Emily Irwin, Wells Fargo Wealth & Investment Management Managing Director, Advice and Planning, joins Yahoo Finance Live to discuss what Powerball winners should and shouldn’t do if they win the historic jackpot.
RACHELLE AKUFFO: $1.6 billion– that’s the Powerball jackpot now, making it the largest on record. And of course, you still have plenty of time to buy a ticket ahead of the drawing tomorrow night. So what happens if you strike it big? Well, Wells Fargo Wealth and Investment managing director Emily Irwin joins us now with a look at what to do if you’re lucky enough to win big. So, obviously, a lot of people get very excited about this. But it’s important to have a plan in place. Talk about some of the initial steps people should be taking.
EMILY IRWIN: Absolutely, and thank you for having me. The first thing to really consider is putting a communication plan in place. And that communication plan is comprised of with whom are you going to share this big news, when, and how. And so thinking about the who– friends and family, keeping that circle tight and close, and ensuring that no one’s going to share the news on your behalf is key.
Secondly, you want to comprise a team. And thinking about assembling that team, you very often can have up to a year to claim that Powerball ticket. And so thinking about that team to help you bide some time, considering how to take the payments, thinking about an attorney, an accountant, a charitable advisor, as well as an investment advisor.
And then finally, how are you going to share the news? After you determine that it’s the time to go claim your winnings, are you going to be able to minimize any scammers by ensuring some privacy? This varies state by state, but this is certainly not the time to post yourself and your winning ticket on social media.
SEANA SMITH: Emily, and then, of course, you have the massive decision on whether you should go with the lump sum, which, in this case, would be right around $782 million, or if you should opt for that yearly payout. What should people consider? And I guess, what advice do you have for that lucky winner if we do get a winner in this drawing?
EMILY IRWIN: Well, when you’re thinking about the lump sum, of course, you’re going to have more control over how you invest those assets. And for many, that is critical to their decision-making. They like the assuredness that they’re going to receive those winnings and be able to determine how to invest or spend them over the years.
By contrast, if you’re someone who you have a dollar in your pocket, and you’re going to spend it, an annuity might be a better strategy for you. Or if you’re someone that you think you’re going to have a hard time saying no, whether it’s to friends or family or organizations, you might want a little bit more peace of mind knowing that every single time that year, calendar turns over, you’re going to be receiving another payment. And so I think part of it is behavioral finance, how do you interact with your finances, and part of it is how much control do you want, and how much do you want to have that money now versus having it doled out over a number of years.
RACHELLE AKUFFO: So you really have to understand your financial personality before making a decision like this. Now, obviously, we read a lot of heartbreaking stories about people who won the lottery and end up going bankrupt, going broke. What are some of the mistakes that people should really try and avoid? What are some of the don’ts?
EMILY IRWIN: Yeah, unfortunately, there are those individuals that that winning ticket is something they wish they never had in their hand. And so some best practices are put a plan in place and put a budget in place. As insane as that sounds for someone who’s going to win that ticket, this will very likely catapult them into a different financial stratosphere. Not only what are the outlays of cash that they expect over the next few years, but what are the ongoing maintenance costs of those types of expenses?
And it might be something that they’re not used to. A financial plan or an investment plan with scenarios and analysis supporting all of their wishes and goals can really help bring some dollars and cents to maybe some of their hopes.
And then secondly, thinking about ways to really communicate with those around you, as you may be seen as a bank within your community going forward, making sure that you have some sort of a mission statement or a intentional giving statement. So you have the flexibility and peace of mind to be able to say yes and say no as you’re approached by different individuals and organizations.
SEANA SMITH: All right, Emily Irwin. Emily, real quick, are you playing?
EMILY IRWIN: Absolutely. I already have my ticket.
SEANA SMITH: Oh, good. Good for you. I was going to say, I have to run out and buy one. All right, Emily Irwin, great to have you. Rachelle, how about you?
RACHELLE AKUFFO: Absolutely, I bought my ticket yesterday. I’m not fooling around with the rush today. I was like, I bought mine. I’m ready. What would you spend it on if you won it?
SEANA SMITH: I don’t know. I don’t know what I would spend it on. I have to think long and hard about it. I don’t think there’s any huge purchase I would make right away. I think it’s most important you got to save. You’ve got to save for the future.
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