If You Win The Lottery, Here's What Suze Orman Suggests You Do: Take The Cash Or Lifetime Annuity?

Unfortunately, winning the lottery is just a dream for most people. While the odds may not technically be in your favor, it's fun to fantasize about what you'd do if you found yourself winning millions – or, in some cases, hundreds of millions. 

Podcast host and finance expert Suze Orman has offered some advice for lottery winners over the years, emphasizing the importance of making informed decisions about managing sudden wealth. One of the most commonly debated and hardest decisions is choosing between a lump sum or a structured settlement.

Don't Miss:

• Can you guess how many retire with a $5,000,000 nest egg? – How does it compare to the average?
• How much money will a $200,000 annuity pay out each month? The numbers may shock you.

In 2022, Speaking at the National Structured Settlements Trade Association’s annual conference, Orman covered the benefits of structured settlements for lottery winners. She explained, “If you win a lottery, it’s no different from getting a large inheritance. All that money’s gone within a few years. Why is that? Because they don’t know how to structure their finances to last forever." 

Orman understands that not everyone’s a financial whiz. While her advice changes depending on your money know-how, she suggests a structured settlement or annuity for those new to managing large amounts of money. This approach doles out your windfall in steady chunks, stopping winners from blowing it all in a blink – a common lottery winner woe.

See Also: Many are surprised by Mark Cuban’s advice for lotto winners: Cash or annuity?

Lottery winners don't have the best track record, statistically speaking. According to the Certified Financial Planner Board of Standards, nearly one-third of lottery winners eventually go bankrupt within three to five years.

For financial matters, Orman suggests taking a lump sum. In a 2019 CNBC article, she advised, “If you feel capable of investing it, if you feel capable of managing it, and you want to do that, take the lump sum.” That way, you’re in control of your own money. 

If you're fortunate enough to win an exceptionally large jackpot in the hundreds of millions, Orman leans toward recommending an annuity in this case, too. This strategy aims to prevent the risk of spending the entire amount too quickly. Annuities often get a lot of backlash but can be the right choice in some situations. 

Trending: Warren Buffett once said, "If you don't find a way to make money while you sleep, you will work until you die." Here’s how you can earn passive income with just $100.

Orman’s advice has sometimes been criticized for being out of touch with current market conditions. In a 2011 episode of her show, she advised a Powerball winner with $3.15 million after taxes to invest it all in Municipal Bonds, suggesting a 5% return. Financial experts questioned this recommendation as unrealistic, given the prevailing interest rates.

She also touches on the significant psychological aspect of winning. She encourages winners to reflect on their ability to manage guilt, as they may struggle with having substantial wealth while friends and family do not. 

When you win the lottery, people in your life may feel you "owe" it to them to help out financially. She suggests to combat guilt, avoid the lump sum, explaining, “[If] you’re surrounded by a family, by friends, by people that you are going to feel guilty that you have so much money and they don’t take the annuity."

No matter which option they pick, Orman stresses the importance of managing their money wisely to ensure their windfall has a lasting, positive impact.

Read Next:

• This Jeff Bezos-backed startup will allow you to become a landlord in just 10 minutes, and you only need $100.
• Warren Buffett flipped his neighbor's $67,000 life savings into a $50 million fortune — How much is that worth today?