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  #1  
Old 03-23-2007, 03:54 AM
Klaatu Klaatu is offline
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Lottery winners and banking the money

What do big time lottery winners do with the cash?

Say I win the Powerball and have 50 million bucks after taxes. What do I do with the money, short term, just put it in the bank?
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  #2  
Old 03-23-2007, 05:36 AM
FRDE FRDE is offline
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You would probably find that a very helpful advisor would turn up, with the full recommendation of the lottery.
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Old 03-23-2007, 05:54 AM
Sunspace Sunspace is offline
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I believe the Ontario lottery, at least, has counselors that help big winners figure out what to do.

I tried googling this once, but it's almost impossible to find meaningful information about winners' experiences and pitfalls amidst all the scammers trying to sell you systems to win. I did see a number of stories that advised new winners to stick the money in the bank, hire a financial consultant to teach them about taxes and such, and basically disconnect from the world for a while, at least until the hype died down.
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Old 03-23-2007, 06:23 AM
FRDE FRDE is offline
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Quote:
Originally Posted by Sunspace
I believe the Ontario lottery, at least, has counselors that help big winners figure out what to do.

I tried googling this once, but it's almost impossible to find meaningful information about winners' experiences and pitfalls amidst all the scammers trying to sell you systems to win. I did see a number of stories that advised new winners to stick the money in the bank, hire a financial consultant to teach them about taxes and such, and basically disconnect from the world for a while, at least until the hype died down.
I've read some stuff about UK lottery winners, it seems there is some sort of 'gated' area where the saner ones hang out together.
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Old 03-23-2007, 06:55 AM
A.R. Cane A.R. Cane is offline
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Banking that much is problematic. I would put the majority in short term treasury instruments and jumbo CD's. Then work on secluding myself from the public eye while I figured out an investment strategy. If you can get past the first year w/o doing something stupid, you're probably on the right track. Too many winners focus on buying things and playing the big spender w/ friends and relatives, rather than investing and preserving their winnings.

Last edited by A.R. Cane; 03-23-2007 at 06:57 AM..
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  #6  
Old 03-23-2007, 07:34 AM
glee glee is offline
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I recently inherited some money, so used a financial adviser at my bank.

And he explained it's true - rich people get much better rates of interest.

There are also lots of ways to invest large sums - from no risk through steady risk up to high risk. Of course the interest rises with the risk.

You will also start using phrases like 'portfolio', long-term' and 'ease of withdrawal'.
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Old 03-23-2007, 09:30 AM
Sunspace Sunspace is offline
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Quote:
Originally Posted by A.R. Cane
Banking that much is problematic.
Why?

This is just for the short term (weeks or a couple of months), until the winner gets sorted out. Is there a maximum limit to what a bank account can hold? I know that only the first $100 000 (or whatever) will be insured (FDIC, CDIC, etc), but surely you can put more in? If I resented a lottery cheque for $50 million at my local RBC, presumably they'd check that it was real (by phoning the lottery corporation?), but would they be unable to deposit it?

Last edited by Sunspace; 03-23-2007 at 09:31 AM..
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  #8  
Old 03-23-2007, 09:43 AM
Loach Loach is online now
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Quote:
Originally Posted by Sunspace
Why?

This is just for the short term (weeks or a couple of months), until the winner gets sorted out. Is there a maximum limit to what a bank account can hold? I know that only the first $100 000 (or whatever) will be insured (FDIC, CDIC, etc), but surely you can put more in? If I resented a lottery cheque for $50 million at my local RBC, presumably they'd check that it was real (by phoning the lottery corporation?), but would they be unable to deposit it?

I think the insurance is the point that most bring up. So just plop it in a bank at first then start spreading it out. They wouldn't have a problem depositing the check. I doubt you would be able to withdraw it as cash right away .
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  #9  
Old 03-23-2007, 09:51 AM
hotflungwok hotflungwok is offline
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One of the things you have to do when you win a big lottery is arrange for a special bank account to hold it. The lottery will only wire the money to an account set up for this purpose.

If I ever won a lottery like that I would disappear for several months. I really don't want to have to go through people coming out of the woodwork asking for money. I've heard that it can be really bad, even worse if you actually start giving money out.
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  #10  
Old 03-23-2007, 09:54 AM
Loach Loach is online now
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Quote:
Originally Posted by hotflungwok
One of the things you have to do when you win a big lottery is arrange for a special bank account to hold it. The lottery will only wire the money to an account set up for this purpose.

