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Message: <blockquote data-quote="Dannyalcatraz" data-source="post: 3718851" data-attributes="member: 19675">Just as an FYI, I actually know some people who won the $5M Reader's digest sweepstakes some years ago...1) In the USA, lottery winnings are treated like most other forms of income, and are thus taxable...currently, the highest marginal rate is 38%, as I recall.2) The reason the lottery commission doesn't award you the whole thing if you take it in a lump sum is the time-value of money. The reduced winning value of $xMillion today is equivalent to the full value of the lottery if the $xMillion is invested at about 7% interest for the 20+ years the lottery commission would take to pay out the full value.3)  You take the lump sum primarily because you want to gamble that you can invest the $xMillion at a rate greater than the 7% assumed interest rate.  With that much money, odds are good a sensible investment strategy can beat the 7% rate by several percentage points...meaning you come out ahead.4)  You also take the lump sum because you get the money in today's dollars, as opposed to tomorrow's inflated dollars.What to buy?First, some history- the NY commission did some research and found that most of their winners spent their lottery winnings in 5 years.  They did some more research and found ways to avoid that unfortunate effect, and now, before claiming a prize, a lottery winner in NY has to go through a 1 day class or read a brochure or some such.Basically, the research showed that you should:1)  Buy something you really, really want in the first year.  Getting yourself out of debt has lasting repercussions even if you blow through everything.  AFTER that first year, settle your spending down.  You could even set up a special Entertainment & Fun account that gets filled in January (from your investment income) and you only get that much to play with in a given year.For me?  I'd donate about 10% or so of the gross award to charities (before accepting the prize for tax reasons: the charity gets more and you still have the same amount after the Feds take their cut), then buy a house, some really cool guitars.  Gemstones for jewelrymaking & other collectibles.  A new car or two...something for my parents...blah blah blah.2)  DON'T quit working!  If you do, you are much more likely to spend your winnings.  (That doesn't mean you have to work at the same job, though.)My friends who won the RD sweepstakes?  They were a married couple who were both college professors.  They continued teaching, but they each taught fewer classes per semester.  They are still doing quite well, especially with their nice, paid-for lakehouse.3)  Invest in good accountants & lawyers to use sophisticated legal documents to protect your wealth.  Trusts & certain kinds of investments can make your money work for you AND protect it from creditors.BTW, consider this an invoice for my legal services...I want 3% of your winnings!</blockquote>

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