- Jan 13:
- Colorado Powerball has sold $50M in tickets, $6.3M on Tuesday
- Jan 12:
- Lottery players go to great lengths for Powerball tickets
- Powerball jackpot increases again to $1.5B on strong
- AP News Guide: A look at the record Powerball drawing
Admit it. You bought a Powerball ticket not because a portion of every dollar sold in Colorado goes to fund parks, trails, outdoor recreation and schools.
You're a dreamer. In the days and hours before the multi-state lottery tries again to find a winner of the record jackpot Wednesday night, the would-be wealthy shared fantasies of buying a house, a Colorado mountain range or a ticket to the Denver Broncos' first playoff game.
In reality, odds that you'll win the jackpot are terrible . Even buying every combination possible — that's 292 million tickets — you'll win, but you'll likely share the cash and be out the $584 million spent to ante.
David Gold, a venture capitalist with Access Venture Partners in Westminster, did the math.
He only plays "when the expected value of a ticket exceeds the cost of the ticket." And it just doesn't add up, he said, even with the jackpot at $1.5 billion, as it was Tuesday afternoon. The expected value of the $2 ticket — cash winnings, after taxes, divided by the odds of 1 in 292 million — is $1.75.
"And, of course, that assumes you are the only winner," Gold said. But given the size of the pot, he said, "I may break my rule for this one, just for entertainment value."
Losing may leave you better off, say financial experts who are wary of the completely new life that big money can bring.
"You have no idea how debilitating it can be. Seriously," said Myra Salzer, founder of The Wealth Conservancy in Boulder, who advises people who suddenly become rich. "It's going to ruin lives if it's not done right."
But let's think positive. Should you win, she advises, don't rush to claim the money. Before telling officials you're the state's newest billionaire, disconnect your phones, get an unlisted number and hire a chief financial officer, Salzer said. (Companies like hers charge a "negotiated rate" for that service when wealth is over $500,000.)
Colorado winners can stay somewhat anonymous by setting up a trust fund or limited liability company, lottery spokeswoman Brooke Christopher said.
"We never give financial counsel, but if a winner wanted to set up an LLC or trust fund, they have the option to do that," she said. "The name of the trust fund would be public record."
Also public: the winner's hometown and the retailer that sold the winning ticket.
Last week, Colorado Powerball sales hit $22.8 million, Christopher said. Weekly sales typically are $1.3 million to $1.4 million.
As of Tuesday morning, $41.2 million in tickets had been sold in Colorado for this specific Powerball gamble, which has so far included 20 drawings .
If Wednesday's drawing ends up with you getting a fat check, you may also want to add a therapist who specializes in sudden wealth to your list of trusted advisers.
"A therapist can talk to people about their values when it comes to money, their vision," said Jennifer Dunkle, a licensed professional counselor in Fort Collins who is a member of the Financial Therapy Association. She usually counsels couples where money has become a disconnect.
One of the easier choices is how to accept the money. Powerball offers winners a choice: A one-time payment, $930 million as of Tuesday, or 30 smaller payments over 29 years, or about $50 million a year.
Financial experts have long advised taking the cash since you can invest the money for a better return. But with a jackpot this big, the annuity makes sense.
"Can you safely save and manage the money? There are stories upon stories and statistics aplenty that demonstrate that this is an exceptionally difficult thing to do when receiving a windfall," said Wendi Strom, a certified financial planner with Renaissance Wealth Management in Englewood. "An annuity option would provide an automatic annual renewal of funds."
And then there are taxes, "a sickening number," said Jeff Belair, CPA and tax partner at EKS&H tax consultants in Denver.
Federal income taxes alone could consume 39.6 percent . Colorado takes another 4.63 percent. That drops the lump sum to $518.7 million and the annual payout to $27.9 million.
One way to lower your bill is to make charitable contributions. Bruce DeBoskey, a philanthropic strategist with The DeBoskey Group in Denver, recommends creating a foundation or a donor-advised fund. And then strategize.
"You can write checks all day long and not change a thing," he said. "The idea about being strategic about your philanthropy is being strategic about what needle you want to move and what is the benefit you want to have on society."
But no matter how generous you are, there will be taxes.
Even if you donate half to charity — the maximum one can deduct — you still must pay taxes on the other half. Donate everything and you also still pay taxes on half of your income.
"Income is the income is the income," said Mira Finé, national director of tax operations at Hein & Associates in Denver.
Her firm has advised lottery winners in the past where taxes proved costly. One well-intentioned client regularly gave a lottery ticket to a disabled woman on the 16th Street Mall. When she won, she was disqualified from her subsidized housing and had to file taxes, Finé said.
"She got really mad at the guy. She didn't want to win," Finé said. He ended up paying her tax bill.
"That lottery ticket he bought her cost him a whole lot more," she said. "There are so many things you don't think about and how it affects you when you win that money."
What the state of Colorado will take
Colorado's share of the Powerball is 24 percent of tickets sold in the state. Last fiscal year, the state collected $128 million from all lottery sales. This year, there could be a new record, Colorado Lottery spokeswoman Brooke Christopher said.
Three state outdoor agencies are the primary beneficiaries: Great Outdoors Colorado gets 50 percent; the Conservation Trust Fund gets 40 percent; and Colorado Parks and Wildlife gets 10 percent.
Every cent over a state-mandated cap, which was about $126 million last year, flows to the state education department's Building Excellent Schools Today program to help build schools in underfunded districts. BEST received $1.9 million last fiscal year.
"We're in a really good position to give them a lot more than we've given them in past years," Christopher said.
What could you buy?
• $200 million: The Playboy Mansion, a 5-acre property in Los Angeles complete with 29 rooms, a rare zoo license and Hugh Hefner.
• $300 million: A circumlunar trip for two around the moon via Space Adventures. First mission expected to launch by 2018.
• $410.25 million: The 10 most expensive homes in Colorado, according to Zillow.
• $750 million: The reported sale price of the Pittsburgh Penguins National Hockey League team.
• $1 billion+: Pep Boys, as long as you beat out current buyer Carl Icahn, whose $1 billion offer was accepted by the auto parts retailer with 800 stores.