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What are the potential drawbacks of winning the lottery?

Winning the lottery may seem like a dream come true, but it can also come with some significant downsides. While the influx of cash may be exciting, handling that sudden wealth can be challenging and winning can impact your life in ways you may not expect.


One of the first drawbacks of winning the lottery is the taxes you’ll need to pay. In the United States, lottery winnings are taxed differently depending on where you live. Federal taxes will take out 24% right away for the top prize. However, you may owe more when you file your tax return at the end of the year. State taxes can be as high as 8% on top of what you already paid to the federal government. Some states, like Florida and Texas, do not tax lottery winnings, but most states do have some form of tax.

Federal Taxes

For federal taxes, if your winnings are over $5,000, the organization paying out your prize is required to withhold 24% for federal taxes before giving you your money. However, you may owe more taxes when you file your federal return, especially if the 24% withheld didn’t fully cover what you owe based on your total income for the year. The top federal tax rate is currently 37%, which applies to income over $539,900 for single filers and over $647,850 for married couples filing jointly. So if your prize takes you over those thresholds, you’ll owe an additional percentage to the federal government.

State Taxes

In addition to federal taxes, most states also tax lottery winnings. This ranges from a modest 2.5% in Iowa to a high of 8% in some states like Michigan and Rhode Island. Some locations like New York City and Washington D.C. also tack on local taxes. So make sure to check the rules in your state. The amount withheld for federal taxes does not necessarily cover what you may owe in state taxes.

Risk of Bankruptcy

It may seem counterintuitive, but winning the lottery can come with a higher risk of eventually filing for bankruptcy. According to research from the University of Kentucky, lottery winners are more likely to go bankrupt within just 3 to 5 years compared to the general population. One study found that lottery winners are twice as likely to file for bankruptcy. This increased risk can come from a number of factors.


Many lottery winners go bankrupt because they take the sudden influx of cash as a license to overspend. They fall into the trap of buying expensive houses, cars, and vacations beyond their means and end up blowing through their winnings very quickly. Having millions of dollars makes it tempting to make extravagant purchases, but without saving and investing responsibly, that money can disappear faster than winners expect.


Even those with good intentions can mismanage their winnings. Some people quit their jobs immediately but then struggle without a steady income. Others make poor investment choices or fall victim to financial scams. Having a team of experienced financial advisors is important for lottery winners to help protect their windfall through smart money management. But many winners try to manage their money alone and end up making costly mistakes.

Cutting Off Family and Friends

Family and relationship issues are another top cause of bankruptcy among lottery winners. It’s not uncommon for winners to loan or give away too much money to others or have others take advantage of their windfall. Sudden wealth can also cause rifts and jealousy among friends that money can’t mend. These relationship stresses combined with bad money management can burn through a lottery fortune very quickly.

Loss of Motivation

Winning the lottery removes much of the financial motivation and drive for some individuals. After suddenly receiving millions of dollars, many people choose to stop working entirely. While quitting a job you dislike makes sense, having no productive activities or pursuits can lead to boredom and loss of purpose. People who derived a sense of accomplishment and meaning from their careers may struggle without work to motivate and challenge them. Retiring decades earlier than planned without a solid structure and goals in retirement can take a major psychological toll.

How to Stay Motivated

If you do decide to quit working after a lottery win, it’s essential to find other ways to spend your time and find meaning in your life. Take up volunteering, go back to school, pursue artistic hobbies, or start a business. Travel and spend time with friends and family. Figure out what makes you truly happy and create daily routines and plans around those activities. Having too much free time without anything productive to do can be detrimental. Creating structure, social connections, and goals outside of work is key.


What was supposed to be a joyful event can quickly become a major source of stress. A giant influx of money causes big changes in a short time period, which can be overwhelming. There’s stress around deciding what to do with the money, navigating financial decisions, and adjusting your lifestyle. The increased attention and requests for money from others can also amplify anxiety. This sudden change in circumstances is a shock to the system. Without the right coping mechanisms, it can become extremely stressful.