If I ever won a lottery like that I would disappear for several months. I really don't want to have to go through people coming out of the woodwork asking for money. I've heard that it can be really bad, even worse if you actually start giving money out.
But of course you'll give us some money right? After all we've stuck with you through all those though times.
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  #11  
Old 03-23-2007, 09:56 AM
ParentalAdvisory ParentalAdvisory is offline
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I would spread out a bunch of CD's up to the limit of the FDIC insurance for a safety net and count them as bonds in a portfolio. The rest I would setup a portfolio at Vanguard or Fidelity. They have experience in the multi-million dollar account business (just not insured, which is the reason for CD's). From there, I would forward all dividends, interest, and capital gains to a money market account and that is where I would live off my "salary". I would actively avoid any and all "advisors", except a personal laywer and a professional tax advisor. Any other type of strategy would not be in my best interest, no matter how much they think they can't beat the system.

Last edited by ParentalAdvisory; 03-23-2007 at 09:57 AM..
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  #12  
Old 03-23-2007, 09:58 AM
MarcusF MarcusF is offline
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As they say, the problem is deciding what to do about the begging letters:












Do you keep sending them out or not?
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  #13  
Old 03-23-2007, 10:25 AM
fortytwo fortytwo is offline
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One of the most famous winners of the football pools in the UK were Keith and Viv Nicholson. They won £150,000 in 1961 (the equivalent today of about £3 million). They refused to discuss any investment plans that the pools company offered through their team of advisers and Viv famously said she was going to "spend, spend, spend". So they did.

Even as late as 1969 the pools company, Littlewoods, were trying to get them to invest what was left but they carried on spending and by the early 70s Keith was dead and Viv was bankrupt.

For most people a win like that would be a once in a lifetime chance to get out of the rut and put away money troubles for ever.

I'm damn sure I'd use their advisory service to invest my money if I was to win a large sum on the lottery - very unlikely as the £1 ticket I buy every few weeks when I happen to think about it has got odds of 14,000,000 to 1 against.
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Old 03-23-2007, 10:32 AM
MarcusF MarcusF is offline
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I can't remember the name but i remember reading that one of the first big UK lottery winners (GBP 18 million six years ago) put the whole lot into a bond that he couldn't access for three months or so just so that he couldn't rush out and do anything stupid.
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  #15  
Old 03-23-2007, 11:13 AM
Dewey Finn Dewey Finn is offline
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Quote:
Originally Posted by ParentalAdvisory
I would spread out a bunch of CD's up to the limit of the FDIC insurance for a safety net and count them as bonds in a portfolio.
I wouldn't worry too much about the FDIC insurance limits, particularly if I put the money in a big bank like Citibank or Bank of America. (Do you really think there's any danger that Citibank is going to collapse any time soon? And if it does, we've all got big problems.) If you are concerned about the insurance limits, I'm fairly certain you can buy additional insurance to cover the amount in excess of $100,000.

In the long run, of course, I would want to invest it in something more lucrative than a bank CD. (I might think about a hedge fund. Some of the best ones have done really well, with annual returns of 20-30 percent.)
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  #16  
Old 03-23-2007, 11:22 AM
zev_steinhardt zev_steinhardt is offline
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Originally Posted by Dewey Finn
(Do you really think there's any danger that Citibank is going to collapse any time soon? And if it does, we've all got big problems.) If you are concerned about the insurance limits, I'm fairly certain you can buy additional insurance to cover the amount in excess of $100,000.
Just make sure the insurance company doesn't keep their reserves at Citibank.

Zev Steinhardt
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  #17  
Old 03-23-2007, 11:27 AM
drachillix drachillix is offline
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Quote:
Originally Posted by Klaatu
What do big time lottery winners do with the cash?

Say I win the Powerball and have 50 million bucks after taxes. What do I do with the money, short term, just put it in the bank?
Banks are safe enough holding places but you are going to want that money to start working for you ASAP.

If you are sitting on 10 million in a generic checking account...no real return.

Standard savings account @ 1% or so $100K/year or about $273/day in interest.

Get a better rate, say 3%, make that $819/day.

Find some decent investments that average out to about 8% after taxes $2184/day.

