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Powerball announced that a player won the $1.817 billion jackpot on Wednesday evening.
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After winning the jackpot, lottery winners receive little guidance on how to spend their money.
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Here’s how Wells Fargo’s Emily Irwin recommends Powerball winners spend their money.
Hire advisors, don’t immediately buy a private jet and don’t spend your money all at once: these are some of the tips a financial advisor offered to Powerball winners.
The most recent Powerball jackpot winning numbers were announced Wednesday, breaking a streak of 46 drawings without a big winner. The $1.87 billion prize was the second largest lottery jackpot in United States history.
The winner must choose between receiving their windfall in the form of a prize annuity worth an estimated $1.817 billion, paid over 30 years, or in the form of a lump sum of approximately $834.9 million.
This choice is just one of many lottery winners must make, often with little or no support.
“A lot of people tend to overlook this, but after you win the lottery, you’re basically on your own,” Emily Irwin, a Wells Fargo advisor who guides lottery winners on how to spend their money, told Business Insider in a 2023 interview.
Former Powerball winner Timothy Schultz, who won $28 million in 1991 at the age of 21, made wise decisions after consulting financial professionals.
He told Business Insider in 2024 that he invested conservatively in stocks, bonds, and mutual funds to ensure the returns could last a lifetime. He also returned to college, supported his family and traveled.
But some lottery winners have lost their fortunes after squandering their winnings or spending them all on vacations and luxury goods.
According to Irwin, these results are not inevitable if you receive sound financial advice.
This is what she recommends you do if you are lucky enough to get your hands on a winning ticket.
Irwin told Business Insider that this decision should depend on two factors: the financial implications, primarily tax-related, and how you personally tend to manage money.
“If we consider the financial and tax aspect, taking the lump sum amount is often advantageous,” she believes. “Even though you face higher upfront income taxes, you benefit from greater long-term control over how your money is invested and you have immediate access to your funds.”
In contrast, annuity payments tend to be spread over several decades. In the case of Powerball, winners receive an immediate payout followed by 29 annual payouts that increase by 5% each year.
“The benefit here is that it provides peace of mind,” Irwin said. “If you’re the type of person who has a dollar in your pocket and you plan to spend $1.50, having this annuity and the three-decade guarantee can be a reassuring safety net.”
Because lottery winners are often left to fend for themselves, Irwin recommends building a team of advisors as soon as possible. The team, she said, should include a lawyer, an accountant, an investment advisor and a philanthropic advisor.
“It’s not as simple as flipping through the yellow pages and picking someone at random,” she said. “You need to carefully consider experts who specialize in tax planning for high-net-worth and ultra-high-net-worth individuals.”
Irwin also suggested interviewing multiple candidates for each role to ensure the relationship is good, since winners will often work with these advisors for years.
“I think it’s very important to have a diversified portfolio and review it with your financial and investment advisors,” Irwin said.
“Typically, we see a mix of immediately available short-term assets, such as cash or cash equivalents, as well as more traditional investments in stocks and bonds,” she added.
Real estate is another common investment, Irwin said, but winners must fully understand the risks and costs involved.
She said buyers should consider whether they plan to pay for their property in cash or through financing, how much of their overall portfolio the purchase would take up and whether they have the cash flow to support it.
“What I would say is look at these decisions holistically, because owning real estate comes with ownership costs, including property taxes, maintenance fees and possibly hiring property management companies — expenses you may not be accustomed to,” Irwin said.
Before lottery winners start spending, Irwin suggested they should think about paying off any debt they may have, which includes paying off student loans and mortgages. “Most individuals find peace of mind and financial stability through a healthy balance sheet, as well as some financial improvement,” she said.
“One of the things we think about with mega-lottery winners is making sure they can collect their winnings in a way that keeps them anonymous and that, in turn, can keep them safe,” Irwin said.
This may mean limiting your spending at first, rather than making highly visible purchases, like multi-million dollar homes or private jets.
Irwin also warned that winners should consider how they will communicate their winning to family and friends. “Lottery winners frequently encounter requests from friends, family and various organizations, and without proper guidance, it can be difficult to navigate these conversations,” she said.
Learning to say no gracefully is essential, she added, and in some cases, winners may even benefit from working with a coach who specializes in family dynamics.
Irwin’s biggest piece of advice is for lottery winners to control their urge to overspend.
“People see six zeros, nine zeros, even ten zeros in their bank account, and they think there’s no way they can spend all of that,” she said. “But it’s certainly possible if you buy five houses worth $50 million and a private jet.”
Once expenses increase, expenses also increase, and balances can then drop very quickly, she said.
“It’s easy to spend your money quickly,” Irwin said, “so spend it wisely.”
Read the original article on Business Insider
