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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Survey seems to Contradict what Jackpot Winners actually do!
Nearly 70% of all Jackpot Winners end up broke within seven years.
...and yes, " The last Jedi" sucks more than a dyson.
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.
I've been saving my whole adult life, I would spend like a crazy lady.
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?
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.
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.
Good luck to you on powerball tomorrow music I hope you win a cool million even in California.-weshar75
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.
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.
I'd claim it as fast as I could, I need a housekeeper, Chef, personal shopper, asap. LOL
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.
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.
Lol... you go girl...... Most of us on here are reasonable and would spend on some goodies(House-cars-toys-girlie stuff-man cave stuff)
Should someone who won a PB or MM jackpot actually lose that kind of cash due to frivolous spending ?
Well......................
You just can't fix "gormless" !!!
Hey Sully, Dont forget the arm and the leg!
Best of luck to all who play these growing games. They may not be record breaking jackpots but way more than I need.
Merry Christmas!
This is what I'd do. I'd buy a barrel of gold coins and fake ones too (from Alibaba - for decoy). Maybe $15 million. Buy a mountain property through some trust or any other mechanism that will hide my name. Bury the darn things there and then invest the rest of my millions in interesting tech. startups that could potentially be swallowed by other tech giants. Also start my own Shark Tank company, invest in the stock market, and real estate (rent). I'd park outside technology universities and ask the top nerds there to talk to daddy about their wet technology dreams. Enough of dreaming today for me!
First person I'd be speaking with would be that lottery lawyer bloke mentioned in the article :)
I have never had this problem .........
I would avoid lawyers altogether. They will write things up where they get the most benefit!
Be aware of frivolous lawsuits. They could have you in court a lot longer than you want to be.
The Lottery Lawyer's name is Jason Kurland. Find him on YouTube and you can follow his advice
The answer is simple, although people commonly say save for themselves. Let's be real, you need $5 million to say not work, $15 million if you're say a party animal. I honestly could never think of having $15 million dollars at once. Who the heck needs $15 million dollars? What the heck is anybody gonna do with that. So, the amount of the windfalls creates a mirage for these winners, however money is nothing new in life so it should not come as a surprise in how to think about. Once again for yourself, you should be the one to think about it based on what you think. Not based on others or what others think. I mean that amount of money calls for being a grown up. It's like the sports players today, who the heck needs $20 million dollars? Like the great NFL player Jim Brown says, if I had $20 million dollars I'd be the greatest activist ever. There's only one thing to do. Good luck to all.
http://thelotterylawyer.com
I know many people disagree with me, but how is taking the lump sum a smart choice? An immediate 30-40% loss plus the chance to lose it all in less than 8 years. I'd rather take the annuity.
An excerpt from TD ameritrade - "With the lump sum, taxes would actually be paid twice -- on the initial lump sum and on any money made each year from investing it. The winner wouldn't be taxed on investment income with the annuity because Powerball is actually the one investing the money and it doesn't pay income tax".
What about inflation? I'm attracted to the annuity as well. I'd say that if you know you have a chance of being irresponsible with the money or think the professionals somehow will somehow take advantage of you and leave you broke, or that it will be too much stress to handle such a big windfall all of the sudden, then take the annuity, even if 90 years old. Nobody needs more than the first year's payment to live or do their thing anyway. Like Craig at Craigslist said once after being asked why he didn't charge or not charging enough on his site, I believe: "How much money does one need to live?" You can let your heirs claim the rest of the money.
"An immediate 30-40% loss"
Which means that you get 60 to 70% right away. With the annuity you get about 1.5%. A year later you get a bit less than 1.6%. Another year later you get about 1.66%.
If you wait patiently you'll get that 60 to 70% that you could have had right away in 22 to 25 years.
I'd be so bad at saying no to anyone willing to beg hard enough. Seven years is a long time. If I'm lucky enough to be alive seven years from now, I'd be satisfied if I'm broke, if I had taken care of my family's financial futures and done some good in the world somewhere.
I have never been surveyed. I also find it interesting that people still get jacked up about the amount of the Powerball or Mega Millions lotteries, as if the jackpot amount makes it more likely they will get lucky and win. I play for the fun and the knowledge that even though I am throwing away $2 each drawing, it is my discretionary $2 that I chose to squander for a minuscule chance to win something more. I don't hang my hopes for riches on winning the lottery. If I were to win, I would make prudent plans to minimize public exposure and invest with plan to only utilize a variable fraction of annual dividends and interest. I would be the boring yet well-traveled, business-minded lottery winner you might only hear about for some other successful life accomplishment...not merely as a lucky lottery jackpot winner. And no, I won't pursue any plans to start my own movie production company, invest in options, or even in restaurants or bed and breakfast (I want freedom of time and those last two businesses don't provide that).
Happy 2018 and good luck whether the jackpot is $40 million or whatever.