I have won the lottery: Now what?

seriously.

if you are saying 6.4 is the lump sum, then it is, by definition, after tax...at least the tax on the initial distribution.

first, you need to realize that the odds are incredibly small that you will make it - - sorry for the sobering news - but hopefully it will convey to you how big your challenge is.

second, it is not really that complex - so if someone recommends anything to you that you and your wife cannot understand, you should do nothing until you do.

third, if you hire a financial adviser, please ensure it is someone from a VERY large, VERY public, VERY recognized firm....think: Wells Fargo, Fidelity, Merrill Lynch.

last - remember that 5M in the bank, with tax-free, inflation indexed bonds, can provide you more money than you and your wife have ever made, without touching the principal......which should be your goal.

Perhaps I missed this, but why is the OP so committed to a lump sum? The annuity takes care of a lot of the self-control issues, AND you end up with a total higher percentage of the money (correct me if I'm wrong on this one.) People who get lump sums often end up screwed. This American Life did a bit on it, which I highly recommend:

http://www.thisamericanlife.org/radio-archives/episode/329/nice-work-if-you-can-get-it

cheesewiz wrote:

third, if you hire a financial adviser, please ensure it is someone from a VERY large, VERY public, VERY recognized firm....think: Wells Fargo, Fidelity, Merrill Lynch.

Cheezwiz named 3 very different types of firms, probably on purpose. I would say to not go to a fully commissioned broker like Merrill. These guys do not necessarilly have your best interests in mind, they make 100% commission so they will undoubtedly steer you towards expensive structured products Sicking and proprietary funds. They also know that you are like old ladies in that this may be the only big money you ever make, you are not big earners, at least right now, so they are going to make their money, move on, never talk to you again. Fidelity and bank-based advisors like Wells are weak.

I would go to a large or moderate sized bank, but talk to the Privte Banking or Private Client area which has salaried bankers and advisors. Honestly, you are a little small for them. You might also consider placing half or a third of your money with different advisors. When one advisor knows that there is another couple of million for them to get, they will work hard. Over time if you like them, you can give it to them. On a slightly different note, beware of any advisor who wants to invest it all right away. This works for them, because they get paid right away, but it is also a collossal market time if you stick 4 Mil in the market on the same day, if the market tanks 25% you will not be happy.

See if you can consolidate your credit card and other non-mortgage debt into a single low-rate loan. General rule of thumb is that if instead of paying it off up-front you can invest it and earn a rate of >half the rate of the loan, you're going to come out on top, since the earned interest is on an accruing sum whereas the interest paid is on a decreasing sum. Plus there are tax advantages to lots of types of debt.

If you want to retire now or in the next 5ish years, invest the money very conservatively since you're not trying to turn your 6M into 12M, you're trying to generate the cash flow to support a decent lifestyle. If you want to specifically set aside money for your kids though, you should invest that portion based on THEIR horizon, aka aggressively.

Very good advice given above. Open a trust account at a major wealth management company where you have a team working for you....Portfolio Managers, Portfolio Administrators, and Analysts and not some individual with only a few clients.

Clearly a troll, no one moves back to Jerzey!

What to do? wrote:

.... really want to move back east to NJ. Its home and we miss it.

two words for you lottery winner. Bang cock

I'd set up my end goals first and work backwards from there (taking a play from Lydiard's playbook). Look at what you want your retirement to look like and set up ways to ensure that happens. Once you have designed a plan to ensure your long term goals are met, then, you can do with the rest as you like. Personally, I'd live in the same house, pay off my bills (including the mortgage) and find a way to make a decent salary off of investments. A good financial advisor would probably be the only thing I would look for. Feel free to buy little things you've always wanted, just understand, the thrill wears off and, if you blow a lot on the "letting loose" thrill, you're stuck down the road. For me, I'd buy a really nice mandolin, some computer training I've always wanted and a decent bass and amp. Total, maybe $50,000. A lot by normal standards for sure, but, not a lear jet or anything insane.

Way Way Way off wrote:

Then I would get a job doing something I loved. Probably something simple like teaching and coaching track, where I could be around my family as much as possible and do what I want to do.

I hope you're not a troll.

You're as big an idiot as the guy who says he respects the posters of Letsrun for their advice.

Teaching is something simple where you can be around your family as much as possible and do what you want? Asshole.

Quit your job and see how simple teaching is.

Nah. In the planning stages when talking about finances, it's best to stay conservative...worse case scenario. If you get to the reality part and it's BETTER (as it likely would be if you used conservative figures) then you can adjust as necessary.

The new UncleB wrote:

Flagpole wrote:

Just being conservative.

.

No. Being inaccurate. When making importamt financial decisions, accuracy is important

osu fan wrote:

You're as big an idiot as the guy who says he respects the posters of Letsrun for their advice.

