What begins as a fountain of fortune can quickly become a puddle of pennies.
Lottery winners, like the Plymouth Sargento Cheese plant workers who claim to have won the $208.6 million Powerball prize, must be careful to avoid losing their luck, say local financial advisers.
Winners first should find a good attorney and financial consultant, said Larry Goebel, owner and president of the Goebel Planning Group. Advisers and attorneys can help people determine whether to take the money in increments or in a lump sum.
"Everybody's situation is going to be different," he said.
Lottery winners also need to know their interests and needs, said Mark D. Rasner, certified financial planner and chartered financial consultant for Ameriprise Financial Services, Inc.
Financial consultants will assist clients with their "soul searching," he said.
"An advisor can help them understand where they are at and where they want to go," he said. "If you don't stand for something, you'll fall for anything."
Know thyself
People with lottery winnings face several issues, Rasner explained. People must know if and why they want to accumulate wealth. Retirement, future traveling or a college education prompts many individuals to build their savings. Winners also must ask what they want to do to protect their nest eggs and whether or not they want to leave a legacy, added Rasner. "If something happens to them, where do they want the money to go?" he said.
Lottery prizes are much like lionfish - beautiful, but dangerous if mishandled. One of the worst things new winners can do is splurge without planning, said Steve Dilling, financial consultant for A.G. Edwards & Sons, Inc.
No early retirement
Many lucky people think they can immediately retire, buy fancy houses and drive luxury vehicles. They usually can't, Dilling said.
Some older winners might have enough to retire, but young people may want to keep working or add more straw to the nest.
"It's a wonderful group (Sargento employees) of people," Dilling said. "I'm glad to see them win the money. You would hate to see them do something that was not smart."
Working has other rewards, too, said Goebel. People may continue working to keep their benefits. Health plans alone can cost $5,000 to $10,000 per year for single coverage, with family plans and plans for those with pre-existing medical conditions even higher.
"All of your million dollars needs to work for you," he said. "It sounds like a lot of money, but your ability to work it is worth millions."
Investing sense
There are multiple ways to crack the whip. Lottery winners who want to protect their finances might consider insured money markets and reputable mutual fund groups, Goebel said. Workers may look at maximizing IRAs and 401(k) plans if they remain employed.
"It's not easy," he added. "There are a lot of things that go into it."
Rasner, who has talked to previous lottery winners, said people might consider investing in different ways.
First and foremost, winners must know themselves, he said. They should work with their consultant to determine how much risk to take, what would be an appropriate investment allocation of their portfolio and what specific investments could work.
Planning also involves developing a system to monitor and review portfolios, he added.
"Don't put all your eggs in one basket," Rasner said. "Diversify your investment portfolio."
Great article. Goebel's approach sounds like one that actually wants to help protect and carefully build on what they've got. He doesn't seem to be pushing people's portfolios directly towards large percentages of risky investments with promises of high yields. Insured money market sounds nice to me. Mutual funds...maybe, maybe not.
People who lose what they won may do so because of being either greedy or trusting the wrong people (that can be a LOT of people!) My advice is to immediately come off like Scrooge and remember that if people are really your friends they would accept whatever you gave to help them even if you gave them nothing. Always quote: "Where were you when I was poor?"
I would be happy if the money I won would be enough to live on comfortably just the interest at around 5%. $1000/wk for life (pre-tax) would be perfect for me.
Many lucky people think they can immediately retire, buy fancy houses and drive luxury vehicles. They usually can't, Dilling said.
Some older winners might have enough to retire, but young people may want to keep working or add more straw to the nest.
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Okay, I've always wondered about this. Assuming a winner is an everyday working slob, and assuming they've won enough to let them be very comfortable, if that's the case, isn't there almost a moral obligation to quit a job to make room for someone who really needs it?
Back in the early 1980's a guy won $43,000,000 in the Illinois lottery. He was making $650 a week as a printer (pretty good money for then) and said he was going to keep working.
That lasted less than a month. He was an avid bowler and I think he bought a bowling alley.
This is what I am getting my degree in....financial planning....so if anyone from Lottery Post wins a jackpot...you know where to come....haha
Brad
Great article. Goebel's approach sounds like one that actually wants to help protect and carefully build on what they've got. He doesn't seem to be pushing people's portfolios directly towards large percentages of risky investments with promises of high yields. Insured money market sounds nice to me. Mutual funds...maybe, maybe not.
Yep, this is a good article. Some nice tips.
People who lose what they won may do so because of being either greedy or trusting the wrong people (that can be a LOT of people!) My advice is to immediately come off like Scrooge and remember that if people are really your friends they would accept whatever you gave to help them even if you gave them nothing. Always quote: "Where were you when I was poor?"
I would be happy if the money I won would be enough to live on comfortably just the interest at around 5%. $1000/wk for life (pre-tax) would be perfect for me.
From the OP:
No early retirement
Many lucky people think they can immediately retire, buy fancy houses and drive luxury vehicles. They usually can't, Dilling said.
Some older winners might have enough to retire, but young people may want to keep working or add more straw to the nest.
////////////////
Okay, I've always wondered about this. Assuming a winner is an everyday working slob, and assuming they've won enough to let them be very comfortable, if that's the case, isn't there almost a moral obligation to quit a job to make room for someone who really needs it?
Back in the early 1980's a guy won $43,000,000 in the Illinois lottery. He was making $650 a week as a printer (pretty good money for then) and said he was going to keep working.
That lasted less than a month. He was an avid bowler and I think he bought a bowling alley.
some of the things i'd do with 200 million.
first i would have a lot of land and build a huge house.
second i would build a gym and movie theater on the property side by side.i could shoot some hoops and then go watch goodfellas.
third i would build a mcdonalds right there on the property and it would be staffed 24/7 in case i get the munchies.
four there would be a convenience store built there too in case i need a soda or a snack.