An Ohio woman won a $15M jackpot this summer, but here’s why she may take home just $4.5M after taxes — plus a few ways you can use a big cash windfall to grow your net worth

Lady Luck was present and accounted for when a woman from Sandusky, Ohio, won big in the state’s 50th Anniversary scratch-off game back in June.

The winner, identified only as Jeanne, dropped to the floor when she realized she’d won a $15 million jackpot from a $50 scratch-off card, according to the Ohio Lottery Commission.

When she took the winning card to the clerk at Friendship #83 in Sandusky, they “both just cried,” Jeanne said in a press release. “There were people in line looking at me like I lost my mind.”

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Jeanne had two options for how to claim her enormous prize: she could take an annuity of $600,000 for 25 years (which would total $15 million), or she could take a lump sum of about $7.5 million.

She opted for the $7.5 million cash option, a sum that will actually shrink to around $4.5 million, Moneywise estimates, once she’s paid her federal and state taxes.

That $10.5 million difference between the advertised $15 million prize and her eventual winnings begs the question: Did she throw money down the drain by picking the lump sum?

And what are some smart ways you could put a large cash windfall to good use?

Taxing mega lottery wins

The IRS requires all lottery agencies to withhold 24% of lottery winnings over $5,000 for federal taxes. On Jeanne’s $7.5 million purse, this amounts to tax of $1.8 million.

But as lottery winnings are taxed as ordinary income, a windfall of this size would land Jeanne in the highest federal income tax bracket of 37%, meaning she must progressively pay additional tax until she meets the bracket’s threshold. In the end, her total federal tax bill will land at around $2.73 million.

The Buckeye State also taxes lottery winnings like normal income. Jeanne’s $7.5 million lump sum win would place her firmly in the top state income tax bracket of 3.5% for 2024, which would eat approximately $262,000 from her total.

After all that, Jeanne’s total tax liability related to her win alone comes to about $3 million — meaning she’ll only get to enjoy around $4.5 million from her $50 scratch-off win (which is still a stunning return-on-investment).

With the lump sum, you also have the opportunity (after shelling out your taxes) to invest in growth-oriented assets like stocks and alternative investments like [real estate], precious metals and even artwork.

If you’ve had a major windfall like a lottery or inheritance, you may be wondering how to invest it to ensure the best returns and your long-term security.

Becoming an accredited investor will allow you to access investment classes that aren’t open to the average investor, and diversify your portfolio to help ensure long-term growth of your net worth.

Real estate

Commercial real estate is one asset class open to the accredited investor that can afford a higher minimum investment. Commercial real estate tends to perform well in the long term, and can be a worthwhile investment to maximize your lottery gains or cash windfall.

However, it’s not always easy to find the right strategic bets for your money.

let you take advantage of the hot real estate sector with professionally-vetted commercial real-estate deals for accredited investors.

Private equity firms like First National Realty Partners (FNRP) give accredited investors access to necessity-based commercial real estate — such as grocery stores and health-care facilities.

That means the properties are essential to the local community, often leased by national brands like Kroger, WholeWalmart, and likely to remain desirable.

FNRP has developed relationships with these essential-needs brands and provides insights into the best properties both on and off-market.

Once a deal is closed, FNRP’s team of experts manages all the details, so you can focus on finding more deals you love.

Another “grounded” asset

While most Americans are aware of the potential ROI of investing in real estate, few may consider investing in plots of land — especially arable land used for farming.

Even billionaire investors like Bill Gates see the upside of investing in agricultural land, with the Microsoft magnate recently buying up huge swaths of U.S. farmland.

But that begs the question of where do you start?

Enter FarmTogether, a company offering a range of funds and bespoke investment opportunities for accredited investors looking to put their capital to work in physical farmland.

Tailored to investor needs with more than $2.1 billion in capital deployed, and a conservative and disciplined investment philosophy, the company hits on many of the key needs of investors looking for exposure to this asset class.