Personally I could find a way to eek out an existence on $1000/day and watch my millions grow. As my principle grows I can give myself a small raise every year and still have a growing fortune, kids at Stanford, a couple nice houses in nice areas of the US, a couple dozen timeshares scattered across the globe, and a good basic mercedes or two at each home.
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Old 03-23-2007, 12:16 PM
vetbridge vetbridge is offline
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How much would a standard king-size mattress hold? What about a California king?
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Old 03-23-2007, 12:19 PM
CJJ* CJJ* is offline
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It seems to me the ultimate tragic irony that there are not only lottery winners who have rued their enormous windfall, but that the story is incredibly common; this article from Money magazine is just sad.

Based on the Money article, it seems there are three common pitfalls to winning the lottery, even after you learn that that $100 million dollar prize is actually only about $30 million:

(1) It's a natural impulse to be overly-generous to friends and relatives, but it is very common for the money to blind these folks to how manipulative anyone can be.

(2) people miss the hidden costs on large purchases; the number 1 to-do on lottery winners' lists is usually "buy a house", but larger houses often have not just larger expenses (an overlooked but not unreasonable fact of life), but exponentially larger expenses, i.e. if a $200,000 house costs X to maintain, that doesn't mean a $2,000,000 house costs 10X to maintain; it's often closer to 30X or 40X.

(3) everyone thinks they're a millionaire after they've won the lottery, and as such are entitled to the "millionaire lifestyle" they imagine all wealthy folks have (spending every day on a yacht, limitless travel, etc.). In reality most wealthy folks live much more quietly than in "champagne wishes and caviar dreams" as seen on TV.

Yes, a few of the folks in the Money article had some bad breaks (particularly the guy whose ex-girlfriend successfully sued him for part of the winnings), but overall they just blew the money foolishly. Personally, that just amazes me...

Last edited by CJJ*; 03-23-2007 at 12:21 PM.. Reason: Fixed link, typos
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  #20  
Old 03-23-2007, 12:34 PM
postcards postcards is offline
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Quote:
Originally Posted by hotflungwok
One of the things you have to do when you win a big lottery is arrange for a special bank account to hold it. The lottery will only wire the money to an account set up for this purpose.
Good to know. I can't imagine having to haul that 4 x 8 foot check into a bank; and just think about how big you'd have to sign your name on the back.
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  #21  
Old 03-23-2007, 12:38 PM
garygnu garygnu is offline
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Quote:
Originally Posted by vetbridge
How much would a standard king-size mattress hold?
If you filled a 12 inch tall King (76x80 inches) entirely with $100 bills, you could fit ~$105,892,500

Quote:
What about a California king?
(72x84 inches) ~$102,827,200

more if you stuff the box spring, too.
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  #22  
Old 03-23-2007, 12:43 PM
Exapno Mapcase Exapno Mapcase is online now
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Quote:
Originally Posted by ParentalAdvisory
I would spread out a bunch of CD's up to the limit of the FDIC insurance for a safety net and count them as bonds in a portfolio. The rest I would setup a portfolio at Vanguard or Fidelity. They have experience in the multi-million dollar account business (just not insured, which is the reason for CD's). From there, I would forward all dividends, interest, and capital gains to a money market account and that is where I would live off my "salary". I would actively avoid any and all "advisors", except a personal laywer and a professional tax advisor. Any other type of strategy would not be in my best interest, no matter how much they think they can't beat the system.
I agree with others that is about the worst possible strategy short of sticking the money in a mattress.

The interest rates are the lowest you can find and CDs have restrictions on when you can use the money. And why in the world would you forward your dividends to a money market account at low interest rates when you could reinvest the money in your portfolio for a high interest rate? Don't you know that today you can treat portfolios exactly like a checking account and draw money on them to suit you needs? You sound like someone who doesn't currently do large-scale investments and has no idea about what is available in the real world.

Financial advisors can be crooks, true. But if you go to one of the big-name investment houses you can be sure that your money will be safe and that you'd be dealing with people who routinely handle far more money than a mere lottery winner ever can dream of. And your returns will be far greater and even safer than the silly scheme that you thought up.
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  #23  
Old 03-23-2007, 02:24 PM
DrDeth DrDeth is offline
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Take 10 Million (or about 1/4 or so of your winnings) down to a good Non-profit org, such as Consumer Reports. Buy an Annuity. That's a nice tax deduction and aound $50K/month income for the rest of your life. And when you do nigh inevitable and piss away the rest of the $40M, you'll still have that $50K/mo.

