The Pros And Cons Of Lottery Winnings

By Simon Volkov

Lottery winnings can radically alter a person’s life in both positive and negative ways. Many people buy lottery tickets in hopes of winning the jackpot. They dream about winning millions and achieving financial freedom. They long to quit their job, travel the world, buy a mansion, and shower their loved ones with expensive gifts.

While it is true lottery winnings can bring fortune, winning large sums of money can bring unwanted notoriety and fame. Relatives you haven’t seen in years suddenly want to rekindle relationships in hopes of receiving a cash handout. Friends expect lottery winners to pay for dinner, host lavish parties, and buy expensive gifts.

Winning the lottery often brings unwanted scrutiny; especially when winners owe back taxes or have creditor liens or judgments. When a person owes money to creditors or the IRS, outstanding debts must be paid from the lottery winnings. Depending on the amount won, winners may end up with little to no money once previous debts are repaid.

Another problem with jackpot lottery winnings is taxes. Lottery winnings are taxed at both local and federal levels. Depending on the state of residence and amount won, taxes can amount to 50-percent or more. Lottery winners who accept a lump sum cash payment receive less money than those who select annual installments.


Mega-jackpot lottery winnings are often awarded through annuity payments which extend for 10 to 20 years. A structured settlement is established which provides payments on a monthly, quarterly, semi-annual, or annual basis. By accepting annuities, lottery winners can reduce their tax obligation because funds are taxed when they are received. This option allows individuals to receive more money over the long-term.

Individuals who choose to take lottery winnings as a one-time lump sum payment receive between 50- and 65-percent of the winnings. If a person wins $1 million, they would receive between $500,000 and $650,000, less taxes. The tax rate could further reduce winnings to around $325,000.

Lottery winners who enter into a structured settlement would receive around $40,000 per year against the $1 million jackpot. Depending on their tax rate, winners would receive between $20,000 and $30,000 after taxes. This would provide winners with around $400,000 to $600,000 or nearly double what they would receive when taking the lump sum payment. Actual lottery winning amounts vary depending on the winner’s tax status and state lottery regulations.

One of the most prevailing problems with winning jackpot lotteries is many winners do not possess money management skills. Statistics show the majority of lottery jackpot winners are broke within 2 years. Instead of making smart investments, lottery winners often embark on spending sprees and buy mega-mansions, fancy cars, yachts, expensive jewelry, and a multitude of unnecessary items.

Individuals who invest lottery winnings can double or triple their winnings. Instead of siphoning money on frivolous items, lottery winners should develop a solid investment plan. A variety of investment products are available and include real estate, real estate stock, stocks and bonds, and cash flow notes.

Individuals who have dreamed of starting their own business can use lottery winnings to build a solid foundation. However, before becoming an entrepreneur business owner, it is crucial to develop a solid business plan.

Lottery winners should contribute a minimum of 10-percent of their winnings into financial products such as high interest savings accounts, money market accounts, savings bonds, or certificates of deposit. It is best to consult with a financial planner to develop a strong investment portfolio and protect winnings from excessive taxation.

Lottery winnings can provide financial freedom to those who implement solid investment strategies. Those who win large amounts of money should organize a financial team consisting of a lawyer, tax accountant, and financial planner. Don’t become a lottery statistic. Learn how to invest and allow your monetary windfall to generate more money!

About the Author: Real estate investor, Simon Volkov share insights about investing

lottery winnings

and establishing financial plans to maximize winnings. His article library provides information and resources about real estate investments, financial investments, and strategies to minimize taxation at



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