Managing Stress

It’s important for lottery winners to recognize potential stressors and have an action plan to lower anxiety. Take time to adjust to your new financial situation instead of making big changes immediately. Seek trusted financial and legal advice. Be cautious in deciding who to tell about your windfall and learn how to say no to requests. Make time for self-care through exercise, meditation, hobbies, and time with supportive friends and family. Consider meeting with a therapist or life coach to help navigate challenges. Don’t be afraid to ask for help when needed.

Security Concerns

A highly publicized lottery win means increased risk to your safety and privacy. Lottery winners can become targets for criminals looking to prey on the newly wealthy. It’s not uncommon to hear stories of winners being robbed, blackmailed, or extorted. Scam artists also come out of the woodwork trying to trick winners into fraudulent investment schemes. Even friends and family may emotionally manipulate winners for their own gain.

Protecting Yourself

There are steps lottery winners can take to protect themselves and still enjoy their wealth. Avoid immediately announcing your win publicly if able to claim your prize anonymously. If you must do press events, keep details about your family, home, and future plans private. Hire security if needed. Install a home security system, change all passwords, and shred financial documents. Use a trust or LLC to keep your identity private when making purchases. Move to a new home if necessary and cut off toxic relationships. Seek advice from financial experts about safely investing your money.

Strained Relationships

Winning the lottery can place strain on relationships with romantic partners, family members and friends. The dynamics often change when one person suddenly has significantly more money than loved ones and differences arise about how it should be spent or shared. Financial inequality within marriages and families can become a source of tension and conflict. There may also be jealousy from others about opportunities the winner now has.

Impact on Marriages

Sadly, many marriages and long-term relationships do not survive a lottery win. Spouses may battle over money decisions, experience distrust about how the other is spending shared funds, or grow apart over differences in lifestyle. One spouse may feel entitled to more of the winnings while the other wants to share with extended family. Financial stress ruins many relationships. It’s important for couples to communicate openly, set shared goals for funds, attend financial counseling, and not let money change their commitment to each other.

Friend and Family Issues

Winners also risk damaged relationships with friends and family. Some winners feel obligated to provide large gifts or loans to loved ones which breeds resentment on both sides if expectations aren’t met. Others have trouble saying no when asked for money. Family and friends can also become jealous of your good fortune and new opportunities or make you feel guilty for your success. Setting healthy boundaries and protecting your mental health should take priority over keeping toxic relationships.

Increased Scrutiny

A high-profile lottery win often means increased media attention and public scrutiny of your life and decisions. The world feels entitled to know everything about you and judge how you spend your money. This sudden lack of privacy can be very uncomfortable for people who value their anonymity. Winners are often peppered with questions about their plans and critiqued for purchases, relationships, and even their physical appearance. This scrutiny can be anxiety-inducing.

Coping With Scrutiny

The best way to handle increased public attention is to maintain privacy as much as possible. Avoid flashy purchases at first that will grab headlines. Don’t do interviews where you reveal too much personal information. Move to a new home if needed to get distance from media. Hire legal help to deal with requests about your finances and plans. Set firm boundaries with reporters. Recognize that eventually another news story will come up and coverage of your win may fade. Keep your real friends and family close as a support system.

Feelings of Guilt

Survivor’s guilt is also common for big lottery winners. Winning by chance alone when others are struggling financially can cause people to feel undeserved guilt. Winners may then feel compelled to help family and friends out of this guilt which can be a slippery slope. It’s easy to have constant feelings of obligation toward others and get caught up in trying to solve everyone’s problems. Guilt can lead winners to give away too much money or make other poor financial decisions.

Dealing With Guilt

It’s important to recognize that a lottery win is simply luck and chance, not something you earned or deserved over others. But you are responsible for putting that windfall to good use. Set healthy boundaries around assistance that preserve your financial health. Find charitable causes where donated funds can do the most good through research rather than just giving to every personal request. Volunteering can also help assuage guilt. Focusing on doing good versus addressing perceived guilt will lead to more positive outcomes.

