What to Do if You Win the Lottery - And What the Rest of Us
Should Do When We Don't

Sure, it’s not the largest lottery pot in history, but the Powerball jackpot has grown to an astounding $700 million.

Of course, the odds are greatly against you winning. In fact, the current odds of hearing your lucky numbers read are somewhere around 1 in 292 million, which is essentially the equivalent of having your name drawn from a pot filled with every other person’s name in the United States.

But what if you are that one lucky person—or more likely, part of a group of winners? What is the first thing you should do if you win the lottery?

First step—do nothing.

That doesn’t mean quit your job, stay home and do nothing—instead, relax and go about your business as usual until it has sunk in that you inherited an unthinkable windfall. You will trend on Twitter. You will be invited to every news show in the country. Everyone will want to know what your next move will be.

Resist the urge for instant fame, and just do nothing. In fact, it will be important to stay as anonymous as possible as people will come out of the woodwork hoping for a piece of the pie.

The absolute worst thing you can do is start spending money without a plan. There are way too many emotions running through your head to make sound decisions. Don’t invest, don’t spend, just think about how you are going to handle this windfall—and who will help you in the process.

powerball lottery winner thinking about what to do if you win the lottery

Assemble your all-star advisory board.

With such a large windfall, you will need a team to help put a strategic plan in place. Whatever you do, don’t try to go at it alone. Here are some people you may want to consider for your team to help you decide what to do if you win the lottery:

  • Tax Attorney: With this amount of money, tax and legal issues arise very quickly.
  • Certified Public Accountant (CPA): You’ll need guidance on tax implications, compliance and recordkeeping.
  • Financial Planner: You have a lot of decisions to make about how you want your financial life to evolve. How much can you safely spend/give/invest?
  • Psychologist: This may sound strange at first, but many people who win the lottery end up in depression due to the stress and conflicts that arise from such a windfall.

You’ll work with your advisory team to determine whether to take the lump sum or the annuity option, evaluate the tax consequences, and decide how to initially hold the money until your ultimate plan is in place.

Decide what your “job” will be.

Do you really want to quit your job right away? What will you do to keep busy and give yourself purpose? Perhaps you’ve always wanted to be Mark Cuban on Shark Tank and invest in start-up companies. Maybe you want to take a chunk of your winnings and travel the world, personally handing out checks to your favorite charities. Do you want to start that small business you’ve been talking about for the last decade?

Realize maintaining your wealth will be more important than growing it.

We’ll spare you the boring tax calculations which result in the lump sum option deteriorating by half. In short, you’ll be lucky to walk away with just about $336 million, after numerous taxes are taken out.

If you happen to be 18 years old (the youngest you can be to win), you could easily spend $4 million dollars a year until the age of 100 before you run out of money—even more if you are older. Without investing a dime, you will have more than enough money to live off of for the rest of your life. The most foolish thing you could do is invest too heavily in hopes of growing your money quickly when all you had to do was intelligently maintain your wealth.

man googling what do to if you win the lottery

On the other hand, what if you are one the millions of folks who don’t end up winning the 1 in 292 million lottery? What should you do next?

If you had daydreams about how you would live your life after you won the jackpot, use them as benchmarks for your financial plan. Most of us will never experience a meaningful windfall like this, so it make sense to face reality and put meaningful, real goals in place along with a plan to reach them.

If you thought about all the debt you would pay off, all the charities you would support, and all of the business ventures you would start—what are you doing today to accomplish those plans?

If you think your financial life would be complete chaos after winning the lottery, take a look at your financial life today and see if you are actually in a financial chaos to begin with:

  • Do you have an understanding of your personal balance sheet—or are your finances in disarray?
  • Are you relying too much on a future windfall (inheritance, settlement, etc.) when you should be focusing more on saving?
  • Do you have an advisory team in place—or are you going at it alone?
  • How are you managing your smaller windfalls, such as the sale of a home or business, bonuses, or raises at work?
  • Do you have a financial plan or are you relying on luck and good fortune?

Unfortunately, it is highly unlikely that anybody reading this will be winning the lottery. We can, however, drastically change our own financial lives by taking small, meaningful steps.

This post was originally published on January 13, 2016. It was updated on August 23, 2017 to reflect the latest lottery news.

Aldrich Wealth, LP, (“Aldrich Wealth”) is an investment advisor registered with the U.S. Securities and Exchange Commission. Aldrich Wealth Advisors provides wealth management services where it is appropriately registered or exempt from registration and only after clients have entered into an Investment Advisory Agreement confirming the terms of the client relationship, and have been provided a copy of Aldrich Wealth ADV Part 2A brochure document. The information contained in this document is provided for informational purposes only, is not complete, and does not contain material information about making investments in securities including important disclosures and risk factors. Under no circumstances does the information in this document represent a recommendation to buy or sell stocks, bonds, mutual funds, exchange traded funds (ETF’s), other securities or investment products.

The technical information in this newsletter is necessarily brief. No final conclusion on these topics should be drawn without further review and consultation. Please be advised that, based on current IRS rules and standards, the information contained herein is not intended to be used, nor can it be used, for the avoidance of any tax penalty assessed by the IRS.