How to Invest Large Sums of Lottery Money

Turn your lottery winnings into a lifetime income.

If you are lucky enough to win a big lottery payout, you can be set for life and never have to worry about finances again. You could also blow the money in just a few years. The choice is up to you and how you choose to invest your windfall. If you invest your lottery winnings wisely, you can enjoy a great lifestyle now and still have money left to pass on to your children and grandchildren.

Instructions

1. Meet with a CPA or tax planner to talk about ways to minimize taxes on your windfall. In some cases it may be advantageous to spread the payments out over time with an annuity. In other cases it would be best to take the money in a lump sum, pay the taxes and invest the rest. Get the advice of several experts

2. Find the total amount you will receive after taxes. Your accountant can provide you with this information. Calculate how much income that money will generate at several different interest rates. Keep in mind that a higher return also means higher risk. If the payout is a large one, there is no need to take a lot of risk to generate a sufficient income. For instance, a return of just 3 percent on a $10 million nest egg gives you an annual income of $300,000 while leaving the principal untouched.

3. Shop around for investments that provide safety and stability while still offering a solid interest rate. Some examples of these investments include Treasury bonds, certificates of deposit and investment-grade bond funds.

4. Use the CDARS program to invest your lottery money in FDIC-insured certificates of deposit without worrying about the $250,000 insurance limit. This program allows you to invest a large lump sum and spread your money around to many different banks, thus keeping all of your money insured and providing you with a safe and reliable income.

5. Invest some of your lottery money in stocks and mutual funds if you wish. Stock investing can provide future growth and help your nest egg grow larger, but if you are working with a very large payout, you do not need to take a lot of risk.

References

• CDARS Program: CD Sales
• Mega Millions: FAQ