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Can you invest the money you win from lottery?

Winning the lottery can be an exhilarating and life-changing experience. After the initial shock wears off, one of the first things lottery winners have to decide is what to do with the money. With lottery jackpots routinely in the hundreds of millions or even billions of dollars, winners are suddenly faced with sums of money beyond anything they’ve likely ever managed before. While it may be tempting to splurge on luxury items or travel the world, investing at least a portion of lottery winnings is often a wise move for long-term financial stability.

Should you invest lottery winnings?

Investing a large windfall like lottery winnings has many potential benefits:

  • It provides ongoing income beyond just the initial lump sum payment
  • It helps protect against inflation eating away at the purchasing power of the money over time
  • It diversifies your assets rather than just having everything in cash
  • It prevents you from spending the entire amount too quickly
  • It allows the money to potentially grow substantially through compounded returns

That being said, investing does involve risk and requires financial knowledge and discipline. Some lottery winners may prefer to play it safe and keep the money in cash. But for those looking to make their winnings last and work for them over the long run, investing is likely the superior choice.

How should you invest lottery winnings?

Lottery winners have a few basic options for investing their windfall:

Retirement accounts

Contributing to tax-advantaged retirement accounts like 401(k)s and IRAs is a smart way to invest lottery winnings. For 2023, you can contribute up to $22,500 to a 401(k) and $6,500 to an IRA. These accounts grow tax-free and withdrawals in retirement are taxed as ordinary income. This can help lottery winners squirrel away a sizeable nest egg in accounts with substantial tax perks.

Brokerage accounts

Standard brokerage accounts offer the flexibility to invest in stocks, bonds, mutual funds, ETFs, and other assets of your choosing. While they don’t have the same tax advantages, brokerage accounts give you open access to your money at any time if needed.

Real estate

Many lottery winners invest a portion of their winnings in real estate, such as rental properties. This can provide ongoing income over time. It also gives your money exposure to the potentially lucrative housing market.

Hybrid approach

A diversified approach using a mix of these and other investment vehicles is likely the best strategy. This balances tax-advantaged retirement accounts, flexible brokerage investing, and tangible real estate while mitigating risk.

How much should you invest vs spend?

Exactly how to split a lottery windfall between spending and investing comes down to personal preference. But the following factors should help guide lottery winners:

  • Size of the jackpot – The bigger the winnings, the more you can afford to spend frivolously while still investing a substantial sum.
  • Other income sources – If you have an ample income aside from the lottery winnings, you don’t need to invest as much for ongoing needs.
  • Debt obligations – It’s wise to pay off any high interest debts with lottery winnings before investing or spending too freely.
  • Tax implications – Keeping taxes in mind for both lump sum payments and investment income can prevent nasty surprises.
  • Your financial discipline – Those prone to overspending should invest a higher percentage to maintain financial stability.

Younger lottery winners still in their prime earning years will need to invest more to last decades into retirement. Older winners with more modest lifestyles may only need to invest a quarter or third of their winnings. Regardless, the general consensus among financial experts is to invest at least half of all lottery winnings.

Should you take the lump sum or annuity?

Lottery winners usually get to choose between accepting the entire jackpot at once in a lump sum or spreading the payments out over several decades through an annuity. Each option has pros and cons:

Lump sum


  • Full access to the money upfront for investing or spending
  • Avoids risk of lottery commissions going bankrupt
  • Can grow significantly through investing over time


  • Large tax hit all at once
  • Requires discipline not to spend it all immediately
  • May not actually come out ahead compared to annuity (situation dependent)



  • Steady income stream for life without investment responsibilities
  • Lower taxes spread out over time
  • Forces a disciplined spending plan


  • Less flexibility and control over the money
  • Payments are fixed and don’t keep up with inflation
  • Less potential for growth compared to investing lump sum

Younger lottery winners lean more toward the lump sum, while older winners may prefer the simplicity and security of the annuity. Splitting the difference and taking a partial lump sum with the remainder in annuity payments is also an option. Each lottery winner’s personal finances and risk tolerance should dictate the best choice.

How to find the right financial advisor

It’s highly recommended for lottery winners to work with an experienced financial advisor and accountant. This provides professional guidance on investing, tax strategy, and overall financial planning to make the windfall last. When choosing an advisor, lottery winners should look for:

  • Someone who specializes in wealth management for high net worth individuals
  • A certified financial planner (CFP) for comprehensive financial planning
  • A fee-only advisor who acts as a fiduciary for the client
  • Someone experienced serving other lottery winners and inheritance recipients
  • A personable advisor you trust and share common financial philosophies

Reputable financial advisors for lottery winners don’t come cheap. Their fees often involve charging a percentage of total assets under management. For a Powerball jackpot winner, that could mean fees in the hundreds of thousands of dollars or more. But the right advisor provides expertise that can help lottery winners invest and manage their money prudently for the long-haul.