You can get better % from a Life Insurance company for annuities, but from a Non-profit you get atax deduction, too, which you will need badly.
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Old 03-23-2007, 02:25 PM
RickJay RickJay is offline
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Quote:
Originally Posted by Sunspace
Why?

This is just for the short term (weeks or a couple of months), until the winner gets sorted out. Is there a maximum limit to what a bank account can hold? I know that only the first $100 000 (or whatever) will be insured (FDIC, CDIC, etc), but surely you can put more in? If I resented a lottery cheque for $50 million at my local RBC, presumably they'd check that it was real (by phoning the lottery corporation?), but would they be unable to deposit it?
I've little concern my ultra-huge megabank's going out of business. My first act would be to go straight to the bank, speak to a manager to ensure nothing went awry, and then deposit the entire emount in my account.

(Canadian lotteries pay the entire jackpot up front, and there's no tax payable.)

After that, I'd go to my investments man and our accountant, who've been working for our family for 25+ years, and sort out how to live in style while investing most of the dough.

Any REALLY big jackpot, half goes to family, but that happens up front and is permanent; a quarter to my side, a quarter to my wife's, only given to a few select people and that is the last nickel anyone else gets. Then we plan out exactly what we want to buy, figuring the carrying costs and go from there; the job, really, would be to work with our investments man to determine how much we needed to put awayto have a low risk but conseiderable income, and therefore how much we could spend right away.
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  #25  
Old 03-23-2007, 04:15 PM
ParentalAdvisory ParentalAdvisory is offline
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Originally Posted by Exapno Mapcase
I agree with others that is about the worst possible strategy short of sticking the money in a mattress.

The interest rates are the lowest you can find and CDs have restrictions on when you can use the money. And why in the world would you forward your dividends to a money market account at low interest rates when you could reinvest the money in your portfolio for a high interest rate? Don't you know that today you can treat portfolios exactly like a checking account and draw money on them to suit you needs? You sound like someone who doesn't currently do large-scale investments and has no idea about what is available in the real world.
I think you seriously misunderstood me... I didn't intend to convey that I would spread all of the money in CD's, I'm not that foolish!

What I meant was something along the lines of the following with a net cash value of 50 million after taxes:

2 million spread between 20 different banks at 100k each for a safety net. Sure, Citi isn't going anywhere now, but neither is a pre-Enron type company either , but it's about diversification of banks to guarantee these CD's up to FDIC limits. It's also a backup to investing in a volatile stock market. It's just one big safety net to insure that I won't have to work for the man anymore, that's all. 20 banks might seem extreme, but so what, I have 50 million!

The rest, likely a conservative 60/40 stock & bond ratio and an international holding of 40% of my stock holdings with a company like Vanguard or Fidelity. And forwarding dividends to a money market account to live off of. The capital gains will be a bitch come tax time to sell shares every time I want cash. Also a good reason to forward dividends and capital gains to a money market account is that it allows me to rebalance every year for my target allocation so reinvesting them doesn't screw that up, nor does it mess with the cost basis come tax time. I would treat my money market account like a checking account, and no other stock or bond funds - that wouldn't be wise. What are you doing in your real world Mr large-scale investor?

If it's investing in real estate and Casino's, well why the hell would I bother? I have 50 million! Something like that just brings in extra risk that isn't need and would be better off in like 4 funds total for a lazy investor stock/bond portfolio.
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Old 03-23-2007, 05:31 PM
iamthewalrus(:3= iamthewalrus(:3= is offline
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Quote:
Originally Posted by DrDeth
Take 10 Million (or about 1/4 or so of your winnings) down to a good Non-profit org, such as Consumer Reports. Buy an Annuity. That's a nice tax deduction and aound $50K/month income for the rest of your life. And when you do nigh inevitable and piss away the rest of the $40M, you'll still have that $50K/mo.

You can get better % from a Life Insurance company for annuities, but from a Non-profit you get atax deduction, too, which you will need badly.
For anyone likely to spend his way to poverty, I doubt an annuity will do much good. After all, there are plenty of institutions willing to extend you credit based on your ability to pay for it with the income from the annuity, and if you can't manage to hold onto the millions you have, why would you worry about spending the millions you don't have?

