One lucky person picked the winning $1.73 billion Powerball number in California. It is a life-changing amount of money for the lucky winner or winners \u2014 but not necessarily in a good way.\u00a0<\/p>\n
Robert Pagliarini, author of \u201cThe Sudden Wealth Solution,\u201d has been guiding lottery winners for decades. And he has seen plenty of people run through their winnings faster than you can say \u201cjackpot!\u201d Or, friends and family (and certainly office lottery pool players) can see their winnings tied up in legal battles for years, as the parties argue over who gets how much. About 70% of lottery winners lose or spend all the money in five years or less, after all.\u00a0<\/p>\n
\u201cMoney \u2014 especially when you\u2019re talking about this level of money \u2014 absolutely upends people\u2019s lives,\u201d Pagliarini, the president of Pacifica Wealth Advisors, told MarketWatch. \u201cYou should be excited, but you should also be prepared, for sure.\u201d\u00a0<\/p>\n
These are his five tips for what to do if you win the lottery or get another windfall.<\/p>\n
Sign your name on the winning ticket, take a picture of yourself holding the winning ticket \u2014 in fact, take a video of yourself holding the signed, winning ticket, for good measure.\u00a0<\/p>\n
\u201cThe first step is really all about securing the ticket \u2026 because whoever has it is the owner,\u201d says Pagliarini. \u201cThere\u2019s no record of you having purchased that ticket with those<\/em> numbers. So having that ticket is everything.\u201d\u00a0<\/p>\n Related: <\/strong>Hoping to win Mega Millions? This woman hit a $112 million Mega Millions jackpot.<\/p>\n You have to document that this ticket is yours, which is why Pagliarini says legal experts recommend signing it. \u201cI would absolutely sign it myself,\u201d he adds.\u00a0<\/p>\n And then put that ticket in a safe place, like a home safe or lockbox. <\/p>\n You may want to sing the good news from the rooftops that your financial troubles are over. Problem is, everyone else\u2019s troubles aren\u2019t \u2014 and Pagliarini warns that, for your own personal safety and peace of mind, it\u2019s better not<\/em> to let the world know you\u2019ve just become a billionaire overnight \u2014 if you can help it. Unfortunately, most states make you disclose that you\u2019ve won.<\/p>\n \u201cWe\u2019re used to seeing people with the big check on TV, which looks pretty cool \u2014 but now everybody in the entire world knows that you\u2019re worth $1 billion. And that\u2019s not really the kind of publicity that you want,\u201d says Pagliarini. \u201cYou\u2019re going to be hit up for lots of money requests as people come out of the woodwork. And that adds such a huge amount of stress when you\u2019re in a situation that is already stressful.\u201d\u00a0<\/p>\n You generally have 180 days to collect the winnings, and you\u2019re going to have to make some big, life-changing decisions during that time. Staying anonymous, if you can, will give you the space to make those decisions with a clear head.\u00a0<\/p>\n Unfortunately, as noted, most states compel lottery winners to come forward publicly. If you have to reveal yourself and do press interviews, protect your personal information. Some past Powerball winners didn\u2019t answer questions about any meaningful or personal significance associated with the winning numbers that they played, for example, or they refused to share details about their children. One couple simply moved out of their house and refused to speak with the media at all while they settled their affairs.<\/p>\n \u201cMy rule is basically, you tell one family member, and then you immediately try to get professional help,\u201d Pagliarini adds. Which leads us to\u2026.\u00a0<\/p>\n Bring in the professional help as soon as you can. An attorney can help you decide the best time to claim your lottery prize, and offer more advice on keeping your ticket safe. They can also help navigate your rights and protect your best interests with regards to how much you need to present yourself publicly. And they can also help you manage your safety.\u00a0<\/p>\n Meanwhile, a financial adviser can assess your financial situation and help you decide whether it makes sense to take a lump sum of cash, or to collect your winnings over annual payments. A financial adviser can also help you manage your money so that you can check things off your bucket list without overspending.<\/p>\n \u201cYou know you\u2019ve won, and then typically you have about 180 days to collect the winnings,\u201d says Pagliarini. \u201cSo you\u2019ve got to do some serious planning.\u201d You need all the help you can get.\u00a0\u00a0<\/p>\n Pagliarini considers staying anonymous as the first big decision a lottery winner makes. The second most important question, however, is how they collect their winnings. Do you want to take a lump sum, or do you want to take the annuity (aka, a payout over time)?<\/p>\n \u201cThis is really the biggest financial decision you\u2019ll ever make in your entire life,\u201d he says. (Granted, it\u2019s one that most of us will never have to make, since the odds of winning the lottery, let alone a jackpot of this size, are infinitesimal.)\u00a0\u00a0<\/p>\n He notes that most people take the lump-sum payment, and in some circumstances this can be a better decision. But keep in mind that if you win a $1 billion Powerball jackpot, for example, you are not getting $1 billion. <\/p>\n \u201cThey send you about 60-ish percent of whatever the lump sum is,\u201d Pagliarini notes. So for a $1 billion prize, for example, \u201cyou would get around $600 million instead of $1 billion,\u201d he said. And after state taxes, depending on where you live, and federal taxes, that jackpot may be closer to $300 million in the end. Whereas, the annuity is given as 30 payments over 29 years, which will come closer to hitting the advertised $1 billion jackpot than lump-sum takers would get. So being patient can pay off in the long run, especially with a bigger prize like this.