by Ryan Hart | Updated on December 2, 2020 | Post may contain affiliate links. As an Amazon Associate we earn from qualifying purchases.
I surveyed 1,000 adults in the United States to find out what they would do if they won the lottery.
Financial experts often give the same basic advice to lottery winners: stay quiet, hire a financial advisor, and create an estate plan.
But is this what people would actually do if they won the lottery?
What I discovered might surprise you.
In this post, you’ll learn how lottery winners plan to manage their money, if they would set aside money for taxes, and whether or not they would keep playing the lottery.
Ready to learn more?
In contrast to what most financial experts recommend, only 38.1% of U.S. adults would take the lump sum payment option if they won the lottery.
Multi-state lotteries like Powerball and Mega Millions offer two payout options: 30-year annuity or a lump sum worth approximately 60% of the jackpot value.
A $100 million jackpot would only pay about $60 million if you take the lump sum option before taxes.
If you choose the annuity payment plan, you would receive the $100 million jackpot paid out over 30 years.
Financial experts usually recommend taking the lump sum option and investing it to take advantage of compound interest.
A $60 million lump sum investment in the stock market at a 7% return over 30 years would balloon into $456,735,302.
In contrast, if you invested your annuity payment in the stock market each year at a 7% return, you would only have $264,953,017 at the end of 30 years. That’s over 40 percent less than if you had taken the lump sum option.
How much would a $100 million lottery jackpot be worth in 30 years at 7% interest compounded annually?
If you win the lottery in the United States, 24% of the winnings are withheld for federal income tax.
You may also have to pay state income tax on your winnings.
However, depending on your tax bracket, you could owe an additional 10% of your winnings at tax time.
On a $60 million lump sum jackpot payment, that could add up to an additional $6 million tax bill!
Knowing this, I was shocked to find out that only 27% of Americans would set aside money to pay taxes if they won the lottery.
40.1% adults in the U.S. would hire a financial advisor to manage their money if they won the lottery.
Even though financial experts strongly encourage lottery winners to hire a financial advisor, most people in the U.S. feel comfortable managing their own money.
Sadly, one-third of lottery winners eventually declare bankruptcy.
Only 25.6% of survey respondents say they would create a living trust if they won the lottery.
Financial experts often recommend lottery winners hire an estate attorney to set up a living trust in order to protect their winnings.
Living trusts offer legal protection and tax benefits to wealthy individuals, such as lottery winners.
Despite this advice, our survey results reveal that the majority of Americans are comfortable managing their lottery winnings without the protection of a trust.
20.7% of adults that won the lottery say they would keep it a secret from friends or family.
One of the most common pieces of advice for lottery winners is to keep quiet and not tell anyone.
Experts reason that lottery winners are at a higher risk of frivolous lawsuits and should remain anonymous.
Another popular argument for keeping it a secret says lottery winners will be constantly bothered by “zombie” relatives looking for a handout.
The results from our survey clearly indicate that most Americans are not worried about what others might think of them if they win the lottery.
Surprisingly, 9.5% of Americans say they would continue playing the lottery after they won a jackpot.
Financial experts continue to beat their drum that the best way to “win the lottery” is to not play at all.
Considering that Americans spend over $85 billion on lottery tickets each year, it’s clear that most people do not care whether the odds are in their favor or not.
To put that number in context, Americans spend 3.27 times as much on lottery tickets than they do on books each year ($85 billion vs $26 billion).
It seems that they enjoy playing for the love of the game and the excitement it gives them.
And now I’d like to hear from you.
What would you do if you won the lottery?
Did any of these survey results surprise you?
Either way, please leave a comment below right now.
Study Details and Methodology:
We conducted this study as an online survey in October 2020 and received responses from 1,000 adults in the United States. The results published here have a 3.1% margin of error with 95% confidence based on a U.S. adult population of 255 million.