What To Do If You Win the Lottery, According to a Wealth Manager
Back in November 2022, California became home to the first lottery billionaire when Edwin Castro of Altadena won a record-breaking $2.04 billion Powerball jackpot. Since then, three more jackpots have surpassed the billion-dollar mark in the U.S. between the Powerball and Mega Millions.
Still, Castro's win is an experiment in unexpected, swift wealth accumulation that is virtually unparalleled, and with another high-prized Powerball always on the horizon, many people wonder what they would do if they hit it big.
Robert Pagliarini, a seasoned wealth advisor and author of "The Sudden Wealth Solution," provided some valuable insights on how to manage this kind of immense wealth.
A Unique Situation
Upon learning about the Powerball billionaire in California, Pagliarini voiced his awe. "It's sick. It's ridiculous levels of wealth," he stated to The Atlantic. His concern, however, was less about the wealth itself and more about the psychological implications of coming into such an enormous fortune unexpectedly.
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In contrast, those who have sold businesses for billions typically have a supportive network of financial and legal professionals to lean on. This makes the journey of the Powerball billionaire truly unique.
Lump Sum or the Long Game?
When asked about whether a winner should opt for a lump sum or an annuity, Pagliarini expressed his preference for the latter. He said, "I've been a big proponent of taking the annuity for years. What the annuity gets you that the lump sum does not is the ability to make mistakes and to recover from them."
He explained that with the annuity, there is room for learning and growth. Winners can make financial missteps in one year but will still receive another deposit the next year, allowing them to learn from their mistakes and improve their financial management skills.
The Main Challenges
Aside from the tangible financial aspects, Pagliarini believes the greatest challenges for lottery winners are psychological.
"I tell people that, with sudden wealth, especially a lottery, there are two emotions after you win," he said. "And the first is this sense of joy and excitement and jubilation. But that is quickly followed by this sense of, 'Oh my God, I don't know what I'm doing.'" He added, "It's like 99% psychological and 1% financial."
Pagliarini emphasized that while the financial side of managing wealth is pretty straightforward, dealing with the psychological ramifications is where the real challenge lies. The wealth manager also warned about the potential strain on relationships after a lottery win. The people around the winner often change their behavior, creating an uncomfortable dynamic.
He referred to the notorious "lottery curse," where winners often feel their relationships become strained or even destroyed due to others' altered attitudes and expectations.
Do This Above All Else
Ultimately, Pagliarini advises winners to establish a team of financial and legal advisors before making any drastic decisions. "Let's get the tax person and get the legal person lined up," he suggested.
But perhaps the most significant piece of advice he imparts to lottery winners is this: "Sign the ticket. Take a photo with it. Take a video with it. Tell one trusted person. Don't tell anyone else."
While the vast amount of wealth from a Powerball win can be exhilarating, it's essential to approach it with caution, prudence and professional guidance. Understand that it is more than a financial journey; it's a psychological one that can impact every aspect of life.
This article was provided by MoneyLion.com for informational purposes only and should not be construed as financial, legal, or tax advice.
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