The first rule of winning the lottery is: You don’t tell anybody that you won the lottery!
With the final Powerball jackpot of the year reaching an estimated $760 million, which is being drawn on Saturday night, it’s tempting to daydream about immediately putting in your two weeks’ notice at work, or telling everyone on social media that you’re now a multimillionaire if you happened to pick up the winning ticket.
Not so fast!
This is a life-changing amount of money, and not necessarily in a good way. About 70% of lottery winners lose or spend all the money in five years or less, after all.
MarketWatch spoke with sudden-wealth advisor Robert Pagliarini, author of “The Sudden Wealth Solution,” about what to do if you win the lottery. These are four of his go-to tips.
Take a picture of yourself holding the ticket
Document that this winning ticket is yours ASAP. Pagliarini recommends signing it, as well as photographing yourself holding the signed, winning ticket for good measure. And then keep that ticket in a safe place, like a home safe. “Whoever has [the ticket] is the owner,” he said. “There’s no record of you having purchased that ticket with those numbers. So having that ticket is everything.”
Keep your sudden-wealth status a secret
You generally have 180 days to collect the winnings, and you’re going to have to make some big, life-changing decisions during that time. Staying anonymous, if you can, will give you the space to make those decisions with a clear head, he said.
“We’re used to seeing people with the big check on TV, which looks pretty cool,” said Pagliarini. But he notes that letting everyone in the world known that you’re suddenly rich is probably not the publicity that you want until you’ve got your affairs in order. “You’re going to be hit up for lots of money requests as people come out of the woodwork,” he said. “And that adds such a huge amount of stress when you’re in a situation that is already stressful.”
Many states do make lottery winners come forward and share their good fortune, however. So if you have to reveal yourself and do press interviews in order to collect your winnings, then protect your personal information by refusing to answer questions about any meaningful or personal significance associated with the winning numbers that you played. Or keep details about your children private, for example.
Get professional help from a lawyer and a financial adviser
Who should you tell about your sudden windfall? An attorney, who can help you protect your rights and your best interests with regards to how you need to present yourself publicly. They can also help you decide the best time to claim your prize, as well as help manage your safety.
Pagliarini also recommends working with a financial adviser to assess your new financial situation, and determine whether you have enough winnings now to do everything you want with all of this cash — whether that’s paying off debt, traveling, buying a new house or giving everyone in your family a new car. Perhaps you want to set up a retirement nest egg for yourself, or a trust for your children.
Plus, they can help you make the most important financial decision upfront: whether to take the lump-sum payment or the annuity.
Decide whether you’re taking the lump-sum or the annuity
So, how do you want to collect your winnings?
The lump-sum payment sees you pocketing about 60% or so of what the jackpot actually is— and that’s before state and federal taxes, depending on where you live, also take their bite out of the grand prize. Pagliarini notes that for a $1 billion prize — to use a round number as an example — you would get around $600 million instead of $1 billion if you take the lump sump. And that jackpot may end up being closer to $300 million after taxes.
The annuity payment, or payment over time, is doled out as 30 payments over 29 years, and will come closer to the advertised jackpot than the lump-sum takers would get. So being patient can pay off in the long run, especially with a bigger prize like this.
Which one is best? It depends on your personal situation. But Pagliarini leans toward the annuity, especially since it can save you from yourself.
Let’s say you overspend your winnings and run out of cash with your lump-sum payment. That money is gone for good. Again, 70% of lottery winners lose or spend all the money in five years or less. But the annuity payments are almost like a do-over each year, Pagliarini said, because you can learn from your mistakes and spend next year’s payment more wisely. “I’ve advised most people honestly to take the annuity,” he said. “It just allows you to really make mistakes, but have them not be a total derailment.”
And from there, work with your financial adviser to decide on the best way to spend, save or invest your winnings. Good luck!
