Four Financial Pros Advise What to Do With Your Powerball Winnings
An estimated 70% of lottery winners go broke. Don’t be one of them. An independent financial adviser can help keep you on track with any financial windfall.
It’s not every day that somebody wins $100 million or more overnight. It may not happen in the growing Powerball jackpot, with an estimated jackpot of $700 million for the next drawing, Wednesday, Aug. 23. But each time there is no winner, the pot gets bigger and bigger. Eventually, somebody will win -- big.
Kiplinger asked four financial advisers -- all contributors to our Wealth Creation Channel -- for advice on how to handle a massive financial windfall. Have a look:
Taylor Schulte, CFPFounder and CEO, Define Financial
Take your dream vacation. You just won one of the largest prizes in lottery history! The odds were 1 in 292 million. You were more likely to get bitten by a shark or to be killed by an asteroid. Before you get back to reality and start planning for the future, treat yourself and your loved ones to a trip of a lifetime. The experience and memories will far outweigh any material items you thought you needed.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Schedule a financial roundtable with your family and trusted advisers. An estimated 70% of lottery winners go broke. If you don’t want to be one them, I would suggest creating a plan and hiring an elite group of professionals to help keep you on track ASAP.
Read more advice from Taylor Schulte »
Scott Hanson, CFPFinancial Advisor and Co-Founder, Hanson McClain Advisors
First, make no major investment decisions for six months. Park the cash in Treasury bills or a money market account, and allow some time to pass before the money is invested. There are simply too many emotions running through one's head to make well-informed decisions.
Second, allocate your winnings into several different baskets. For example, one basket might be for all of the friends and relatives coming to you to "invest" in their various business projects. Another basket might be to fund a charitable trust or foundation.
Third, don't hire a friend as your financial adviser. Rather, find the three best advisers in your region, and interview all three. Pick the one that you can connect well with best, and the one who can help you sort out what this money might mean to you; don't just pick the adviser who promises the highest returns.
Read more advice from Scott Hanson »
Pete Woodring, RIAFounding Partner, Cypress Partners
If you want to gain the most utility from your wishful gambling ticket(s), buy it (them) sooner rather than later. The odds of winning are 1 in 292 million, so the most satisfaction you’ll likely get from the exercise is dreaming about what you would do with such a massive financial windfall. You might as well give yourself the maximum amount of time to dream, so buy early.
Fortunate lottery winners aren't always so fortunate. Massive financial windfalls often tear families apart and/or leave winners in massive debt. You might wonder how someone worth so much could accumulate debt, but it's fairly common when someone chooses the annuity payout option (steady stream of income for a certain number of years). Euphoric winners often end up spending more than their annual payout check and accumulate insurmountable amounts of debt.
The other option is to take a lump-sum payout, but this has its own set of challenges. They include the ability to manage such a large amount of wealth and to avoid some of the common pitfalls: wild spending, investment scams, overextending on real estate and giving to friends and family to name a few. Whether or not the lump-sum option is better than the annuity option will depend on the projected return someone could realistically achieve.
Money can do strange things to people and if winners don't value and respect it along with a long-term plan to manage it, the endgame can be devastating. Whether $1 million or $1.4 billion, the winning formula will be a prudent investment and financial plan lead by a team of trusted advisers.
Read more advice from Pete Woodring »
Marguerita M. Cheng, CFP®CEO, Blue Ocean Global Wealth
Read this brochure from the Credit Union National Assn., to which I contributed some financial advice. It deals with issues of receiving a sudden windfall of money.
Get Kiplinger Today newsletter — free
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.
-
Stock Market Today: Dow Climbs 288 Points After Amazon, Intel Earnings
Post-earnings strength from Amazon and Intel helped cushion the blow of a disappointing October jobs report.
By David Dittman Published
-
Nvidia Stock Is Joining the Dow. Is It Time to Buy?
Nvidia will replace Intel in the Dow Jones Industrial Average this Friday. What does it mean for the stock?
By Dan Burrows Published
-
Best Banks for High-Net-Worth Clients 2024
wealth management These banks welcome customers who keep high balances in deposit and investment accounts, showering them with fee breaks and access to financial-planning services.
By Lisa Gerstner Last updated
-
Stock Market Holidays in 2024: NYSE, NASDAQ and Wall Street Holidays
Markets When are the stock market holidays? Here, we look at which days the NYSE, Nasdaq and bond markets are off in 2024.
By Kyle Woodley Last updated
-
Stock Market Trading Hours: What Time Is the Stock Market Open Today?
Markets When does the market open? While the stock market does have regular hours, trading doesn't necessarily stop when the major exchanges close.
By Michael DeSenne Last updated
-
Bogleheads Stay the Course
Bears and market volatility don’t scare these die-hard Vanguard investors.
By Kim Clark Published
-
The Current I-Bond Rate Until May Is Mildly Attractive. Here's Why.
Investing for Income The current I-bond rate is active until November 2024 and presents an attractive value, if not as attractive as in the recent past.
By David Muhlbaum Last updated
-
What Are I-Bonds? Inflation Made Them Popular. What Now?
savings bonds Inflation has made Series I savings bonds, known as I-bonds, enormously popular with risk-averse investors. So how do they work?
By Lisa Gerstner Last updated
-
This New Sustainable ETF’s Pitch? Give Back Profits.
investing Newday’s ETF partners with UNICEF and other groups.
By Ellen Kennedy Published
-
As the Market Falls, New Retirees Need a Plan
retirement If you’re in the early stages of your retirement, you’re likely in a rough spot watching your portfolio shrink. We have some strategies to make the best of things.
By David Rodeck Published