Many Americans hope — or dream — that winning the lottery will bolster their retirement savings. But such a plan is an extreme long shot, and one investment advisers suggest shouldn't be counted upon over real savings.
Odds are about 1 in 175 million for winning the Powerball jackpot.
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Still, some lucky winners manage to win big, and in doing so, must quickly cope with investing and making sure their windfalls are protected.
Experts encourage lottery winners to find a quality adviser, not only for investments, but also for insurance, taxes, and accounting, personal finance website Kiplinger said
Lottery winners should also carefully decide which is best for them: taking a lump sum payout or annual payments.
"If you go through the entire payout in the first year, you have 19 more chances to get it right," Don McNay, the author of "Life Lessons From the Lottery," told Kiplinger. "But if you die before your payments end, it could trigger complex tax issues; your heirs may need to pay estate taxes on your remaining winnings before receiving the unpaid portion of your disbursements."
Investopedia compared money spent on lottery tickets versus investing that cash for the long term. While the stock market isn't a guarantee of earnings, putting lotto cash into certain investments could yield a stronger divided for retirement.
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"If a person spends $5 per week on lottery tickets, it adds up to $260 per year. Over 20 years (a typical long-term investment horizon for stocks and bonds), the total spent on lottery tickets would be $5,200," Investopedia said
. "Putting $260 per year into bonds earning, for example, 3.8 percent, would yield $7,584 after 20 years, or $11,015 on stocks earning 7.3 percent. Therefore, if you just spent the money on lottery tickets and presumably won nothing, you would be out $5,200 after 20 years, as opposed to a profit with either of the investments."
Kiplinger said five stronger investments are contributing to your 401K, paying off debt, opening a ROTH IRA, increasing mortgage payments, and investing in a taxable account.
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