The Advantages and Disadvantages of Lottery Winnings

Text-only Preview

The Advantages and Disadvantages of Lottery Winnings

Lottery winnings
can completely transform people's lives for better or worse. Millions of individuals
purchase lottery tickets hoping to win the jackpot. They fantasize about striking it rich and being able to
do whatever their heart desires.

Although lottery winnings can provide financial freedom, winning a ton of cash also brings about
unwanted fame and notoriety. Long lost relatives and friends suddenly surface in hopes of rekindling
relationships or receiving benefits of the windfall. Friends start expecting winners to pick up their dinner
check, take them on lavish vacations, and shower them with expensive gifts.

Winning jackpot lotteries can also bring about unwanted financial scrutiny. Winners that have tax liens,
creditor judgments, or outstanding child support or spousal alimony may find their debts are deducted or
their winnings frozen until issues are resolved. Dependent upon how much is owed, winners could end up
with a small stipend once previous debts are paid off.

Another consideration of winning the national lottery is the amount of tax that has to be paid. Combined
state and federal taxes can equate to almost half of winnings. Much depends on the form of compensation
winners select. Those that accept lump sum payment usually receive less cash than people that accept
annual payments.

National lotteries like Powerball and Mega Millions can be awarded by setting up annuity payment plans
that extend for 20 years. Annuity payments provide winners with consistent income and can lessen tax
burdens because distributions are taxed at a different rate than lump sum payments.

People that accept a one-time payment usually receive between 50 and 65 percent of the total amount
won. For example, if a person won $2 million, they would receive payment between $1 million and $1.3

People that accept annuity payments would receive around $100,000 per year before taxes. Dependent on
their tax rate, state and federal taxes could range between 28 and 35 percent. Their annual annuity
payment could range between $65,000 and $72,000. Over the course of 20 years this would amount to
$1.3 million to $1.44 million. The amount of taxes on lottery winnings will vary according to lottery
regulations and the winner's taxpayer status.

One of the more dominant challenges of winning millions of dollars is the vast majority of winners aren't
prepared to manage large sums of money. Unfortunately, many lottery winners are broke within a few
short years. Instead of learning how to put their money to work for them they embark on the lifestyle of a
millionaire and waste money on extravagant cars, homes, jewelry, and designer clothing.

WA (360) 527-2630 * CA (714) 998-6888
Copyright (c) 2006 - 2009 * All rights reserved

Working with a good investment company can help winners double or triple their winnings. Instead of
tossing away wads of cash on materialistic things, winners ought to create a sound investment plan.

Lottery winners should also consider contributing at least 10 percent of jackpot winnings into products
that generate additional cash. These might include certificates of deposit, money market accounts, savings
bonds, or high interest savings accounts. It can be very advantageous to work with a financial planner to
create a diverse investment portfolio and learn how to safeguard winnings from excessive taxes.

Lottery winnings can supply financial freedom to people that establish solid investment methods.
Individuals that win thousands of dollars ought to put together a financial team that includes a financial
planner, tax account, and attorney. Instead of becoming a lottery statistic learn how to expand winnings
through investment practices.
WA (360) 527-2630 * CA (714) 998-6888
Copyright (c) 2006 - 2009 * All rights reserved