You Just Won The Lottery – Now What?

you just won the lottery

For many, winning the lottery is a dream come true. It could mean taking home millions in a lump sum or setting yourself up with a decades-long income stream. But many who win get blinded by the experience. They struggle to make sound decisions, and a surprising number spend their entire windfall, ultimately going broke. However, that doesn’t have to be the outcome. It’s possible to use a lottery win to set yourself up for life. If you’ve just won the lottery, here’s what you need to do.

Don’t Claim Your Prize Immediately

First and foremost, it’s best to play it cool while you come up with a plan. Store the ticket in a safe place, like a safe deposit box at a bank, and take a breath. Usually, you get 180 to 365 days to formally claim your prize, so there’s no need to rush.

Alongside putting your ticket in a safe place, be sure to get the ID that you brought your lottery ticket with handy. It is very likely that the owner of the establishment you purchased your ticket from will want to check these details, so be sure to put your driving license, or fake ID (make sure they are fake ids that scan) in a safe place too. Preferably put it with your ticket, so everything you need is together for when you do cash it.

Taking the time to cash your ticket increases the odds that the media will lose interest in your story, even if you won big. By sidestepping the hoopla, you might not get swarmed with requests for cash that tend to spring up out of the woodwork.

Plus, it increases the odds that the media will lose interest in your story, even if you won big. By sidestepping the hoopla, you might not get swarmed with requests for cash that tend to spring up out of the woodwork.

Do the Math About Your Payout Choices

In some cases, you can choose whether you want to receive a lump sum or an annuity arrangement. With the former, you only get a portion of the advertised prize amount.

For example, when the Mega Millions hit $1.537 billion, the lump sum option came to $878 million. That’s about 57 percent of the advertised amount. However, with the Washington State Lotto, the lump sum is a 50 percent cash option. You receive exactly half of the advertised amount.

If you go with the annuity, the advertised prize amount is delivered in equal installments over the course of 20 to 30 years (depending on the lotto involved). For example, with a $1 million prize and 25-year annuity, yearly payments hit $40,000. With a $3 million prize, that annual payment is $120,000.

Now, none of those amounts include another cost: taxes. Lottery wins are taxed as income on the federal level in all cases. For individuals who live in states that have state income taxes, lotto wins are usually taxed by the state, too. The amount you pay in tax will vary depending on your income bracket and where you live. However, it’s important to understand that you will owe that money.

Annuity Arrangements

In many cases, the annuity arrangement is the best choice from a purely financial perspective. You get more money overall. Plus, it comes in waves. You can’t spend the entire amount in advance, as you don’t have access to all of the money.

However, if you are financially savvy, a lump sum could serve you well. You could eliminate high-interest debt, invest at a rate that lets you earn more than the annuity would provide, or otherwise make sound choices.

Consult with Financial Professionals

Even after doing the math, it’s wise to consult with a few financial professionals. You may want to speak with a tax attorney, a licensed account, a certified financial planner, or a family planning attorney. They can help you review your options and create solid plans before you formalize any decisions. After all, once you choose the lump sum or annuity approach, you can’t change that decision with the lottery commission. As a result, it’s best to square away some details before you sign on the proverbial dotted line.

Find Ways to Protect Your Privacy

If people learn that you have access to millions, some are going to try to find you. Charities, investment advisors, friends, and family members might all arrive with their hands out. This means you might want to have some options for some distance.

You may want to explore other options for maintaining your privacy. In some states, you don’t have to have your name associated with the win, allowing you to remain anonymous. You may want to explore whether having a trust claim the win (which may let a lawyer stand in your place at press events) is a smart move.

At a minimum, changing your contact information could be a great idea. By changing your mailing address to a post office box, getting an unlisted phone number, and maybe even moving for a short period, you become a bit harder to find.

Make Smart Money Choices

Once you’ve sufficiently prepared, you can claim your win. After that, the goal should be to make wise financial choices.

If you take the lump sum, paying off your debt is a smart move, especially if your interest rates are higher. You can potentially wipe your entire slate clean, depending on the size of your windfall. That may give you a lot of flexibility and reduces how much you’ll need to stay financially solvent.

You can also direct annuity payments to your debts. If you keep your job after winning, you can likely conquer most of your obligations in a matter of a few years, even if your lotto win was relatively small. If it was larger, you might be able to clear everything right away.

Once your debt is paid, it’s time for savings planning. While it may seem unnecessary if you have millions in the bank or a steady source of lotto income for the next few decades, that isn’t the case. Many lottery winners end up broke, so you want to make smart choices now.

Prepare For The Future

Begin by creating a healthy emergency fund. Set the money aside in a high-yield online savings account, and don’t intend to tap it unless you have a genuine need.

Next, allocate some money for your retirement. Max out your 401(k), IRA, or other accounts every year. You may even want to set your future payments in a separate high-yield savings account, ensuring you can contribute over the long-term.

At that point, opening an investment account could be a wise choice. You could invest in index funds if you are looking for an easy place to start. Otherwise, make sure your portfolio is diverse, and you are comfortable with the risk level.

If you have children, you could set up college funds for them. For example, you might want to open a 529 college savings account to set money aside for their educations.

Spending is Fine, If You Do It Wisely

Once you have your savings approaches squared away, it’s okay to spend some of your winnings. Just make sure to do it wisely.

For example, if you want to buy a new home, don’t go overboard. Most people don’t need a mansion, even if they can afford one. Plus, an expensive house means massive property taxes and higher insurance and utility costs, and those could become hard to manage if you blow through your windfall.

Never make purchases on a whim, even if they are smaller. While it may feel unnecessary, create a budget. List all of your expenses and estimate what they cost you each year. Then, determine how much you can spend on goods or services that aren’t part of your living expenses so that you don’t end up broke. That way, you won’t find yourself without a dime five, ten, or 30 years from now. Instead, you’ll be set for life, and can rest assured knowing you made great choices.


Do you have any tips for managing a large windfall? Share them in the comments below.


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