Risk of Gambling Addiction

Some lottery winners fall into a dangerous cycle of gambling addiction after winning a jackpot. The initial win can give a high and thrill that winners begin chasing by gambling more. Or winners may feel invincible and that they can’t lose now that they’ve won once already. Gambling large sums because you can afford the loss creates bad habits. This risky behavior often leads to losing the entire jackpot and more. Sudden wealth can set off destructive addictive behaviors in some.

Avoiding Gambling Pitfalls

Winners should be aware of potential gambling risks and get help immediately if signs of addiction arise. Pursue other interests and ways to find excitement beyond gambling. Surround yourself with positive people who will discourage reckless behavior. Avoid drinking or drugs that can cloud judgement. Give a large portion of money to trusted advisors or financial professionals who will ration funds and not finance further gambling. Seek therapy if you have trouble stopping excessive gambling before it’s too late.

Negative Impacts on Children

If lottery winners have children or other family dependents, that sudden wealth can also negatively impact those relationships. Children may grow entitled and selfish if lavished with expensive gifts. They may have trouble finding motivation and work ethic if money is not tied to earning rewards. Wealth can warp kids’ sense of the value of money at a formative age. Extended family may also resent dependence on your new fortune. This can breed anger and distrust within families.

Teaching Financial Values

If sharing your windfall with family, it’s essential to teach positive financial values. For children, make them work for rewards through chores, strong school performance, and finding jobs as teens. Set up education funds versus handing out cash. Remind kids and extended family that the money came from sheer luck. Instill your work ethic and demonstrate philanthropy. Avoid large handouts that can breed conflict. Wealth is not inherently corrupting but requires disciplined teaching of money management.

Fighting and Lawsuits

Infighting frequently erupts among lottery winners and their circles over how to spend winnings. This often devolves into protracted lawsuits further draining the original prize. Winners may sue lottery commissions over perceived mismanagement of funds or investments gone bad. Family members may sue each other of misuse of winnings. Class action lawsuits even crop up years later from ticket buyers claiming they are actually entitled to the winnings. The lottery windfall too often leads to expensive lawsuits down the road.

Avoiding Legal Battles

To avoid legal issues, it’s critical to set up a trust and retain legal help immediately after winning the lottery. Write up contracts if loaning money to family and friends with clear repayment terms. Seek professional financial and tax advice to avoid investment lawsuits. Record conversations as needed to protect against false accusations. Research lawyers carefully to find those who specialize in lottery legalities versus general practitioners. Lawsuits will only chip away at your fortune but can be minimized with prudent legal preparation.

Loss of Long-Term Wealth

While a lottery jackpot seems like unlimited wealth, it can dwindle faster than expected if not properly managed. Tax bills eat up a large chunk right away. Impulsive spending on luxury goods, houses, vacations, and gifts to others can burn through millions in just a few years for those without financial common sense. Bad investments may lose money. Extended lawsuits and family needs may sap funds.

Lack of financial literacy and planning often leads lottery winners to end up with far less wealth than shortly after their win. The key is working with reputable financial advisors to invest wisely, limiting spending and gifts, creating a realistic budget, and not falling victim to scams. With prudent management, a lottery fortune can create generational wealth versus quickly evaporating.


Winning the lottery is full of potential pitfalls if not handled carefully. The sudden influx of wealth can wreak havoc on financial, family, professional, and personal aspects of life. The risks of bankruptcy, strained relationships, safety issues, stress, and lawsuits are real. However, with the right preparation and guidance, these drawbacks can be minimized or avoided completely. The key is moving slowly, planning carefully, maintaining privacy, investing wisely, and not letting the money completely change the trajectory of your life. A quality team of advisors can help make winning the lottery a lifelong blessing versus a fleeting windfall. While winning millions comes with challenges, those who manage their wealth responsibly can build an amazing future for themselves, their families, and their communities.