Although many individuals aspire to hit the lottery jackpot someday, the hopes and dreams attached to such a windfall can differ quite a bit when it comes to senior citizens.
Winning the lottery, for older adults, isn't so much about realizing youthful fantasies and hopping on a private jet but rather about securing a path to inheritance for one's children and grandchildren and bolstering the finances of an older adult in the winning years.
What happens when a senior citizen wins the lottery? And what has winning meant for a handful of jackpot winners in their late years? We take a look at those things in the article below.
Is it still worth it for seniors to win the lottery?
A lot of seniors could really benefit from a huge shot in the arm for their retirement accounts — just about the same way a lot of folks do when they win the lottery. However, practical decisions about what to do with the money can get a bit more complicated for older winners.
1. Annuity vs. lump sum
In general, when you win the lottery, you have the option of taking your windfall as a lump sum or in installments over a number of years. If seniors wish to access their winnings immediately, they might need to choose the lump sum option.
Annuities, on the other hand, provide a constant income stream that may have a lot of appeal for the long-term financially insecure, especially when they aren't confident in their ability to manage a lump-sum win or understand that investing upfront in all those popular vehicles of asset growth might just be necessary for long-term financial security.
And then there are the payouts. Depending on which lottery you win and the specific rules attached to it, the bulk of your winnings might come in annuitized form.
2. Estate planning and taxes
Winning the lottery can complicate the already challenging task of planning for your inheritance. If you win a huge jackpot, you need to think about and discuss how your unexpected fortune will affect your family and their share of the estate after your death, with the estate divided among heirs and the whole affair taxed (or not) by the IRS.
These are huge amounts of money we are talking about. And if they are not handled properly, the IRS is going to (legally) grab a big chunk of them. So the win needs to be managed (and won) as if it were a very lucrative business venture. It can be a wise decision, for instance, to handle lottery winnings using a charitable foundation.
3. Health and longevity
When opting for the annuity option, retirees should not concern themselves too much with the thought of not living long enough to fully realize the potential payout. Most lottery annuities include a provision that pays off to a beneficiary for an extended period of time — often in excess of what the winner might live.
But if we retire to the Bahamas tomorrow and need those cash dollars in the next 10 days, it's better to finish what we're doing now and take the lump sum instead.
4. Purpose and fulfillment
Besides money matters, older adults frequently mull over the kind of impact their lottery win might have. For many, it is almost impossible to imagine hitting the jackpot without also helping out those nearest and dearest.
Some even contemplate how winning the lottery might enable them to create a ripple effect of good deeds that could, in some small way, change the world.
What happens to annuity payments when a winner dies?
Instead of getting a one-time payment, lottery winners might opt for an annuity, collecting their winnings in annual installments. Should the winner not survive to collect the full amount, the payout will typically continue to the end of its designated term. The rules can be specific and vary by state, so it's important to understand what your lottery allows.
For example, if the victor of the Mega Millions or Powerball should die, heirs should have a rightful claim to the deceased's winnings — unless, of course, state law doesn't permit it and the winner didn't designate their heirs.
These arrangements are complicated, and winners would be wise to consult with an attorney well-versed in both state lottery law and estate planning to ensure their winnings are passed on according to their wishes.
While every situation is unique, this collection of stories highlights how a few older winners of the lottery — whether good or bad — handled their unexpected financial good fortune.
Inspiring examples of senior lottery winners
While every situation is unique, this collection of stories highlights how a few older winners of the lottery — whether good or bad — handled their unexpected financial good fortune.
Example 1: Gloria MacKenzie (Florida Powerball winner)
When Gloria MacKenzie of Zephyrhills, Florida, won the $590 million Powerball in 2013, the event generated many headlines because she was the biggest single lottery winner in American history at the time.
MacKenzie, who is now famously quiet, nonetheless has a local presence: After winning, she donated a generous sum to her local high school (whose roofs had fallen into disrepair). MacKenzie also has established a foundation that supports education, community development, and humanitarian aid in Florida.
Example 2: Bob Erb (Canadian Lotto Max winner)
How a big lottery win can be put to good use has been shown by MacKenzie, and demonstrated even more strikingly by Bob Erb. After winning $25 million on Lotto Max in 2012, the 60-year-old Erb — an activist for the marijuana cause — continued to work and to live a modest lifestyle. Erb's case is particularly interesting because he did not pay off his house, did not buy a new one, and did not travel extravagantly.
Even before his victory, he was recognized for the good deeds he did, particularly those that benefited people of limited means. When he won, he leveraged his even greater visibility and wealth to push for a number of causes important to him, including supporting less fortunate families, the expeditious covering of certain kinds of neighborhood nonprofits, and paying for a friend's cancer treatments.
