulted on, in public, at the exact moment everyone is watching. Run the real number first. It takes ten minutes and it's the cheapest ten minutes of a winner's life.
Mistake 3: Becoming the family bank
The requests start immediately, they are endless, and every one of them arrives wearing a story. Winners who say yes by default discover two things: the money goes faster as gifts and "loans" than it ever would as spending, and a loan to a relative is usually a gift that also damages the relationship — because it's remembered as a debt by one side and a gift by the other.
Abraham Shakespeare won $30 million in the Florida Lotto in 2006 and took the lump sum. He gave away money to nearly everyone who asked — friends, family, strangers with hard-luck stories. By the time prosecutors later reconstructed his finances, one man alone owed him a million dollars. There's a mechanical catch on top of the human one: the IRS lets you give about $19,000 per person per year tax-free; above that, gifts start eating your lifetime exemption and generating paperwork. The winners who survive this mistake set one giving budget, in advance, with one person whose job is saying no.
Mistake 4: No structure — spending like it refills
The best evidence on winners isn't the horror stories; it's a study. Economists Hankins, Hoekstra, and Skiba linked nearly 35,000 Florida lottery winners to bankruptcy records (published in The Review of Economics and Statistics, 2011). Winners of $50,000 to $150,000 were about 50% less likely to file for bankruptcy in the first two years after winning — and then more likely to file in years three to five. The windfall postponed bankruptcy rather than preventing it. The detail that explains everything: the median winner in that group received enough to pay off all of their unsecured debt — and mostly didn't. About 5.5% of winners filed for bankruptcy within five years regardless of prize size.
Money without a system lands on whatever trajectory was already there. A lump sum feels infinite in month one; a house, cars, travel, and a payroll of helpers give it a burn rate, and finite divided by burn rate is a date.
Mistake 5: Handing one person the keys
Every winner needs help. The mistake is concentrating it — one advisor who invests, reports, and controls, with nobody else able to see the accounts. The extreme case is Abraham Shakespeare again. In late 2008, a woman named Dorice "Dee Dee" Moore approached him saying she wanted to write a book about how people were taking advantage of him. She became his financial adviser. Prosecutors showed she took control of every asset he had left — his home, his money, a $1.5 million annuity — withdrew his remaining cash for herself, and in April 2009 shot him and buried him under a concrete slab in her backyard. She was convicted of first-degree murder in 2012 and sentenced to life without parole.
Most versions of this mistake are quieter — an advisor charging fat fees, steering a winner into products the advisor sells, or simply stealing, all of which have ended in documented lawsuits by winners. The defense is boring on purpose: a fiduciary (legally required to work in your interest), a separate CPA who sees the same statements, and no arrangement where a single person can move money alone.
And the stat that's bogus
You've heard that 70% of lottery winners go broke within a few years. It's quoted everywhere, usually credited to the National Endowment for Financial Education. In January 2018, NEFE said it plainly: the statistic "is not backed by research from NEFE, nor can it be confirmed by the organization." It traced the number to an unverified remark by one participant at a 2001 think tank. It has been repeated for two decades anyway — a yield of exactly zero evidence, compounded annually.
The honest picture from the real research is less cinematic and more useful: most winners don't go broke (a Swedish study of large winners found life satisfaction up for more than a decade), but the money doesn't fix the habits that were there before it arrived, either. Winning changes your balance. It does not change your system — and the five mistakes above are what having no system looks like at scale.
Check it yourself: links and sources
- Current jackpot and cash value: Powerball.com — $760M annuity / $326M cash for the October 31, 2026 drawing, checked October 29, 2026. Odds of the jackpot: 1 in 292.2 million.
- Prize taxes: the IRS withholds 24% on large prizes and winnings are taxed as ordinary income — see the IRS pages on gambling income and Form W-2G for the mechanics.
- The bogus stat, in the source's own words: NEFE, "Research Statistic on Financial Windfalls and Bankruptcy" (January 2018).
- The Florida study: Hankins, Hoekstra & Skiba, "The Ticket to Easy Street? The Financial Consequences of Winning the Lottery," The Review of Economics and Statistics 93(3), 2011.
- Jack Whittaker: Associated Press coverage via Lottery Post, and the West Virginia Encyclopedia entry (cash netted: $113,386,407.77).
- Abraham Shakespeare: Associated Press trial coverage of the Dorice Moore conviction (December 2012), including the prosecution's account of his giving and her control of his assets.
- Anonymity and claim rules vary by state — your state lottery publishes its claim rules; check them before you ever need them.
Not financial advice.
Comments
Post a Comment