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Banking

Mega Millions Annuity or Cash: Which Should You Take?

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.

There’s exactly a one in 302,575,350 chance that you’re going to win the Mega Millions jackpot. Those aren’t great odds: In fact, you’re about 80 times more likely to be attacked by a shark, and about 19 times more likely to give birth to identical quadruplets.

But hey, someone has to win right? And when that lucky person does hit the jackpot, they’ve got a big question on their hands: Do you take the Mega Millions annuity or stick with the lump sum payout?

And whether you’re the person with that lucky one in 302,575,350 ticket, or just curious about how the system works, it’s worth knowing the difference between the two payout options — because they change a lot about how you get your winnings.

With that in mind, here’s everything you need to know about the Mega Millions annuity, the lump sum option, and which one you should choose if you hit the jackpot.

Mega Millions annuity: How it works

Unlike the lump sum option — in which you get all of your money at once — the Mega Millions annuity spreads your winnings into annual, gradually increasing payments. Similar to the Powerball annuity option, the Mega Millions system is spread out over 29 yearly installments, in addition to one immediate payout you get when you cash in your ticket.

That’s 30 payments in total. It may seem like a long time to wait for your money, but, according to the lottery, this system is designed to “protect winners’ lifestyle and purchasing power in periods of inflation.” Also, since payments grow by 5% every year, your will increase a lot over time.

So what does the annuity option actually look like? Let’s look at an example. Say you won a $100 million jackpot, and you live in Virginia — a state with a pretty average tax rate. Here’s how some of your payments would look:

  • Your initial payment, which you get as soon as you cash in your ticket, would be $1,083,703 after taxes.
  • Your first yearly payment (your second payment in total, but the first of your annual installments) would be $1,137,888 after taxes.
  • By year 14, you’d eclipse $2 million, earning an annual payment of $2,043,484 after taxes.
  • By year 22, you’d exceed $3 million, getting $3,019,157 after taxes.
  • Your final installment would total $4,460,670, more than four times your original payment.

After taxes, this scenario would leave you with a total of $72,000,000. Your taxes will obviously vary based on your state though, so to explore more options — and see a more thorough, year-by-year breakdown — check out this online calculator.

Mega Millions lump sum: How it works

The lump sum, also known as the cash option, is a little more straightforward. It involves a single, one-time payment that you receive right after you cash in your winning ticket.

There are a few details worth nothing, though. First, the jackpot amount you see advertised on billboards and lottery machines is not the lump sum payout. Those numbers show you what you’d get over 29 years with the annuity option — in reality, the cash option is always less.

Robert Pagliarini, president of Pacifica Wealth Advisors and a financial planner who specializes in sudden wealth events, says that the lump sum normally pays around 60% of the advertised jackpot.

And that’s not including the government’s share. The good news with the cash option is that you only have to pay taxes on your winnings once, but Pagliarini warns that it’s still something winners need to take into account.

For example, in that same situation from before — the one where you’re a Virginia resident who wins a $100 million jackpot — your lump sum payment would be $43,920,000 after taxes.

Mega Millions annuity vs. cash: Which should I choose?

Yes, taking the annuity will eventually amount to more money, but both options have some major advantages. Here are some of the biggest benefits of each.

Mega Millions annuity advantages

Pagliarini says he “preaches” this option to clients for a number of reasons — and not just because it’s a bigger jackpot. Another draw is that the annuity option gives winners room for mistakes, which could be crucial for people who are suddenly coming into a large sum of money.

“What we find is that some people make some fairly bad decisions when they get such a large amount of money,” Pagliarini said. “[The annuity] allows someone to screw up with their money and get a do-over — not just one do-over, but 29 do-overs.”

Pagliarini also said he believes the annuity option makes it easier for winners to deal with taxes, as they’ll lose a small amount every year versus one big tax hit with the lump sum. He said cash option winners may “anchor” — or mentally attach themselves — to the total jackpot amount, setting themselves up for disappointment when they lose millions in taxes at once.

Mega Millions lump sum advantages

The most obvious advantage here is simple: You get all of your money at once. That sort of quick, immediate payout is great in a lot of situations — if you’re older, have some immediate spending needs or just want your money now — but Pagliarini points out another big selling point.

To him, it’s all about investment. Taking the cash option gives you a lot of money to work with, and, if you use it wisely, you could find yourself in an even better financial situation than if you took the annuity. Pagliarini suggests that lump sum winners put a big percentage of their jackpot into stocks or real estate as soon as they receive it.

“In fact, if you were to take that money and invest it in a diversified portfolio,” Pagliarini advised, “you most likely would actually end up with more money than if you had taken the annuity.”

But despite these advantages, Pagliarini almost always tells people to take the annuity. He warns that if you do choose the cash option, you should immediately surround yourself with a large team — of tax lawyers, accounts and financial advisors — to help you manage that massive payday.

“The pressures [of winning a jackpot] are so intense that it’s really easy to make bad decisions,” Pagliarini said. “So it’s really important to have someone helping to make decisions on your behalf.”

