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Survey: Many investors would make questionable decisions after winning the lottery

Insider BuzzInsider Buzz: Survey: Many investors would make questionable decisions after winning the lottery
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The odds of winning the Powerball jackpot are a slim 1 in 292,201,338; the Mega Millions is 1 in 302,575,350. But that doesn't stop people from dreaming about how they'd handle a big-ticket lottery win.

Asked to allocate a multimillion-dollar lottery win, consumers said they would put roughly two-thirds into savings — saving an average 52 percent of the prize for themselves and 16 percent for others, according to a new survey from TD Ameritrade provided exclusively to CNBC.com. Of the remaining funds, those hypothetical winners anticipate spending for themselves (11 percent) and on others (10 percent), and donating to charity (11 percent).

TD Ameritrade polled 1,005 American adult investors in early October.

As of Tuesday morning, the Mega Millions jackpot was $223 million and the Powerball was $269 million. Both games had their most recent jackpot wins in late October. (Although large, neither is a record amount: For either to land in the top 10 of U.S. jackpots, they would have to surpass the $448.4 million Powerball shared by two winners in August 2013.)

The next Mega Millions drawing is at 11 p.m. ET on Tuesday, and the next Powerball drawing is at 10:59 p.m. ET on Wednesday.

Making the most of a jackpot

Consumers saying they plan to save the bulk of a big lottery win was a welcome surprise, especially amid public stories of lottery winners who financially struggle or file for bankruptcy protection, said David Lynch, a managing director and head of branches at TD Ameritrade. He also cheered consumers' "pay it forward" intent of donating to charity and helping boost savings for friends and family.

"You hope that's actually how they do behave" if they win, Lynch said.

But other elements of would-be winners' ticket-claiming plans could prove problematic for achieving those financial goals.

Roughly 4 in 10 told TD Ameritrade they would claim the winning ticket immediately versus waiting to come forward, while 1 in 5 said they would claim the ticket "with no outside help" from a lawyer, accountant or financial advisor. Almost half would quit their job immediately. (See chart below.)

Those actions run afoul of advice experts typically give jackpot winners.

"Just slow down," Lynch said. "Don't make any quick decisions. Don't rush into anything."

Claiming the prize without or before consulting a team of experts could be an especially expensive mistake.

"Just going on your own and doing [the claim], it puts you a step behind," said Jason Kurland, a partner with Certilman Balin Adler & Hyman in East Meadow, New York, who is known as the Lottery Lawyer.

"This is such a lucky opportunity," he said. "Winners only get one chance to do it right."

For example, 90.7 percent of consumers told TD Ameritrade they would remain anonymous in claiming their prize. But the feasibility of that varies widely by state, Kurland said — and staying anonymous may require a lawyer's assistance in setting up a trust, LLC, or other entity ahead of claiming, or to negotiate with the state lottery commission.

Advice from a financial advisor and accountant can be key in helping you figure out whether to take the lump sum or the annuity, if it makes sense to quit your job and how much you'll have left after taxes for saving and spending. (That last line item is notably absent from how winners in TD Ameritrade's assessment plan to divvy up their prize.)

Your net take-home is an especially important number, said Cicily Maton, a partner and senior financial planner at The Planning Center in Chicago. Individuals who come into a sudden windfall (whether a signing bonus, inheritance or lottery win) tend to anchor on the initial number before taxes and other expenses, an inflation that can lead to overspending.

"The number that stays in their mind is, 'I'm a millionaire with $30 million,' not the day-to-day total," said Maton, who is also a certified financial planner.

Ideally, before you make any big purchases or pledge gifts to others, you'd sit down and make a "bliss list" of all your immediate wants, long-term aims and other dreams for the money, Maton said. Then you can start prioritizing and putting numbers to those competing goals, adjusting them as needed.

"We have a saying: 'You can do anything you want, but not everything,'" she said.