He also pushed with his newfound wealth for the legalization of marijuana, which had as much to do with his unwavering support for his neighborhood as it did with him having a good time.
Example 3: William “Bud” Post III (Pennsylvania Lottery winner)
In 1988, a 66-year-old man named William "Bud" Post III won $16.2 million in the Pennsylvania Lottery. Although most prize winners are far younger, the tale of what befell Post after he won is often recounted as a cautionary narrative because it involved family contention that could have easily been avoided, a conspicuous lack of financial judgment, and also a series of seemingly poor investment decisions made post-winning.
In the end, very little remained of the jackpot, which should have altered the quality of life for Post and his heirs. Despite facing many personal challenges, Post worked hard to support his family and community. He invested in a family business, which ultimately failed.
His story reminds us of the critical importance of financial planning and the potential perils of winning a large sum of money in the lottery, especially for older people lacking in the sorts of support systems that help them deal with sudden wealth.
Example 4: John and Linda Kutey (New York Mega Millions winners)
In 2011, a Mega Millions jackpot of $319 million was won by John and Linda Kutey, two sixty-year-olds, and seven other state employees who all worked in Albany, New York. The prize was split among the nine of them. John and Linda turned what could have been a very tempting "20-year annuity" into a cash payout after taxes of about $19 million each.
A large part of the Kuteys' jackpot went to something they considered important: the construction of a water park usable by children, in nearby Green Island, New York. "Spray Park" was the name slated for the facility, which would offer fun, safe, and interactive water features, along with a play area and a lot of shoots and ladders.
Not only did the water park have the potential to put some cool cash back into the local economy, in the summertime no less, but, obviously, its main function was to serve as an enjoyable place for kids and their families.
Considerations for senior winners
All lottery winners have things to consider when hitting a huge jackpot, but senior lottery winners have some unique considerations to keep in mind.
1. Tax implications
Taxation on large lottery prizes works like this: you win it, and then a big chunk is taken away right off the bat, and before you see a dime. While many people might think of the lottery as "winning a windfall," financial experts caution that winners must be prepared to handle that unexpected windfall responsibly.
And handling it responsibly, includes having a good plan in place to deal with the taxes you'll owe. If winners and would-be winners make tax plans before the lottery comes into play, they might be able to save some cash when all is said and done.
2. Estate planning
It is imperative that seniors have an estate plan in place that clearly articulates their wishes as to the distribution of their wealth after death. Should seniors want to leave a charitable legacy, they can create a foundation or a trust and designate beneficiaries of annuity payments.
In addition to reducing the chances of a legal squabble, an estate plan makes sure that the winner's wealth gets to the causes and individuals that matter most to them.
3. Health and longevity
The decisions made by senior lottery winners about how to allocate and utilize their winnings may be influenced by their health and life span. Those with poor health or shorter life expectancies might prefer the up-front lump sum option — and for good reason, since living in retirement can be expensive, and many retirees face hefty medical expenses.
Proper planning for long-term care can make the difference between a retiree living a secure, stable life and the opposite. Indeed, winners could set aside a percentage of their winnings for this type of expense.
4. Avoiding scams and exploitation
Scammers often go after older people. And when we think of scanning schemes, we usually think of con men bilking people out of their money, not necessarily taking advantage of what we might consider the lucky side of life.
But what happens when an older winner of a big lottery jackpot suddenly becomes a target for the bad guys? And what could richer seniors with fewer security conundrums to deal with mean for society?
It's best for these senior winners to have safeguards in place to block these scammers, like working with financial advisors and attorneys.
5. Creating a legacy
Numerous senior champions seem driven by the notion of creating a legacy that leaves a couple of "positives" behind. These champions and their families do not need to worry about "win or lose" at this point in their lives.
They go for gold to achieve something like a "golden moment." Supporting family, establishing a foundation, and channeling funds into community projects — this is wealth planning at its best.
So, is it still worth it for senior lottery winners?
While it is certainly life-changing if an elderly person wins a lottery, there are some problems and considerations involved that are not immediately obvious. Winning brings an increase in finances, of course, but seniors need to think about how to handle their new riches.
Right on the heels of the last big check, seniors must decide what to do with their money. The four stories mentioned show how some older winners have managed their windfalls or have let them manage them.
Whether or not it is "worth it" to win the lottery depends, in the end, on the particular situations and aspirations of individual seniors. Those who are good at managing money might use lottery winnings to enjoy their retirement while also establishing a legacy that benefits future generations.
Enjoy playing the lottery, and please remember to play responsibly.
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