The company’s proprietary sourcing technology and experienced team means that less than 1% of the deals that enter the company’s pipeline are qualified as investor-worthy.

You can find out more about their long-term investments with historically attractive risk-adjusted returns by downloading the free Introduction to Farmland Investing guide.

A classy asset

You may not think of fine art as the most the accessible alternative asset. Not everyone has the cash to buy a piece by their favourite big-name artist at an auction or a private sale.

However, fine art tends to be a solid investment over time as its value remains generally more stable compared to market fluctuations.

If you want to dip your toes into the art world, Masterworks is a top platform for retail and accredited investors to invest in fractional shares of blue-chip contemporary art — including paintings by iconic artists like Banksy, Picasso and Basquiat.

For those looking to gain exposure to this particular asset class, the Masterworks team does the due diligence for you, vetting each piece with industry experts, with an ultra-low acceptance rate of less than 3%.

Once you join the Masterworks community of more than 280,000 members, you can tap into a whole lot of data and insights and use them to guide you in choosing the art you want to put your money into.

Jeanne has big plans for her winnings. She wants to pay off her best friend’s mortgage, whom she’s stayed with for the past two years, and she’d love to buy a house in Florida.

But could she have achieved those goals and collected more money in the long-run by taking the annuity prize option?

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What if she took the annuity?

If Jeanne took the $600,000 per year for 25 years, she would have received the full $15 million prize, eventually. Instead of feeling immediately wealthy, she would have been comfortably rich for years to come.

When a lottery winner chooses the annuity option, they typically pay taxes based on the annual payment (in this case, $600,000) rather than on the total prize amount.

So, Jeanne would be signing up to pay income taxes on $600,000 — plus any other income she earns through working, investments, benefits and so on — for two and a half decades. That would place her in the highest federal and state income tax brackets.

In terms of federal taxes, she would owe around $180,000 on her winnings in 2024, and in state taxes, she would owe about $20,000. This also assumes Jeanne doesn’t reduce her tax liability through various clever strategies and with help from a financial advisor.

If calculations like these on your own income make your head swim, hiring a trusted financial advisor can be the best way to make sense of your finances and feel confident in your financial decisions. Advisor.com can help you find someone that’s right for you.

Advisor.com is an online platform that connects you with vetted financial advisors. Just answer a few quick questions about yourself and your finances, and the platform will match you with experienced financial professionals best suited to help you develop a plan to achieve your money goals, whether that’s buying a house like Jeanne, saving for retirement, or investing in the stock market.

You can view the advisors’ profiles, read past client reviews, and schedule an initial consultation for free, with no obligation to hire.

Annuity vs. lump sum debate

Once you get over the shock and elation of winning a life-changing windfall, there are many important things to consider. First, you typically have to choose between taking a lump sum or an annuity.

Many people take a lump sum because they want immediate access to the cash to buy big-ticket items like houses or cars — or perhaps, like Jeanne, they want to use it to pay off debts or to help friends and family.

With an annuitized payment, lottery winners can enjoy the security of steady income and peace of mind knowing they can’t blow through it all at once.

It can be worth working with a financial advisor on how to maximize that money stream. For example, you may want to put it to work via tax-advantaged investing accounts, like a 401(k) or a traditional or Roth individual retirement account.

One option to consider is a gold IRA. Gold has historically acted as a hedge against inflation and this retirement account can help you stabilize your finances by allowing you to invest directly in physical precious metals rather than stocks and bonds.

You can open a gold IRA today with the help of American Hartford Gold — a precious metals dealer offering IRAs and direct purchases of precious metals and coins.

One of the country’s most trusted precious metals companies – with an A+ rating from the Better Business Bureau – American Hartford Gold has helped thousands of clients protect their retirement.

To learn more about how you can grow your retirement savings with this safe haven asset, you can request a free guide and up to $15,000 in free silver on qualifying orders allowing you to start saving right away.

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This article provides information only and should not be construed as advice. It is provided without warranty of any kind.