Most of the CFPs in a decent-sized city are competent to handle a $5-10M account. If you live in rural Bumfuque, your county seat is probably not where you’d find somebody suitable for even that relatively modest sum.
If somebody is looking at $300M (the take-home from a $1B headline win), that’s a whole 'nuther situation. You need the kind of advisers that deal with that sized account all the time. Those folks aren’t cheap. But since screwups with that much money have tremendous leverage to hurt you, their expense is relatively cheap insurance.
Good point. And I am certain that if you live in a non-anonymous State you will be solicited by many people being willing to help you out! In my case, my regular CFP will have a suggestion or two. Any major brokerage will have in house people to assist.
When a previous lottery jackpot reached the billion-dollar level, I saw an article that included a “sudden wealth advisor.” Apparently there are people who specialize in this, not just lottery winners but those who founded newly public companies or those who inherit money.
In Québec we have Gagnant à vie , a lottery where the grand prize is a choice between a one-time payout of 1 million dollars, or monthly payments of 1000 dollars for life. Yes, it’s tax-free, though of course any interest or capital gains on the amount are taxable. And I guess the government could change their mind about the taxes.
Kind of hard to see why anyone in Quebec would choose the $1,000/month for life. At $12,000 per year, even if you lived 80 years after winning the jackpot, you still wouldn’t have reached a million dollars, and that’s not taking inflation into account.
I’m sorry, I miswrote (I’m at the office and can’t view the site directly). It’s 1000 dollars a week. Chance of winning the grand prize is 1 in 6 million.
It’s less a question of “what type of bank account” than a question of where to do your banking. Many banks have a special division for providing banking and investment services for wealthy clients. One bank I used to do consulting work for has a number of such branches, the most impressive of which is a magnificent old building that used to be their original downtown main branch. The interior is just breathtaking – imagine a sort of cross between a magnificent mansion and a church, richly paneled and with what appear to be original 1920s era art deco fixtures. That’s where I would take my millions for my primary banking needs!
The US lottery makes yearly payments over 30 years. The lump sum that you would have gotten is placed into an annuity. Any reasonable person will do much better with investing the lump sum and an older person may not live for the life of the term. It’s really for people who know that they won’t be able to resist blowing it all.
I’m not sure that I understand your question. You could invest some of your lump sum or some of your annuity payment in foreign currency.
More important are interest rates. There is a rate at which the Net Present Value of the lump sum is equal to the Net Present Value of the string of cashflows (i.e., the annuity).
If your financial institution is offering a higher rate than that (and you think you are likely to get it), then the lump sum is better. When interest rates are low, the annuity is better.
The last time I ran the numbers, they were equivalent at a rate of 6%. But that was for a 20-year annuity, and I don’t have a financial calculator at the moment. Does anyone know what the current number is?
I believe his point was that if you took the lump sum you could move it all out of dollars before the current administration destroys the value of the dollar. If you took the annuity, you could only convert the first couple or few payments before the impending hyperinflation meant your later annuity payments may be e.g. $30M/year, but when a loaf of bread is $500K, that $30M is not a princely sum.
So the question becomes how to hyper-inflation proof your payout. The answer to which is: take the lump sum, and convert all of it out of USD before the hyperinflation hits.
Sure if you are planning on investing just in bonds or whatever. The market is going to do way better than that over time barring a disaster so bad that your dollars are going to be the least of your worries. Plus you’d diversify into real estate and precious metals. There is also the utility of having all of the money rather than the annuity having most of it. With that much capitol, you’d survive a recession just fine.
Probably gold and platinum would be better than Euros or whatever in that scenario. Would the dollar implode and the Euro be fine?
So I win the current Mega Millions jackpot, decide to take the $236,500,000 cash (after taxes), and deposit it…where? I will need to convert it to something stable like Swiss Francs, which in a one-to-one transfer would theoretically be 187,166,100 francs. Under the “Rule That Reality Guzzles Bog Water” though, how long will it take to convert dat cash, and what would my take actually be?
You would get an account at a major brokerage like Schwab or Fidelity. The lottery folks would electronically transfer it by probably the next day. You’d be assigned a high level advisor there or you’d give your CFP access and one of them would make the trade which would be instantaneous.