A lucky lottery player beat tough odds to win $1 million, but promptly lost a chunk of it thanks to the decision he made.
Michael Koldis, from Sheffield, Massachusetts, was stunned to discover he had become a millionaire overnight on Monday.
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Koldys purchased a $20 scratch ticket from the $5,000,000 100X Cashword game.
The winning ticket was purchased at a local store in his hometown.
He was the second winner of the $1 million prize from the lottery game in less than a week.
However, instead of taking home his $1 million check, the Massachusetts lottery player took home only a small portion of the profit.
Read more about winning the lottery
When big money winners go out to claim their lottery prizes, they are faced with a tough decision – take the cash option or pay the full amount in installments.
Koldy's went first, receiving a one-time payment of $650,000 before taxes.
In doing so, he sacrificed more than $300,000 of his winnings.
Despite the big loss, he has big plans to get the money.
He told lottery officials he wanted to buy a new boat, save it for retirement, and “have some fun” with his prize money.
The store that sold the ticket, Silk's Variety, will also receive some cash as a bonus for selling the winning ticket.
He is scheduled to receive a reward of $10,000.
However, Koldi's decision to take the lump sum sparked controversy among financial advisors and lottery lawyers.
Taking the lump sum is a huge mistake, attorney Andrew Stoltman told the US Sun in an interview.
The lawyer who represents what he calls “lottery losers” said that decision is made by about 90% of winners.
Lottery winnings: lump sum or annuity?
Players who win large sums of money on lottery tickets usually have a choice: lump sum or annuity?
Both payment methods can affect the amount of money you get from your prize.
Annuities are paid out slowly in increments, often over 30 years.
Lump sums are paid all at once but in a smaller amount, as taxes are withheld all at once. This means that 24% of your prize goes to Uncle Sam immediately. Many states tax gains as well.
Pensions can buy winners time to build the financial infrastructure needed to receive a life-changing sum of money, but lump sums have the advantage of being taxed only once.
Inflation is also worth taking into consideration when making a decision, as payments do not adjust to the value of the dollar. This means you'll likely have less money back at the end of the annuity.
Each state and game pays jackpots differently, so it's best to check your state's lottery to confirm payout policies. A financial advisor can also help you weigh the pros and cons of each option.
Experts have varying opinions on whether you should take a lump sum or take an annuity.
According to Stoltman, it is a mistake to make a decision because many winners do not have the financial support and advice to deal with a sudden influx of money that can lead to significant losses.
Meanwhile, wealth advisor Robert Pagliarini has warned players to think twice before taking home cash as the risks are higher.
He explained that they could not afford to make bad investments.
“Lottery winners would be much better off if they chose the annuity,” he told the US Sun.
Winners only have “one chance” to make their final prize, and they will be under more pressure if they increase the risk of making mistakes.
“If you take the lump sum, you have to realize that if you start making mistakes, or making bad investments, there will be no change,” he said.
“It's not like you're going to win the lottery again. You only get one shot at this.”
Pagliarini pointed out how this pressure could be reduced if they got their payments in installments.
Responsible gambling
Remember to gamble responsibly
A responsible gambler is someone who:
- Sets time and financial limits before playing
- Only gamble with money they can afford to lose
- Never chase their losses
- He does not gamble if he is upset, angry, or depressed
- National Council on Problem Gambling – https://www.ncpgambling.org/
- Gamble Aware – www.begambleaware.org
For help with problem gambling, call the National Gambling Helpline at 1-800-522-4700 or go to ncpgambling.org/chat
