Million-Dollar Lottery Winners Face New Financial Decisions

by Mark Friedman  on Monday, Jan. 16, 2012 12:00 am  

Lottery tickets at the Site store on the corner of Cantrell Road and Kings Row Drive in Little Rock. (Photo by Michael Pirnique)

On larger wins — not a mere $1 million — there will be immediate decisions to make, such as choosing to take the winnings in a lump sum or have them spread out over a number of years.

The financial adviser can figure out what’s the best option.

Bolhouse said she would advise a winner to take an annuity rather than a lump sum. But Ed Mahaffy, a principal at ClientFirst Wealth Management LLC of Little Rock, said the team of advisers would have to run the numbers to determine the best option.

“If, for instance, the annuity rate is 5 percent, you (and your team of professionals) may feel that you can do better by investing the cash value lump sum,” Mahaffy said in an email to Arkansas Business. “On the other hand, if the annuity rate is 8 percent, you may be inclined to take the annuity.”

Bailey, who took his Pow-erball win in a lump sum, couldn’t be reached for an interview. But when the Arkansas Democrat-Gazette tried to interview him, a man on Bailey’s property flashed a gun at the reporter and told him to “Get out of here,” according to a Feb. 10, 2010, article.

Financial Advice

Financial adviser Stephen McNamara, head of McNamara Financial Planning LLC of Jonesboro, said he would advise lottery winners to stop spending money immediately and put a financial plan in place.

“They feel it’s a large amount and they feel like they can give away large amounts,” McNamara said. “It tends to disappear quickly when you do that.”

He said it was critical for lottery winners to not go shopping for luxury items right away.

“You don’t want to have a huge change to the lifestyle of a millionaire only to find out that it takes more than a million to live like a millionaire,” McNamara said.

Corkern, owner of Barry M. Corkern & Co., said he would demonstrate to winners how taking home $680,000 would impact their fi-nancial goals.

Also on top of the to-do list for Corkern would be determining the client’s previous financial condition.

 

 

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