News story photo(Click to display full-size in gallery)

News story photo(Click to display full-size in gallery)

News story photo(Click to display full-size in gallery)

CNBC, Lottery Post Staff

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31 comments. Last comment 7 months ago by music*.
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Raven62's avatar - binary
New Jersey
United States
Member #17843
June 28, 2005
84761 Posts
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Posted: December 19, 2017, 12:48 pm - IP Logged

Survey seems to Contradict what Jackpot Winners actually do!

Nearly 70% of all Jackpot Winners end up broke within seven years.

A mind once stretched by a new idea never returns to its original dimensions!

Catch-22: A dilemma or difficult circumstance from which there is no escape because of mutually conflicting or dependent conditions.

    noise-gate's avatar - images q=tbn:ANd9GcR91HDs4UJhjxO7cmeMQWZ5lB_FOcMLOGicau4V74R45tDgPWrr
    Chasing the Dream.
    White Shores- California
    United States
    Member #136477
    December 12, 2012
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    Posted: December 19, 2017, 2:39 pm - IP Logged

    Survey seems to Contradict what Jackpot Winners actually do!

    Nearly 70% of all Jackpot Winners end up broke within seven years.

    I Agree!.. The " sudden wealth syndrome " kicks in the minute the thought of millions of dollars starts to marinate mentally. Some winners don't want to be told anything, sound advice is completely ignored. One has to have a brain that actually functions, before thinking about savings & the future. ....

    ...and yes, " The last Jedi" sucks more than a dyson.

     * Voice of Reason *   

     

    People who say it cannot be done should not interrupt those who are doing it- George Bernard Shaw.

      Avatar
      Jacksonville
      United States
      Member #153806
      March 26, 2014
      597 Posts
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      Posted: December 19, 2017, 8:03 pm - IP Logged

      In truth, we are making questionable decisions by playing the lottery at all.

      The reason so many go broke after winning is because they had poor money management skills before winning and after winning their skills did not improve.

        sully16's avatar - sharan
        Ringleader
        Michigan
        United States
        Member #81740
        October 28, 2009
        59070 Posts
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        Posted: December 19, 2017, 10:08 pm - IP Logged

        I've been saving my whole adult life, I would spend like a crazy lady.  Hyper

        Cheers

          music*'s avatar - box
          The Big Valley in California
          United States
          Member #157856
          August 2, 2014
          2493 Posts
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          Posted: December 19, 2017, 10:35 pm - IP Logged

          I've been saving my whole adult life, I would spend like a crazy lady.  Hyper

           sully16, You remind me of the British woman who said, "I will spend, spend, and spend". She shopped till she dropped.  She did not win the lottery but did win in a sports betting game back in the early 1960's.

           Here in California, we have to wait six weeks before we get the check.  That will be plenty of time to hire financial advisers, accountants, attorneys, and lawyers. We can wait for a full year to claim the jackpot.

           Will you claim before the New Year or after January first, 2018?

          Party

            Muddy water is best cleared by leaving it alone.  Alan Watts and Zen Buddhism

            music*'s avatar - box
            The Big Valley in California
            United States
            Member #157856
            August 2, 2014
            2493 Posts
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            Posted: December 19, 2017, 11:23 pm - IP Logged

              There are no loans for retirement. I hope that the generation who will not see Social Security benefits will prepare themselves for retirement. 

             After I die will be the time for the charities of my choice to receive benefits. I will include them in my will. But my family will come first.

              Muddy water is best cleared by leaving it alone.  Alan Watts and Zen Buddhism

              lejardin's avatar - Lottery-014.jpg

              United States
              Member #118609
              November 4, 2011
              1325 Posts
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              Posted: December 19, 2017, 11:32 pm - IP Logged

              On the "What Consumers Say they Would Do" list, I would do four out of the five right off.   Leave saving and investing for last.   In that I would be Sully2.    A home, a car, travel to find my location and depending how much the win is, helping sons and brothers would also be on my "Bliss List".