Danger signs of bad financial advice

While most financial professionals have their clients’ best interests at heart, some unscrupulous advisors prey on lottery winners’ lack of financial expertise. Watch out for advisors who:

  • Promise unusually high, secretive, or guaranteed returns on investments
  • Use high-pressure sales tactics and urge quick decisions on investments or financial products
  • Tell clients to make them the sole trustee or executor of their estate
  • Recommend placing all money under the advisor’s control or investing in the firm’s own proprietary products
  • Have checkered reputations with multiple customer complaints and disciplinary issues

The combination of big lottery winnings and financial naivete is irresistible to some unethical advisors. But there are plenty of competent professionals who sincerely want to help clients manage a windfall responsibly. Lottery winners should thoroughly vet advisors and rely on recommendations from trusted sources.

Tax planning tips

Taxes represent one of the biggest costs for lottery winners. Proper tax planning is crucial to minimize the tax bite and keep more of the money invested and earning returns. Key tips include:

  • Explore the lump sum vs annuity choice carefully based on your situation
  • Don’t take the lump sum right before January 1 when you’d be taxed for two years
  • Contribute the maximum to tax-deferred retirement accounts to lower taxable income
  • Don’t immediately purchase assets expected to generate taxable gains
  • Consider moving to a state with no income tax like Florida or Texas
  • Hire a skilled tax attorney and accountant familiar with lottery taxation intricacies

Lottery winnings also impact eligibility for certain tax credits and deductions. Proper planning considers the bigger picture of your entire tax situation for savings opportunities.

Investing missteps to avoid

Some of the common investing pitfalls for lottery winners include:

  • Keeping too much in cash long-term and missing growth opportunities
  • Failing to diversity and having an unduly risky concentration in a few assets
  • Trying to time the market without the skills or discipline to do so effectively
  • Paying well above market rate for personal luxury items as investments
  • Getting overcharged on fees by unscrupulous investment firms
  • Investing based on hot tips from friends and family without doing sufficient due diligence

Like all successful investors, lottery winners need to build a diversified portfolio aligned with their risk appetite and time horizon. Sticking with conventional, established investment vehicles rather than exotic alternatives also helps avoid big mistakes.

Maintaining financial privacy

Collecting lottery winnings puts your name out in public. This makes winners vulnerable to an onslaught of friends, relatives, charities, scammers, and even thieves requesting money. To maintain financial privacy and security:

  • Have financial advisors and attorneys deal with the lottery commission on your behalf if allowed by state law
  • Collect winnings via an anonymous trust or other business entity if permitted
  • Be selective in who you tell about the win and consider partial anonymity if an option
  • Use a trust for making major purchases to keep assets out of your personal name
  • Invest through accounts without your name attached for more privacy
  • Move residences or even states if excessive harassment becomes an issue

The attention lottery winners get can be difficult to manage for the unprepared. But utilizing professionals and legal arrangements that prioritize confidentiality makes keeping a low profile much more achievable.

Preserving lottery wealth for heirs

It’s not uncommon for massive fortunes to be entirely squandered within a couple generations. Wise lottery winners take steps to prevent their wealth from succumbing to reckless spending and mismanagement by heirs down the road. Options like:

  • Using trusts to pass on the money with constraints on access and spending
  • Encouraging heirs to invest the inheritances through professional managers
  • Involving heirs in financial decisions prior to your death so they learn responsibility
  • Funding instructional programs to teach heirs about handling the family fortune
  • Incentivizing responsible behavior from heirs in your will and estate plan
  • Putting charitable contribution requirements in place for inheriting heirs

With some foresight and discipline, the investing and financial planning lessons of lottery winners can benefit multiple generations to come.


Winning the lottery brings both huge opportunities and major responsibilities. Investing at least a portion of lottery winnings promotes sustained financial security well beyond just a sudden windfall. Carefully weighing factors like payment options, tax impacts, optimal asset mix, privacy concerns, and inheritance issues allows lottery winners to maximize their returns and peace of mind. While coming into a windfall has many financial pitfalls, education and preparation enables lottery winners to invest their winnings successfully for the long haul.