Michael Jackson owned the publishing rights to a bunch of Beatles songs, a sizeable annuity in effect, as we're not likely to stop buying copies of the Fab Four's vocal stylings anytime soon. But he's got more debt than they're worth, do to a combination of lavish spending and legal fees, and was forced to sell off part or all of them not long ago.
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  #27  
Old 03-24-2007, 12:45 AM
Cunctator Cunctator is offline
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When my brother won the first division prize in Lotto he certainly banked the cheque straight away before he and his fiancée decided what they should do with the money.
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  #28  
Old 03-25-2007, 10:09 PM
Colophon Colophon is offline
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Originally Posted by hotflungwok
One of the things you have to do when you win a big lottery is arrange for a special bank account to hold it. The lottery will only wire the money to an account set up for this purpose.
If true then that's a shame. I'd happily miss out on a few days' interest to dump the cheque in my current account, for the pleasure of seeing 8 figures on the "current balance" at the ATM
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  #29  
Old 03-25-2007, 10:27 PM
Triskadecamus Triskadecamus is offline
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You know, I am sixty year old man. If I win the lottery tomorrow, it will be 21,300,000 in after tax cash. The tax withheld is far more than the amount I will eventually actually have to pay, since I certainly intend to give at least %10 per cent to charities. That leaves me with 19,130,000, and no obligations at all, with a pretty much guaranteed tax refund next year of well over half a million.

I really don't see the need for a particularly sophisticated "investment portfolio" to assure me of having enough money for my old age! This is my old age, and in this case, I am one seriously rich old fart. My heirs will get a bit up front, and can sit and gnash their teeth as I spend it on showgirls and fast cars.

I can blow a hundred thousand a year on crap, and as long as I don't live more than thirty years, I am still going to be rich, even with my money in CD's. Hell, I could just take the annual payout, and get a megabuck and a half after taxes for 26 years, and at the age of 86, my twenty year old new trophy wife can divorce me! (Assuming I have managed to spend it all every year until then.)

Why would I need to be a prudent investor?

Tris
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  #30  
Old 03-25-2007, 10:47 PM
Quiddity Glomfuster Quiddity Glomfuster is offline
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The people who have stuck by me for a long time would get prezzies. I would talk to my financial guys and between us we'd figure out enough dough to keep me flush till the end of my days without ever working for pay again.

The rest would go into a fund. I might take whatever it takes to endow a chair at my alma mater. Otherwise, either I'd hire my financial guys to help run a foundation or else I'd hand most of it over to a foundation whose goals are the same as mine.

The one extravagance? I've always loved Bob Mackie's clothes and I'd see if he'd do a dress for me. And then I guess I'd have to spring for a suitable event to wear it to.
Then it would be back to my life as a regular schlub. I'd travel and do volunteer work and study to occupy myself thence onward.

Forgot to add: YMMV. And that there is a book out someplace that tells the sad tales of what happened to several lottery winners. It's mostly a cautionary tale, I gather.

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Old 03-25-2007, 11:09 PM
gonzomax gonzomax is offline
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Cable TV has had 2 separate shows about lotto winners. If the winner was a reasonable person and did not change his life too much he did fine. If they got a huge house and a fleet of cars they were doomed. The poorer a person managed money when they didn't have it ,the worst they did when they got it. Trying to buy happiness through conspicuous consumption.
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Old 03-25-2007, 11:56 PM
RickJay RickJay is offline
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Quote:
Originally Posted by gonzomax
Cable TV has had 2 separate shows about lotto winners. If the winner was a reasonable person and did not change his life too much he did fine. If they got a huge house and a fleet of cars they were doomed. The poorer a person managed money when they didn't have it ,the worst they did when they got it. Trying to buy happiness through conspicuous consumption.
Of course, those people would probably have ended up broke anyway. If you can't manage your money, you can't manage your money.
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Old 03-26-2007, 12:31 AM
Exapno Mapcase Exapno Mapcase is online now
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Originally Posted by ParentalAdvisory
What are you doing in your real world Mr large-scale investor?
We keep enough in our checking account to pay bills. Everything else goes into a 401-K or an IRA or a portfolio at a Big Name firm. That latter includes mutual funds, stocks, bonds, cash, and every other possible variant on a balanced diversified portfolio. If we wanted we could use it directly as our checking account, writing checks against it just like we could at any bank or credit union.

