You won Powerball, now what? What happens when you win big: Advice from Financial Advisor Steve Sexton
Steve Sexton, President of the Sexton Advisory Group, is a talented financial adviser with over 15 years of experience. Steve has been featured on numerous shows, hosted his own radio show called “Winning in Life” and authored a bestselling book titled “More Better.” Steve discusses various topics ranging from the community in San Diego, important financial information, business information, and much more. On this segment of San Diego Living, Steve discusses the best financial decisions for a lottery winner.
If we look at the statistics again, the chance of winning the lottery is 1 in 175 million, and buying more tickets increases your chances of winning by a miniscule amount. Buying lottery tickets is not a wasteful practice, but becomes one when you start spending too much.
What do you do if you win? Watch now to find out!
Many may think, well I’ve won the lottery, what more do I need to worry about financially? Steve explains that this exact sentiment is what causes so many pro-athletes or people in the entertainment industry to go broke. The first question asked by lottery winners is lump sum or annuity? Is it better to receive the winnings all at once, or spread out over the years? From the people who do end up winning, 90% take the lump sum reward.
If the winnings were, for example 60 million dollars, in California it would be taxed at 55%. This means that you would receive 18 million dollars all at once. While this may feel like financial problems are over, don’t go ahead and buy that new house or new car just yet! The key to successfully handling a large amount of money is to distribute the wealth over the years. Living lavishly in the first few years is synonymous to living foolishly, leading to bankruptcy in the near future.
Now if we were to take the annuity, the money will be spread over 26 years or so. This still adds up, after the 55% tax, to more than a million dollars a year. Compared to 18 million it may seem like small change, but an extra million dollars a year isn’t too bad. So what is the best choice? The answer to this question really depends on who you are. If you are a frugal person who can handle a lump sum, distribute it appropriately, and even invest in properly, then go for it. But if not, then the best option is to force yourself to hold back and go for the annuity.
Now that you know, hopefully you will have the chance to put all this information to use one day! Steve Sexton is also giving away his bestselling book, “More Better”, to the first 20 people to call in to San Diego Living. Give Steve a call at the Sexton Advisory Group for your chance to win or to ask any of your burning financial questions!