There are a lot of stories in the media about lottery winners who successfully invested their lottery lump sum payout, but new lotto winners might wonder how to get started as investors. Some lottery winners opt for an extended payment plan called an annuity, but may find that they want to be able to put a larger amount of money toward their investments after a few years. There are finance companies that specialize in converting structured settlement annuity benefits into lump sums, and recent lottery winners may find that they wish to have more cash at their disposal.
There are several investment options for new lottery winners, and while it can be confusing to create an investment portfolio at first, studies show that lottery winners who put their money into long-term investments have a much better chance of success. Fixed investment portfolios can top out around 7%, but mixed commercial real estate portfolios tend to post yearly returns closer to 10%. Of course, the first step after any lottery win is to pay existing bills, and lottery winners interested in selling lottery payments may wish to talk to finance companies about their options.
A lottery lump sum payout can help people avoid the interest that comes with car loans, medical bills, credit card bills, and mortgages; structured settlements may seem appealing at first, but some lottery winners do feel constrained by having to wait for yearly payments. There have been several lottery winners whose lotto jackpot was more than $500 million, and it could be financially advantageous to be able to invest in real estate — both residential and commercial — while interest rates remain relatively low.
Of course, there is no rulebook that tells a person exactly what to do when you win the lottery, and finance companies understand that having money available is important for people who want to invest in a new home, to pay down credit card debt, to move to a new state or to pay for teens to attend college. The great thing about winning the lottery is the chance to make an entirely new life, but scholarships and tax breaks could be a thing of the past.
Some lotto winners who choose to pursue a lottery lump sum payout may be subject to some conversion taxes: selling your annuity could incur a fee of around 10%, but could save much more than that in interest long-term. Winning the lottery is always a surprise, and sometimes a structured settlement or annuity is preferred. When lottery winners are looking to invest in property, to settle medical debt, or to invest in their education, a lottery lump sum payout may be better suited to their current financial needs.