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."
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."
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."