why lottery winners go broke

Why do 70 percent of lottery winners end up bankrupt?

It seems difficult to believe: The lucky winners, possibly three, of Wednesday’s $1.5 billion Powerball jackpot will probably go bankrupt within five years.

In fact, about 70 percent of people who win a lottery or get a big windfall actually end up broke in a few years, according to the National Endowment for Financial Education.

How is that possible?

“People who were little, ordinary people all of a sudden become extraordinary,” said Steve Lewit, CEO of Wealth Financial Group in Chicago. “They’re euphoric. They lose all sense of reality. They think they’re invincible and powerful. They think they’re Superman.”

The biggest problem, several finance advisers agreed, is that lottery winners give away too much money to family and friends.

“Once family and friends learn of the windfall, they have expectations of what they should be entitled to, and many of these expectations are not rational,” said Charles Conrad, senior financial planner with Szarka Financial in North Olmsted. “It can be very difficult to say no.”

The easy solution would be to rely on a third party to act as a gatekeeper, Conrad said, but many lottery winners don’t turn to anyone to intercept the flood of requests from all of those “close” friends and relatives. The same thing often applies to professional athletes who get huge contracts, he said.

Once new millionaires start giving money away, “it’s difficult to reverse course and turn off the spigot,” agreed Westlake financial planner Scott Snow, who had a South Euclid client who won more than $100 million in the Mega Millions lottery a decade ago.

Kevin Myeroff, a certified financial planner and CEO of NCA Financial in Mayfield Heights, said a shocking number of lottery winners don’t get help from professionals such as a financial adviser or attorney. Or they surround themselves with the wrong people. And then they up giving too much money away and squandering too much on depreciating assets such as cars, vacations and gifts.

It’s compounded because, when you’re talking about hundreds of millions or more than $1 billion — what? — it’s virtually impossible to wrap your mind around what that amount means. You’ve heard the TV reports that you could stack $1.5 billion worth of $1 bills and it would reach 100 miles high. Or you could spend $30,000 a day and never run out of money.

When someone has hit a jackpot or received a big inheritance, “the recipient has no idea what that amount of money means to them,” Myeroff said. “If someone had $20 million and I asked them, ‘Could you safely take out $10,000 per month or $200,000 per month to live on?’ They wouldn’t have a clue.”

Snow said newly wealthy people also often invest in businesses without scrutinizing them.

Conrad said lottery winners may not pay enough attention to anything they put money into. “They can invest in things that they don’t understand and they do so without understanding the real risks involved,” he said.

“If an investment has a lot of moving parts or can’t be explained in simple terms, it probably isn’t something they should be doing,” Conrad said. “Just because they now have a significant amount of money doesn’t mean that they automatically become a sophisticated investor.”

To avoid financial woes and other problems, Snow said, lottery winners should surround themselves with a team of trusted advisers who can “act as a sounding board.”

Lewit said that, six years ago, a good friend of his won $22 million in a lottery. In addition to hiring a financial planner, an accountant and an attorney, his friend hired a life coach “to make sure he kept his head screwed on straight.” Further, his friend doesn’t make any major financial decision without consulting his team.

With all of the pressures, it’s no wonder that many lottery winners end up with costly addictions such as drugs or gambling, Myeroff said, that can burn through money.

Lewit said lottery winners often think they have a bottomless pit of money and they spend, spend, spend without a care. “These are obscene amounts of money,” he said. “But you can plow through money fast once you get in that lane.”

“It’s natural to want to spend money on nice things once you receive a windfall,” Conrad said. But if you don’t have a budget, even for millions of dollars, “it is very easy to lose track of how much you have spent. Many don’t realize this until it is too late.”

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Why do 70 percent of lottery winners end up bankrupt? It seems difficult to believe: The lucky winners, possibly three, of Wednesday’s $1.5 billion Powerball jackpot will probably go bankrupt

Why Do Lottery Winners Go Broke?

“What do they do with all that money?”

Odds are you’ve asked yourself that exact question before after learning about big-time lottery winners across the country.

$5.4 Million.

$31 Million.

$315 Million.

As astounding as these numbers are, they are all very real examples of lottery winners that struck proverbial gold. And unfortunately, they’re also all lottery winners that ended up filing for bankruptcy within years of winning.

Why does this happen? Let’s take a deeper look at how—and why—far too many lottery winners go from everything to nothing in a matter of years.

Ways to Come into Lump Sums of Money

Hitting the jackpot isn’t the only way to find yourself with a large sum of money in a short period of time. Other ways to come into money include:



Casino Nights

Unexpected Loan Paybacks


While recipients of large windfalls from the lottery, lawsuits or inheritances are sometimes restricted to certain guidelines before receiving the money, the majority of those come without terms leaving the decisions up to the recipients’ own judgement. And in our experience, that’s usually never a plan for success.

The 3-5 Year Curse

According to CNBC lottery winners are more likely to go bankrupt within 3-5 years than the average American , “Studies found that instead of getting people out of financial trouble, winning the lottery got people into more trouble, since bankruptcy rates soared for lottery winners three to five years after winning.” With numbers such as the ones above it almost sounds impossible to do, doesn’t it? Yet time and again we hear about the downfall of a short-lived financial empire for people who hit it big.

Common Reasons Lottery Winners Lose It All

They Stop Working: All too often winners will quit the very day after winning their money—even before the check gets put in the mail. Not only is this counting your chickens before they hatch so to speak, it’s also not a sustainable model. Even millions of dollars can dissipate quickly and bringing home an income despite being a lottery winner sets you up for more success long-term.

They Give Too Much Away: Family, friends, friends of friends, the guy at the end of the street that lent you his edger one time—they all seem to come around more often after someone hits the lotto. And most times, the winner shares freely. Too freely.

Taxes Negate the Winnings: Depending on the state you’re from—and where you bought the ticket—you could end up paying anywhere from 2.9%-8.75% in withholdings. Oh, but did we mention that the IRS takes 24% off the bat? In short, the amount people “win” is never the amount they walk away with.

They Go Spend-Crazy: Boats? New Cars? A villa in the Maldives? The sky’s the limit, right? Unfortunately, not. Big ticket purchases add up quicker than expected—and money DOES run out.

So, what’s a potential solution?

A Smart Investment with Your Earnings

Before you call even your best friend to celebrate, the first call should go to your financial planner. Don’t have one? We believe the best investment you can make in planning for long-term wealth is to hire a gatekeeper to help preserve your money. Together a financial planner will help you to map out your financial goals so that you are able to enjoy both life and help preserve your, albeit large, nest egg.

Our suggestion? Diversification— and we’re not the only ones who agree. At Snow Financial Group we believe that the best way to create and keep wealth—no matter how you come into it—is to be smart with your money from the onset. If you’re ready to discover the ways to help preserve your windfall or life savings, contact us today at to see what type of diversified strategy we can customize for you.

With Snow Financial on your side “here today, gone tomorrow” doesn’t have to be the story of your big-time winnings.

Why does this happen? Let’s take a deeper look at how—and why—far too many lottery winners go from everything to nothing in a matter of years. ]]>