Mega Millions FAQ

What happens to an annuity if the winner dies?

If someone who’s chosen the annuity dies, the lottery will continue with annual payments exactly as scheduled, making them out to the winner’s selected beneficiary or beneficiaries.

How do I claim my Mega Millions prize?

Jackpot winners must claim their jackpot in person at their state’s lotto headquarters. The time frame for this process varies by state — you can have between 90 days to one year to claim your jackpot, depending on where you live — and you must redeem your ticket in the state where it was purchased.

Can I remain anonymous if I win Mega Millions?

This one also depends on your location. Only 12 states currently offer anonymity to jackpot winners, and some of those offers come with restrictions. For example West Virginia requires winners to donate 5% to the State Lottery Fund in order to remain anonymous. You can find a list of each state’s Mega Millions anonymity rules here.

Are there Mega Millions scams I need to know about?

Yes. The lottery warns that you should beware of unsolicited messages via phone, email and social media, as well as anyone who asks you to provide bank info or send them money before redeeming your jackpot. Mega Millions offers plenty of tips for avoiding scammers, including making sure any call you receive is actually coming from the lottery and being suspicious of anyone saying you must keep your win confidential. They also warn that you should avoid anyone saying they work for Mega Millions — remember, Mega Millions is a game, not the name of an organization.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Dillon Thompson
Dillon Thompson |

Dillon Thompson is a writer at MagnifyMoney. You can email Dillon here

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Banking

How to Cancel a Lost Money Order

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.

Money orders might sound like an old-school way to make payments, but people still use them every day. And for good reasons: When it comes to sending small amounts — usually less than $1,000 — money orders can be a convenient way to deliver funds.

Money orders are prepaid, meaning you don’t need a bank account to send them and you never have to worry about a check bouncing on your recipient. They’re also great for international payments and times when you don’t want to share your bank information.

But they’re also just a thin piece of paper, which makes them pretty easy to lose. The fact that money orders are paid in advance only makes that threat worse — for any fraudster able to impersonate your recipient, they’re basically free money.

That’s why it’s important to cancel a money order the second you realize it’s been lost. Here’s everything you need to know about the cancellation process.

Step-by-step guide to cancel a lost money order

Cancelling a money order can be simple and straightforward, as long as you remember a few key steps. Here’s an easy guide:

  1. Contact the issuer: Once you realize your money order is missing, you should immediately inform the institution that issued it. Be sure to give them as much info as you can, including the date and location of purchase.
  2. Fill out a request form: This will officially start the cancellation process. Cancellation request forms should be available wherever you got the money order, or online at your issuer’s website. Including a copy of your original receipt is important here, as it holds key info about the payment.
  3. Submit your request: Submit the form to your issuer, along with the cancellation fee. As you’ll see in the table below, these fees vary by institution.
  4. Refund vs. reissue: If your money order was not cashed by someone else, your issuer will give you the option to either get a refund or reissue the payment. Since cancellation can take up to two months, it may be too late to make the payment you needed the order for. In that case, a refund is the best option.

Fees to cancel a lost money order

Cancellation fees vary by issuer, which is something to consider when deciding where to fill out your money order. The list below isn’t comprehensive, but it includes many of the most popular issuers. If you don’t see your preferred bank or institution below, you can contact them directly about fees.

Fees for cancelling a money order

Institution

Fees

Western Union

$15 (with receipt)/$30 (without receipt)

Walmart (MoneyGram)

$18

U.S. Postal Service

$6.15

Wells Fargo

$31

Chase

$0 (Service only available in person)

What happens when a lost money order has been cashed?

Unfortunately, the issuer can’t repay you if someone else cashed your lost money order. Your best bet here is to inform law enforcement — recipients have to present a valid form of ID to cash a money order, meaning anyone cashing your money order illegally may also be committing identity theft.

The issuer should be able to give you info about the identity of the person who cashed your money order, or at the very least when and where the order was cashed. Be sure to follow up with them and get these details to the authorities.

Tips to protect your money order

Dealing with the aftermath of a lost money is a headache — and one that can be avoided. A few precautions go a long way, and these easy tips will make the process a lot safer:

  • Know your recipient: Because the money is guaranteed in advance, money orders are an easy target for scammers. Never send a money order to someone you’re not familiar with.
  • Include your recipient’s name: Never leave the recipient field blank. Be sure you know exactly who you’re sending the money to beforehand, and include that person’s name on the order when it’s issued.
  • Check your status: Most issuers offer online tracking services, so you can see when your money order has been deposited.
  • Be speedy: If you can, send your money order as soon as you get it. That way, you’ll cut down on the amount of time it can be lost or stolen.
  • Consider your alternatives: Are there other payment forms that would be safer? Helpful alternatives include a wire transfer, a personal check or an online payment service. If you’re considering sending money online, here are some of the best services available.

The bottom line

Overall, money orders can be a fast and easy option for making a payment, but only in certain situations.

