How to Manage a Lottery Jackpot
When a lottery jackpot reaches a record high, the odds of winning increase dramatically. But the prize isn’t guaranteed to be won; in fact, many winners wind up going broke soon after winning. A big part of this is because people view earned money differently than they do prize winnings. This is why it’s important for anyone who wins the lottery to talk with a financial advisor and create a plan for their newfound wealth.
One of the most common mistakes people make is spending too much of their winnings on things they don’t need. This can include a huge house, cars, and even a new boat. It’s also easy to spend too much on gambling, which is why it’s best to avoid this activity if you can.
Another thing to keep in mind is that the tax consequences of a lottery jackpot are different than other types of income. In most countries, the IRS withholds 24% off the top of any winnings. This can be a big hit, especially for large jackpots. In addition, the winner must choose between an annuity payment and a lump sum.
When it comes to a jackpot, choosing an annuity payment is usually the smarter choice from a monetary standpoint. However, it’s important for lottery winners to consider their own ability to responsibly manage hundreds of millions of dollars. If you don’t feel comfortable doing this on your own, you can always assemble a “financial triad” to help you navigate this windfall.