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

Dec 19, 2017, 9:18 am (31 comments)

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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.

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CNBC, Lottery Post Staff

Comments

Raven62's avatarRaven62

Survey seems to Contradict what Jackpot Winners actually do!

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

noise-gate

Quote: Originally posted by Raven62 on Dec 19, 2017

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.

gatorsrok

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 avatarsully16

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

music*'s avatarmusic*

Quote: Originally posted by sully16 on Dec 19, 2017

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

music*'s avatarmusic*

  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.

lejardin's avatarlejardin

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 avatarweshar75

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

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BigJonStud

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.

KY Floyd's avatarKY Floyd

Quote: Originally posted by Raven62 on Dec 19, 2017

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 avatarsully16

Quote: Originally posted by music* on Dec 19, 2017

 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

sully16's avatarsully16

Quote: Originally posted by lejardin on Dec 19, 2017

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.

rcbbuckeye's avatarrcbbuckeye

Quote: Originally posted by sully16 on Dec 20, 2017

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.

Bleudog101

Quote: Originally posted by sully16 on Dec 20, 2017

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.

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