<\/p>\n As far as taxes are concerned, Pagliarini still leans toward annuity \u2014 especially for a smaller jackpot, like if it was $1 million. That\u2019s because you would get a lump-sum payment of about $600,000, which would put you in the highest federal and state income tax bracket (for single filers anyway) that year \u2014 versus taking an extra $30,000 a year for 30 years. \u201cThat annuity payment is probably not going to catapult you into the highest tax bracket,\u201d he says. But for a $1 billion-plus jackpot like this, you\u2019re going to be in the highest tax bracket whichever payout you choose, he says.<\/p>\n But there\u2019s another reason to consider going the annuity route, Pagliarini says \u2014 it can save you from yourself.\u00a0<\/p>\n \u201cThe biggest advantage of the lump-sum payout is that you get most of the money up front, and then you can do whatever you want with it,\u201d he says, such as pay off debt, invest it, buy a house, etc. \u201cBut that actually happens to be the biggest disadvantage of the lump sum,\u201d he continues. And that\u2019s because, if you overspend your winnings and run out of cash with your lump sum, then you are out of luck. But the annuity payments are almost like a do-over each year, he says, because you can learn from your mistakes and spend the next annual windfall more wisely. \u201cI\u2019ve advised most people honestly to take the annuity,\u201d he says. \u201cIt just allows you to really make mistakes, but have them not be a total derailment.\u201d\u00a0<\/p>\n If you still can\u2019t make up your mind, he also has a free online quiz to help you decide whether you should take a lump sum or an annuity payment.\u00a0<\/p>\n So you\u2019ve secured your ticket, tried to keep it quiet, hired some professional help, and decided how you are going to collect your winnings. Then what do you do with all of this cash?\u00a0<\/p>\n Every financial situation is different, of course, which is where a financial adviser can help you sort out the nuances to make this lottery win a real dream come true for you. But in general, Pagliarini recommends keeping things simple \u2014 even considering that this $1 billion jackpot (even whittled down after taxes) would allow you to do basically whatever you wanted to do.\u00a0<\/p>\n \u201cIf I were meeting with you, we would sit down and make some serious decisions, and prioritize what you want to do,\u201d he says, \u201csuch as paying off debt, and discussing what is on your wish list. Do you want to buy a new house or a second house, or buy your family houses?\u201d He suggests pricing out your wish list together with your adviser to see whether you could afford to do everything you want. <\/p>\n But you still want money left over to live on. \u201cWe want to make sure the money left over is generating enough income so that they could survive on that for as long as they wanted \u2014 and particularly in this case, I\u2019m sure generations would be able to survive on this amount of money,\u201d he says. \u201cI would invest in index funds. I wouldn\u2019t get esoteric with limited partnerships and venture capital. Just go for a diversified portfolio, because as soon as you start deviating from \u2018simple\u2019 you can really increase your chances of just losing it all.\u201d\u00a0<\/p>\n He notes that because lottery winnings don\u2019t feel \u201cearned,\u201d the prize may not feel like \u201creal\u201d money \u2014 which is one of the reasons so many lottery winners don\u2019t manage their newfound wealth well. Again, about 70% of lottery winners lose or spend all that money in five years or less. \u201cIf the money doesn\u2019t feel earned or real, you\u2019re going to make decisions with that money that are probably not going to be in your best interest,\u201d he adds. \u201cYou\u2019re giving it away more freely, spending more freely, or freely investing in things a lot riskier than you would have done if you had to sweat and earn that money.\u201d\u00a0<\/p>\n So keep it simple. \u201cDon\u2019t think just because you have x-millions of dollars now that you really have to get \u2018sophisticated,\u2019\u201d he adds.<\/p>\n This is more of an extra, hindsight tip for before<\/em> you and your co-workers start throwing in a buck apiece for a long-shot bid at a jackpot like this. Pagliarini warns that office pools can get \u201ctricky,\u201d so it\u2019s good to sign a contract setting some ground rules before you all pool together.\u00a0<\/p>\n \u201cThere\u2019s been a lot of litigation around office pools, because maybe somebody forgets to play one week, and that\u2019s the week everyone wins. Or someone thought they played this week, but on this particular week they didn\u2019t,\u201d he says. \u201cSo loosey-goosey situations can end up in court to battle it out.\u201d<\/p>\n A much simpler solution to avoid this is to have an office pool contract that spells out who is in this pool, how much they are contributing, and it also determines in advance whether the group will take the lump-sum payment or the annuity payment.\u00a0<\/p>\n \u201cBecause the last thing that you want is to win $1 billion or $100 million dollars, and then to be tied up in court for four years,\u201d says Pagliarini. \u201cThat\u2019s no fun.\u201d<\/p>\n<\/p><\/div>\nDon\u2019t tell anyone yet!<\/strong><\/h2>\n
Get a lawyer and a financial adviser<\/strong><\/h2>\n
Do you take the lump-sum payment or the annuity payment?<\/strong><\/h2>\n
Keep it simple when deciding where to put your new money.<\/strong><\/h2>\n
And some bonus advice for office pools<\/strong><\/h2>\n