Teaching is something simple where you can be around your family as much as possible and do what you want? Asshole.

Quit your job and see how simple teaching is.

Hey idiot, hate to break it to you, but teachers work MUCH fewer hours/year than the typical American worker. You can ignore that fact if you like, but someone who works LESS should be able to spend MORE time with his family.

it ain't that much wrote:

I am in my late 50s. I still work because my wife and I like our life style and living off the earnings on $4M does not cut it.

When I saw this sentence, at first I didn't believe it. I thought, who cannot live off $4M?

Then I quickly checked the APY I'm earning in EmigrantDirect. It's currently at 0.90% !

With $4M in there, you'd only earn $36,000 per year.

Of course you can get a higher return in more risky investments, but you said you don't want to do that.

Tell your wife to pack her suitcase. When she asks where she is packing for tell her, "I don't care, just get out!"

I agree with you that living off the earnings of $4 million isn't THAT much, but the question is, IS it enough? You're also spot on about taking the lump sum...do that...always.

Some things though:

1) If you invest with Vanguard or Fidelity, a Bernie Madoff won't get you.

2) Let's see what living off $4 million can bring. If you take 4% initially, that's $160,000 per year the first year. If you ALWAYS only take 4% of the total, and the investment brings more each year (6.5% return), you can continue to take MORE each year and in 40 years be taking $379,000 per year while the investment has grown to $9.7 million. That is pretty conservative and does not keep up with 3.5% annual inflation, but with no debt, and starting out making more initially than he was while working, he could do that.

3) IF you want to adjust for inflation and make it last 40 years, then you could take $160,000 the first year, and gradually increase so that you're taking $612,000 in the 40th year. That will leave you with just $1.6 million then, so either you need to take less, OR plan to die in 40 years, OR decide that after 40 years you can take LOTS less. If you're debt free, have purchased Long Term Care insurance, you should be able to do that.

The New UncleB wrote:

Flagpole -- in what hyear are you living where the tax rate is 50%? My God.

The dude's tax bill WILL come to 50% when he adds up his Federal and his State and, maybe, some freaking City tax. Me? I'd spend it on blow and hookers, but you guys already know that.

What to do? wrote:

The 6.4 million is after taxes. We live in the western region but really want to move back east to NJ. Its home and we miss it.

For those who missed it, here is the OP saying the amount is after taxes.

If it weren't, with fed rate at 35%, states as much as 10% and other localities the tax can get close to 50%.

Taking a lump sum isn't a complete no-brainer.

They only give you 65% of your stated winnings before tax with this choice (this is a total scam and a mirepresentaion of the stated "Winnings" in my opinion).

If you take 25 year installments you get the full amount.

So you get a guarenteed return on what the lump sum payout would be.

Now most people think they can beat this return so they take it upfront.

The risk of installent payments is that if you die the payments stop and do not go to your estate or spouse I believe.

So if you take installments you receive more money and get a steady pay over time.

If you take it up front you get less money but have more time to get more IF you successfully invest. Or you can lose it all quickly and have no income to look forward to.

1) Ah...$6.4 million AFTER taxes. Thanks for clarifying that...I missed that he said that. That makes this MUCH easier (obviously) for him then.

2) I couldn't take installments just because the rest of the winnings don't go to heirs. No thanks. If a person knows that they need structured payments, they can set up an annuity or some other vehicle to give them equal payments for life if they want. Not what I would do though.

Math time:

At $6.4 million, if he gets 6.5% annually invested and takes 4% initially and adjusts up for inflation every year for 40 years, he gets to take $256,000 in the first year, $349,000 in the 10th year, $475,000 in the 20th year, $670,000 in the 30th year, and $979,000 in the 40th year. This leaves then $2.6 million left, so after 40 years he would have to pare back his withdrawal a lot. Of course, after about year 20, he likely wouldn't NEED to take so much, so he could really let that balance grow if he wanted to.

Hypothetical math favors taking the lump sum.

I just want to know how they can legally say they have a $1 million dollar jackpot and then say if you want it all now you can only have $650,000 before taxes.

I know they have their legal bases covered but it is such an obvious bait and switch.

Those that don't win don't care and those that do win are happy they've won. Whose going to sue? It seems greedy.

The lottery is such a horrible scam and a huge tax on the poor who spend more chasing the dream and then have trouble with heir bills.

They don't pay what they advertise. And the odds don't nearly match the payout.

Great deal for the states, though.

Take a bunch of money from many people saying they can win X amount.

Use some of that to cover operating expenses. Use some if it as revenue. Pay what is left to one person in amount much less than advertised and then go back and get some of that right back by taxing that person.

Is there a way I can use this business model for my own ventures?

Well, you CAN get the million dollars if you take it in installments. Not what I want to do though.