              Such fun winning would be even with the horrible odds.  No annuity at my age.  And taxes suck regardless. 

                weshar75's avatar - Lottery-042.jpg
                Mcminnville, Oregon
                United States
                Member #3013
                December 13, 2003
                3860 Posts
                Offline
                Posted: December 19, 2017, 11:33 pm - IP Logged

                Good luck to you on powerball tomorrow music I hope you win a cool million even in California.-weshar75

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                  Avatar
                  NY
                  United States
                  Member #147453
                  October 2, 2013
                  701 Posts
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                  Posted: December 19, 2017, 11:46 pm - IP Logged

                  with a large jackpot (more than 10 mil) i'd have to shift some into owning physical gold. 2008 happens all over again and they say "oopsie" and im sure that the national debt will never be decreasing.

                    Avatar
                    NY
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                    Member #23835
                    October 16, 2005
                    3814 Posts
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                    Posted: December 20, 2017, 2:05 am - IP Logged

                    Survey seems to Contradict what Jackpot Winners actually do!

                    Nearly 70% of all Jackpot Winners end up broke within seven years.

                    The survey tells us what people think they would do. History tells us what winners really do.

                    As for the 70% figure, I'd like to know what happens to the people who have won MM or PB in the last 5 years or so. There are still plenty of people who clear a million or two, or even $5 million if they win state games, but the majority of PB and MM winners end up with a really big chunk of change. I know that some people have managed to squander $100 million or more, but you can spend pretty recklessly and still have trouble wasting that much money.

                      sully16's avatar - sharan
                      Ringleader
                      Michigan
                      United States
                      Member #81740
                      October 28, 2009
                      59070 Posts
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                      Posted: December 20, 2017, 5:45 am - IP Logged

                       sully16, You remind me of the British woman who said, "I will spend, spend, and spend". She shopped till she dropped.  She did not win the lottery but did win in a sports betting game back in the early 1960's.

                       Here in California, we have to wait six weeks before we get the check.  That will be plenty of time to hire financial advisers, accountants, attorneys, and lawyers. We can wait for a full year to claim the jackpot.

                       Will you claim before the New Year or after January first, 2018?

                      Party

                      I'd claim it as fast as I could, I need a housekeeper, Chef, personal shopper, asap. LOL

                      Cheers

                        sully16's avatar - sharan
                        Ringleader
                        Michigan
                        United States
                        Member #81740
                        October 28, 2009
                        59070 Posts
                        Offline
                        Posted: December 20, 2017, 5:47 am - IP Logged

                        On the "What Consumers Say they Would Do" list, I would do four out of the five right off.   Leave saving and investing for last.   In that I would be Sully2.    A home, a car, travel to find my location and depending how much the win is, helping sons and brothers would also be on my "Bliss List".

                        Such fun winning would be even with the horrible odds.  No annuity at my age.  And taxes suck regardless. 

                        My son starts College next year, winning the lottery would be much better then selling a kidney.

                        Cheers

                          rcbbuckeye's avatar - Lottery-062.jpg
                          Texas
                          United States
                          Member #55889
                          October 23, 2007
                          7553 Posts
                          Offline
                          Posted: December 20, 2017, 10:36 am - IP Logged

                          My son starts College next year, winning the lottery would be much better then selling a kidney.

                          Sully....

                          if you're doing student/parent loans, have fun with the FAFSA. It's worse than doing tax returns.

                          CAN'T WIN IF YOU'RE NOT IN

                          A DOLLAR AND A DREAM (OR $2)

                            Avatar
                            Simpsonville
                            United States
                            Member #163189
                            January 22, 2015
                            1320 Posts
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                            Posted: December 20, 2017, 10:53 am - IP Logged

                            I'd claim it as fast as I could, I need a housekeeper, Chef, personal shopper, asap. LOL

                            Sounds like a good idea to me.

                             

                            Let me win the big one and I'll post the results of my own survey.

                             

                            Sully 16 still have about a month left on Michigan's Powerball and Mega Millions.  Your is the only state of all that I played that doesn't have a beginning and end date for the multi draws.  I did six months in July...suggest they change it...LOL.