Everyone imagines what they would do if they won the lottery, but what would really be the wisest course of action? Say you just collected a check for the big jackpot after you won the lottery. Assuming you took the lump sum payout, what do you do next? For many people that have actually won the lottery, the vast sums of money prove difficult to manage.
As inconceivable as it sounds, one of the biggest problems many lottery winners face is that they run out of money. They spend it wastefully, and never set up a written plan of action. Before you start spending your fortune, it’s important to determine your financial priorities and to take a few steps to make sure that you will not outlive your money.
Most likely, you have already quit your job, unless you own the company you work for or really enjoy what you do. You have probably paid off any outstanding bills, credit cards and your mortgage. But you still have this huge sum of money to deal with. What should you do?
The first thing to do is to diversify your money. You probably have it sitting at one bank in one account. Considering FDIC insurance is only covering a small portion of it, it would be a good idea to move your winnings around. What most people do not know is that they can increase their FDIC insurance coverage with one bank if the deposits are in different ownership categories. For example, a couple could each have a single account, a joint account and trust accounts, with each type of account having separate FDIC insurance coverage. Those same accounts in other banks also enjoy separate FDIC insurance protection.
A good trust attorney can help you set up various trust arrangements. You may want to have one or more trusts depending on your circumstances. Trusts allow you to spend and control your money while you are living. Upon your death, you would have already decided how and when the money would be distributed.
You might also want to consider buying some life insurance. Multi-millionaires routinely buy life insurance within an irrevocable trust to pay the estate taxes on the money their heirs may inherit. By spending a small fraction of their wealth on life insurance, multi-millionaires have more of their fortune to invest.
Seek out the advice of a good financial advisor who can help you set up a guaranteed income for life using a variety of fixed annuities from multiple companies. Set aside a portion of your money into annuities to pay you an income for the rest of your life, with any remainder passing on to your heirs. That way, should some investment calamity happen and you loose everything else you own, you have at least have something safe you can fall back on.
If you have ten million dollars paying you a five percent lifetime income, you are getting five hundred thousand dollars a year. After taxes at today’s prices, that’s more than enough to live comfortably for a year on a cruise ship, in a hotel in Disney World, Hawaii, and many other travel destinations, if you want to.
Now that you have some of your eggs in many baskets and set up a secure base plan, it’s time to look at what is important about money to you. You can spend and invest your fortune to meet your dreams and desires. You can do whatever you want to do, but it is wise to set some money aside first.
When you win the lottery, you think you are set for life. Sadly this is often not the case. With some professional help and some wise investments, your lottery winning could last the rest of your life and make your wildest dreams come true.
Author: Stevendrahozal
Steve helps people think about their money. For customers at or near retirement, Steve assists them by developing a written customized goals based retirement plan. Steve is highly selective and maintains high standards for the products and services he offers to his customers.
Steve is a small business owner and has been a part of the Mature American Planning Company since it’s founding in 1998. Steve is the current president of the Mature American Planning Company, a Michigan Corporation and a licensed insurance and annuity agency located in Hartland, Michigan. Steve has been in the financial services profession since 1986. He can be reached at (810) 632-9932 or through his website www.drahozal.com.
Steve also offers securities and advisory services through Foresters Equity Services, Inc., Member FINRA, SIPC, Branch Office: 6640 Lusk Blvd., Suite A202, San Diego, CA 92121, (858) 550-4844. The Mature American Planning Company and Foresters Equity Services, Inc. are unaffiliated entities.