![]() Invest whatever is left over for your retirement." With lump sum payments, Pagliarini recommends winners "set aside enough to cover all of the taxes. "One of the best use of your lottery windfall is to pay off all of your debt," Robert Pagliarini, a certified financial planner who also wrote a book on how to manage major cash windfalls, tells CNBC Make It. When that's not an option, using the money to build wealth or reach other financial goals is never a bad idea. "You'll want to engage a lawyer, financial advisor and tax expert who you trust and feel comfortable with."Ĭommon advice for lottery winners says to take the prize as an annuity to extend its life. "If you win the lottery, my first recommendation is to equip yourself with a strong team," Liz Weikes, a Wealth Partner at J.P. In fact, around 70% of people who receive a major cash windfall don't have anything to show for it within a matter of years, according to financial planning group Sudden Money Institute.Įxpert advice varies on how exactly you should spend the money, and your personal needs may influence your decision, but consulting a financial planner can help you navigate those questions and get the most out of your winnings. A smaller prize takes a bit of the pressure off, but anyone receiving such a large cash payout can make mistakes. There are enough horror stories of lottery winners squandering their earnings to make winning a major prize seem like more trouble than it's worth. While smaller-prize winners may not feel the need to maintain anonymity as much as major jackpot winners, a six-figure cash windfall can certainly change your life - and unlike jackpot winners, you may not have the option to receive your payout as an annuity. Regardless of the final total, winners would be smart to carefully plan how to use the money. Local income and prize taxes could bring that number down further, depending on where they live. The automatic 24% federal tax rate would take a $1 million payout down to $760,000, according to Powerball's tax calculator. Those million-dollar winners would still face the hefty taxes that take a bite out of lottery winnings. ![]()
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