(NEXSTAR) — So you’ve beaten the infinitesimal Mega Millions odds and are now staring down a life-changing influx of cash—but what you do next with that jackpot money will decide how rich you ultimately remain. On Tuesday, the jackpot surpassed $1 billion. While many fantasize about spending the cash, the actual winners may be overwhelmed with a different feeling—anxiety.
“The biggest fear that pretty much all sudden wealth recipients have, and especially lottery winners, is that they’re going to screw it up,” said Robert Pagliarini, author of “The Sudden Wealth Solution.” He has advised clients, including lottery winners, for over 20 years on how to handle large influxes of money. He says that the goal is always to turn that lump sum into lasting wealth, but added that for lottery winners there are some must-dos.
Protect the ticket
Holding a winning ticket and knowing that a single slip of paper could easily be lost or stolen can be a terrifying feeling. Until it’s signed, a lottery ticket is a bearer instrument, meaning that whoever has the ticket can claim the money.
“They really need to document that they are the owner of the ticket,” Pagliarini said. “I would take a selfie with the ticket, I would take a video of me and the ticket, I would sign the ticket, and I would keep that ticket in a very, very safe place.”
Over the years, there have been horror stories when it comes to this nerve-wracking period after a lottery win – there was a woman in California who said she lost a $26 million ticket in the laundry. A man in Myrtle Beach, South Carolina thought he lost his winning ticket forever – only to have his wife find it.
Build your team
For lottery winners, it can be their own friends and family – or complete strangers – who try to siphon away their money. “They will want to try to separate you from your new lottery winnings, and that happens often,” Pagliarini said. “And so you need a team to insulate you and to protect you from that.”
He recommends hiring an attorney, tax advisor, and financial advisor, as well as keeping the lottery win a secret for as long as possible. If you live in a state where you have to disclose the victory, that adds a number of challenges “because now the entire world, especially this size of a jackpot, everyone’s going to be talking about.”
There’s going to be helicopters flying overhead when you go and collect the winnings like this. This stuff happens because the world gets excited. And now everyone knows that you’ve got a billion dollars that’s not good. In no circumstances is that a good thing.Robert Pagliarini, founder, Pacific Wealth Advisors
Pagliarini recommends building a media plan, sharing the news with only one trusted family member at first and staying out of the public eye when possible.
The big decision
A monumental decision that Mega Millions jackpot winners face is how to receive their winnings – in a big lump sum or spread out over years in annuity payments. If someone beats the 1-in-302,575,350 odds and wins the current Mega Millions jackpot on Friday, they will ultimately have to choose between taking the pot in 30 payments over 29 years, or the reduced lump cash sum of roughly $602 million. The decision is ultimately a personal one, and what might be ideal for one could be disastrous for another.
“My gut is that 99-plus percent of people choose the lump sum because they want the money, but the problem with that is now that they’ve got this money, if they if they mess up, if they make some bad decisions, if they get the wrong people on their team, they spend too much and there’s no do-over button,” Pagliarini said. “With an annuity, you know, you can screw up year after year after year, and it’s OK because the next year you’re gonna get a new paycheck. And so maybe for the first seven or eight years, you just blow it. But by year eight or nine, you kind of got things figured out. That means you’ve got another 20 years of paychecks coming your way to just sort of redeem yourself.”
“You’ve got to see what is the best option for you,” echoed Steven Evensen, CFP, a financial advisor with Gerber Kawasaki Wealth and Investment Management.
While the lump sum is more popular and would grant immediate access to the cash, it also means more taxes.
“You’d be taxed up to 37% federally, and then even more so depending on your state tax,” Evensen cautioned. “So I would speak to an accountant about that to make sure you aren’t kind of overspending in your head before you actually receive the money and receive your tax bill at the end of the day.”
Regardless of which payout plan you choose, Evensen recommends investing some of the money. What you invest in depends on your goals, but “low-cost mutual funds, index funds are a great place to start.”