Pulling out money to go into a money market account is foolish. We could incorporate that into the portfolio if we chose. You can do anything inside a portfolio if you choose. And their computers automatically spit out cost basis at the end of the year so we have no work to do. The firm either balances or moves money for us or we can direct that money goes to certain items.

There's simply no need today to do any of the complicated maneuvers you talk about. Financial firms are far more sophisticated than anything you can do.

And before anyone asks: no, we're not rich. Not even close. The Wall Street Journal just had a chart that said it took $6 million to get into the top 1% in this country. We don't have even that first million.

But we don't have to. You can get all the advantages even if you have much less money if you know what you're doing.

It is not the only way to go. However, unless you want to spend large amounts of time devoted to manging your money letting professionals use their sophistication is cost effective and time effective.

And if you're a lottery winner it saves you the ten years you'd need to spend to get yourself up to speed on these issues for multi-millionaires.
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  #34  
Old 03-26-2007, 01:04 AM
Klaatu Klaatu is offline
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Thanks for the replies. If I win, I won't forget about you all.
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Old 03-26-2007, 10:15 AM
Bill Door Bill Door is offline
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If you guys ever want to see one of these windfall disasters happen on a small scale, watch a Showtime documentary titled "Reversal of Fortune" where a homeless man is given $100,000 to do whatever he wanted with.

They chose someone who was surprisingly articulate, no obvious drug habits, seemingly healthy, or at least as healthy as you can be while living under a bridge and collecting cans for beer, cigarettes, and food.

There's probably room for debate about whether it was irresponsible or not, they did set him up with a counselor and a financial advisor, but he refused their advice and his life ended up the same, or maybe a little worse than before the documentary began.

The Wiki article on it is as accurate as I can remember. It was really sad, like a slow motion train wreck.
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Old 03-26-2007, 12:35 PM
Bootis Bootis is offline
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Quote:
Originally Posted by garygnu
If you filled a 12 inch tall King (76x80 inches) entirely with $100 bills, you could fit ~$105,892,500


(72x84 inches) ~$102,827,200

more if you stuff the box spring, too.
here's $250 million: http://www.i-am-bored.com/bored_link.cfm?link_id=22478
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  #37  
Old 08-05-2013, 07:50 PM
donnyj53 donnyj53 is offline
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Lottery winners and banking the money

First, get advise from your lawyer and accountant. Second, go to your bank and have them set up a special account for millionaires. The money can then be wired into that account. You can't put the money directly into your normal personal checking account. After the wire transfer is complete you can transfer some or the money into your checking account if that is what you want to do.
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  #38  
Old 08-05-2013, 08:06 PM
bump bump is offline
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Join Date: Jun 2000
Quote:
Originally Posted by ParentalAdvisory View Post
I would actively avoid any and all "advisors", except a personal laywer and a professional tax advisor. Any other type of strategy would not be in my best interest, no matter how much they think they can't beat the system.
Foolish. You'd really need to retain a capital management firm of some kind; the idea isn't to "beat the system", but rather to diversify and wisely invest so that you make money, and in the case of economic downturns, lose as little as possible.

Not having that sort of advice would mean that you'd probably both make a lot less than otherwise, but also potentially lose more when/if things go south as well.
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  #39  
Old 08-05-2013, 08:15 PM
DrDeth DrDeth is offline
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Join Date: Mar 2001
Location: San Jose
Posts: 23,046
Wow, a zombie from 2007.

Annuities, charitable annuities . Your college or any major nonprofit will happily take your money, give you a tax deduction, and lifetime income.
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  #40  
Old 08-05-2013, 08:17 PM
Ethilrist Ethilrist is offline
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Join Date: Nov 2000
I'd build myself a compound and invest in anti-zombie weaponry. They're cropping up everywhere these days...
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  #41  
Old 08-05-2013, 08:42 PM
leahcim leahcim is offline
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Join Date: Dec 2010
Location: New York
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Quote:
Originally Posted by Dewey Finn View Post
(Do you really think there's any danger that Citibank is going to collapse any time soon? And if it does, we've all got big problems.)
And this is the moment when I realized that this was a zombie thread from before 2008.
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