What Happens If You’re a Lottery Winner?

lottery winner

If you’ve ever dreamed of winning the lottery, you probably know that a win can bring huge changes. For starters, you’ll have to decide whether to take your payout in a lump sum or invest it in an annuity.

The right choice can make a big difference to your future financial well-being, says Robert Pagliarini, a certified financial planner and investment manager at Pacifica Wealth. Taking the lump sum can give you a one-time payment, but it’s also a risky move.

Choosing the annuity option instead gives you a steady stream of income, and it can protect you from making financial mistakes with your windfall. However, it’s a costly decision and can put you in the high tax bracket.

A number of people who won massive lottery prizes have fallen into financial crisis and bankruptcy. Some squandered their winnings on luxury items or a slew of bad investments. Others used the money to pay off debts, including credit cards and student loans.

Lottery winners who choose to remain anonymous are at a disadvantage, because they can’t be protected from scammers and long-lost friends looking for cash. In addition, they’re often required to do a news conference and hold up a huge check, which can be intimidating.

The best way to avoid a financial disaster is to make sure you keep your name out of the media and do not disclose your winnings. You should also take a vacation as soon as your press conference is over, and avoid answering the door to long-lost friends who are asking for cash, says New York Lottery lawyer Steven Kurland.