In light of the Powerball drawing that resulted in three Powerball winners splitting a record jackpot worth $1.6 billion, it can be easy to think that these people will soon be living the dream. Evidence suggests the opposite may be in the cards for these Powerball winners.
Many people heard about the low odds of winning the Powerball (1 in 292 million, for reference), but fewer people know that research suggests bankruptcy is a realistic outcome for the latest Powerball winners.
The Payout Is Always Less Than the Jackpot’s Value
While this may seem impossible, understand that the payout of the lottery will be much less. If a sole lottery winner chose the lump sump payment for the record-breaking lottery, their payout would have been reduced to $930 million right off the bat. Then, there are taxes to consider.
Even in a low-tax state like Florida, Forbes estimated a $500 million payout to a single winner who took a lump sum payment. $500 million is a far cry from the more than $1.5 billion lottery it was touted to be.
How Lottery Winners Spend Their Good Fortune Away
After a lottery winner’s payout is reduced by taxes, lottery winners can creep closer to bankruptcy by spending much of what they were so fortunate to receive. A 2001 paper by economists and statisticians discovered that lottery winners save a mere 16 cents for every dollar they won.
In conjunction with lottery winners doing a poor job of managing and saving their money, research also shows that lottery players are most commonly found between the ages of 30 to 39.
Given enough time, and if the lottery winner is young enough, it is feasible that lavish living and frivolous spending could lead to bankruptcy in later years.
Don’t think that such unfortunate outcomes are exclusive to lottery winners. While it is certainly true that bankruptcy rates skyrocket three to five years after a lottery win, research also indicates that bankruptcy and frivolous spending is common for most people who receive a financial windfall.
Large inheritances and financial gifts, then, have also contributed to many bankruptcies for individuals in their 20s, 30s and 40s who did not save properly.
The lesson of lottery winners and bankruptcy seems to be quite simple. No matter what kind of financial windfall you receive, you need to plan ahead, save and avoid making frivolous spending mistakes that will blow your good fortune.
While bankruptcies of this kind are quite rare since the majority of Floridians will never have this kind of capital to lose, bankruptcy can happen to anyone. With a bad business break or a personal calamity, you may find yourself needing to navigate the complexities of bankruptcy.
In such cases, you need an experienced Florida bankruptcy lawyer who can help you efficiently navigate bankruptcy so you can reclaim control of your finances and your life.
John F. Greene is an experienced bankruptcy attorney who represents northwest Florida citizens looking to get their finances and their lives back on track. His firm is also a certified debt relief agency in the State of Florida. Contact John F. Greene or call 850-424-6833 for a legal consultation to discuss the circumstances surrounding your Florida bankruptcy. His office is located in the City of Destin and he serves all those along the Emerald Coast, specifically the Destin, Fort Walton Beach, Niceville, Santa Rosa Beach and Panama City Beach areas.
