Tips for Lottery Winners (and Everyone Else)

By: Keith Wagstaff · April 10, 2024 · Reading Time: 3 minutes

Instant Fortune

A very lucky Powerball player won $1.326 billion last Saturday, the fourth largest jackpot in Powerball history. Who owns the winning ticket, purchased in Oregon, is still a mystery.

But becoming an overnight billionaire, or millionaire after taxes, isn’t always a dream come true. History is littered with lottery winners who squandered their wealth, either by living too large or making ill-advised investment choices.

What Happens When You Win the Lottery?

Buying lottery tickets might not be the best long-term investment strategy. The odds for winning Powerball are 1 in 292 million. Even so, many economists agree that given the low upfront cost of a lottery ticket, it is worth the fun even if the chance to win is slim.

If you do win, you can choose to stay anonymous in 18 states, which is great for keeping grifters at bay. Other states announce all winners to promote transparency.

One of the most important decisions for lottery winners is whether to accept their money in one lump sum, or receive an initial amount plus 29 annual payments. The choice may be determined by immediate financial needs, investing acumen, and state tax rules.

The federal government regards lottery winnings as taxable income. Most states do as well, including Oregon, which will take 8% of the recent winner’s prize. California doesn’t, which was great news for the person who took home Powerball’s largest jackpot in 2022: $2.04 billion.

Making the Most of a Windfall

Whether you win the lottery, inherit money, or get a huge bonus, there are smart things you can do with an unexpected cash windfall. First, don’t rush any decisions and think about what will benefit you long-term.

Next, you might think about finding a financial advisor to help you make a long-term plan, invest your money, navigate taxes, and create a budget. While a solid budget fit for your needs is always a good idea, it’s especially important if you land a large sum, even if it’s smaller than $1.326 billion.

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