We always hear the stories about the big time lotter winners that are broke 7 years later. Are there any stories about lottery winners that bought companies, invested wisely, etc. and have subsuequently doubled their fortunes?
Here are some. It’s just not a great story for the masses. The public seems to prefer stories where the mighty fall, or the destitute are saved by good fortune. But the lucky winners investing wisely and succeeding don’t sound much different than the winners in “life’s lottery” who inherit fortunes or gin the system to their advantage.
There’s a family in my neighborhood who did well. The father won something like a million and a half, two million maybe, almost 20 years ago. He bought 3 lots and had a large but not crazy huge house built, and a large pole barn with lots of parking, put in a pool…nothing super extravagant but nice. He then bought a couple used limousines and started his own limo service. Considering our neighborhood is three miles from a large international airport, good idea.
As his kids grew up, a couple of them joined the business and one went to school and became a doctor. The business is still doing well, even in this economy, and the two kids in the business with him bought the lots on either side of him. They have almost an entire block to themselves and seem to be doing well.
I’ve met someone who won multiple millions 15 or so years back. He’s a friend of my ex’s family. Seemed like a nice guy. He paid off his mortgage, bought houses for his children, gave some money to charity. He’s still living comfortably off his investments or whatever you do with massive amounts of money.
I think most big lottery winners don’t squander it, it’s just a meme.
Johnny Bonanza, a guy at my work, won 50 dollars every month for the next 10 years. Did change his lifestyle a bit to be sure, but he is still the jolly good 'ol JB that I used to know.
I’d say most of them don’t squander it. Basic math, really. All the stories mention the same couple of dozen losers. But there have been how many winners since the lotteries started? You just don’t hear about the sane people.
The step-dad of a guy I went to high school with won 8 million way back in the lat 80’s and did quite well with it. He was already a successful business man, and the at that time the money was paid in 25 annual installments.
The wife of one of my very best friends won $350K 5 years ago. Not a huge amount I know, but an amount that could be quite easy to piss away. Instead they paid off their mortgage and all their bills, traveled a bit and put about 100k in some low risk investments.
I’m sure there are lots, as others have said. It can be hard to find “Dog Bites Man” stories though even if they are everywhere.
Is it more likely that one will squander their winnings if they get a lump sum vice getting it in installments over a set number of years?
In Australia, all the lotteries are lump-sum. The man I mentioned in my post got “multiple millions” (that’s how it was described to me) in one go.
Instalments, to me, smack of the patronising “poor people are poor because they’re idiots with money” meme. Is that the official rationale in the US, or is there some other reason for paying by instalment?
The reason the US has a pay by installment method is so that they can show a higher number for the jackpot, which gets people more excited, and gets more of them playing. The lottery then can say its a $100 million jackpot, but only needs to put away ~$50 million into very conservative investments (usually US treasury bonds) to pay out the jackpot over 30 years. If you take the lump sum, you only get the the $50 million, but with even mildly risky investments like tax-free municipal bonds, or high grade corporate bonds, you would be better off over all.
Ah, bait and switch. Thanks for explaining.
If I win the lottery I plan to spend most of it on forty year old scotch and 20 year old hookers. I may squander the rest.
What, no blow?
I don’t know. I only know one know one lottery winner personally. He is my ex wife’s uncle. I wish I could use him as a positive example but nope, I think he wrote the book on how to screw up your life the most ways possible after winning the lottery.
The four people who I know who won are still down-to-earth, reasonable people who spent their winnings wisely.
4 beats 1, right? 
Oh, please, the lump sum pay-out is the “sucker’s bet”. What “mildy risky” investments will allow you to double your money safely to get back to the amount of the original jackpot?
For any given jackpot the lottery only has half the amount of the jackpot on hand. Say the jackpot is $100 million, the lottery has only $50 million dollars in the pot. And they are happy to give you that money in a lump sum pay out and be done with you. They still get the advertising benefit of saying that you won a $100 million dollar jackpot.
But you are going to be heavily taxed on this huge one time payment and end up with $25-30 million left, maybe. And then you are going to spend *none *of this money and invest it how to get back to the original $100 million?
If you take the payout over time, the annuity, you will be taxed at a lower rate for each payment and receive the full jackpot, minus the taxes over time.
But most people do not want to wait and are happy that their $100 million is really only $25 million.
Here in the U.K. it’s the full amount only. In America, is the annuity index-linked?
BINGO!
My personal rule of thumb is to divide the notional (advertized) prize amount by 4 to get the real after tax cash prize.
Given that interest rates are so low these days, I suspect dividing by three might get a more accurate answer, but I haven’t bothered to prove that to myself.
Back in the 80’s when interest rates were much higher, you had to divide by five.
So that $500 million recent prize was more likely worth $125 to $167 million after “annuity interest” and taxes.
Generally take the cash amount. Even if you can’t invest it better than they can, you’ll help your family avoid an estate tax trap if you die. Estate tax is owed on the entire remaining balance to be paid out on the prize annuity. Families in that situation would have to borrow against the future winnings which obviously will be done at rates favorable to the lender.
I disagree. With the economy in the shitter and interest rates down, the lump sum is more like 75%. In fact, the cash payout for the current MegaMillions is 73.333%. I can invest much more wisely than the clowns at the lottery commission, who have to play it safe. Invest in a couple of index funds like Janus and Roberta’s your aunt’s live-in lesbian lover.