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?
You would probably find that a very helpful advisor would turn up, with the full recommendation of the lottery.
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.
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.
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. :smack:
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’.
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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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.
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.
As they say, the problem is deciding what to do about the begging letters:
Do you keep sending them out or not? 
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.
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.
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.)
Just make sure the insurance company doesn’t keep their reserves at Citibank.
Zev Steinhardt
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.
How much would a standard king-size mattress hold? What about a California king?
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…
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.