If you’re without a checking account, sending money international or paying a recipient who won’t accept checks, it’s definitely an option to consider. Still, it’s worth knowing the downsides of relying on a thin sheet of prepaid cash.

Being aware of these risks, and taking steps to prevent them, will make the entire process a lot more convenient.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Dillon Thompson
Dillon Thompson |

Dillon Thompson is a writer at MagnifyMoney. You can email Dillon here

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Banking

Can I Open a Bank Account Online?

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.

Opening a bank account shouldn’t be a chore. Thankfully, internet banks make it pretty easy to open an account online, plus online banks offer some of the most competitive rates available.

Think of a bank account as a deal between you and a financial institution: You deposit money into the account, and the bank keeps the money safe and lets you withdraw it in a variety of convenient ways.

Entering this sort of deal over the internet may seem risky, but if you take precautions and understand what you’re doing it can be a smart way to manage your money. Here’s what you need to know to open an account online.

What you need to open an account online

Online banks ask for varying kinds of information, but there are a few items you’ll almost always need. Here’s what you should have on-hand:

  • Your full address, plus other basic personal and contact information.
  • Your Social Security number or Taxpayer Identification Number, either of which will help verify your identity.
  • Your government-issued I.D., since many banks will ask for another form of identification besides your Social Security number. A passport, driver’s license or birth certificate will usually do.
  • Key financial details, like routing and account numbers for the source of funds you plan on depositing in your new account.

Open an account online: Perks and potential risks

There are plenty of advantages to ditching traditional brick-and-mortar banks to open an account online. Here are some perks:

  • Higher interest rates: Traditional banks typically offer annual interest rates of around 0.01%, meaning every year you’ll make $1 for every $10,000 in your account. Meanwhile, many online checking accounts earn as much as 2.00% each year, while some savings accounts offer up to 2.53% (as of the date of publishing).
  • No overdraft fees: Overdraft fees are the penalty you’re charged when you spend more money than you have available. Thankfully, you can find plenty of online banks that have checking accounts with no overdraft fees. Overdraft fees can be as high as $39 for some of the big banks, many of which can charge you multiple times per day until you replenish your funds.
  • Easy account setup: Convenience is another major benefit here. Online banks let you set up your account quickly and from the comfort of your own home.

That being said, there are also some downsides worth considering before you open an account online:

  • No in-person help: A personal touch can be helpful when managing your money. If you have a problem or question regarding your account, most online banks don’t have any brick-and-mortar locations.
  • Website malfunctions: This may seem like a rare occurrence, but if your bank’s site does happen to go down, you may be unable to access your funds for limited periods.
  • ATM access: Many online banks are part of free ATM networks — such as Allpoint — with locations across the country. However, if you find yourself without one of those nearby, you might face steep withdrawal fees when using another bank’s machine.

Here’s how to stay safe if you open an account online

The best online banks can be just as safe as a traditional account, as long as you take the proper steps to secure your info. Here are some tips to keep in mind when accessing your account:

  • Avoid public Wi-Fi: Public networks can be hotbeds for hackers, so it’s best to do your banking at home — or use your cellular data connection when you’re on the go.
  • Turn on text alerts: Almost every online bank offers text notifications that alert you when your funds run low or if a large purchase is made from your account — make use of them! If you’re hacked, they’ll also help you figure it out a lot quicker.
  • Update your software: You should regularly check that your computer is running the latest antivirus software, and that your mobile banking app is updated.
  • Make sure your money’s insured: It’s worth confirming that your online bank is Federal Deposit Insurance Corporation-insured, meaning the federal government will protect your money if the bank fails (generally up to $250,000). You can do that by checking the FDIC’s search tool.

Great online banks to start with

So what bank should you choose? Each online bank has its own advantages, but some stand out above the rest. Here are a few of the top options from our rankings:

High-yield online savings account

Online Savings Account from Ally Bank

Online Savings Account from Ally Bank

APY

1.90%

Minimum Balance to Earn APY

$0

LEARN MORE Secured

on Ally Bank’s secure website

Member FDIC

High-yield CD

High Yield 12 Month CD from Ally Bank

High Yield 12 Month CD from Ally Bank

APY

2.35%

Minimum Balance to Earn APY

$0

LEARN MORE Secured

on Ally Bank’s secure website

Member FDIC

High-yield money market account

Money Market Account from earn.bank

Money Market Account from earn.bank

APY

2.25%

Minimum Balance to Earn APY

$0

LEARN MORE Secured

on earn.bank’s secure website

Member FDIC

High-yield checking account

Institution
APY
Minimum Account Balance to Earn APY
Aspiration
Aspiration Account from Aspiration

2.00%

$0

LEARN MORE Secured

on Aspiration’s secure website

Online banking can be risky, but not if you do your homework. A little bit of research goes a long way, and ultimately finding the right online account can mean more savings, easier access and — most importantly — a lot less stress.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Dillon Thompson
Dillon Thompson |

Dillon Thompson is a writer at MagnifyMoney. You can email Dillon here