Would winning the lottery help your retirement?
A couple of years back, 53-year-old hospital worker Mavis Wanczyk phoned her boss and told him she wouldn’t be back at work. Ever.
She’d just won the biggest, undivided lottery jackpot in US history—a $US758.7 million ($A960 million) Powerball prize. That would make for a handy pot of money for anyone’s retirement. Mine or yours.
The problem is that Mavis has a 70% chance of losing it all within a few years. The statistics say that 70% of lottery winners end up bankrupt in five years.
Of course, that would never happen to you and me. We’re too smart for that. That’s what the 70% probably thought, too.
Steve Lewit, CEO of Wealth Financial Group in Chicago says, ‘People who were little, ordinary people all of a sudden become extraordinary. They’re euphoric. They lose all sense of reality. They think they’re invincible and powerful. They think they’re Superman.’
But once new millionaires start giving money away they often can’t stop. Then there are the poor investments. Without controls, the money can soon disappear.
Wanting to win the lottery
Winter Troxel, a retirement advisor, reckons that too many of those approaching retirement want to win the lottery for several reasons.
‘The advantage of winning the lottery,’ he says, ‘is the ability to establish an endless quality of life without financial worry. Winning the lottery, for most people, is not about acquiring material possessions—it’s about peace of mind.’
Peace of mind is not a bad thing.
But wanting to win the lottery is also about what they want to do with their retirement. ‘Most near-retiree I have met believe their retirement dreams are out of reach.’ And too often they are ‘lottery dreaming’ about what they would do if . . .
What’s your plan?
Troxel suggests that we’re too fixated on the accumulation of money for retirement when we need to consider our ‘distribution plan’. What do you want to do with it?
‘The idea is to be able to consider your desired outcomes for retirement (quality of life, vacations, time with family, etc) and then connect your assets to those outcomes.’
This is much more focused than an ‘I need to win the lottery’ approach to have a successful retirement. When you begin to look at the outcomes you want, you can begin planning how you can achieve them. And that includes understanding the finances you will need.
You may even discover that the money you need is not as great as you thought it would be.
It’s worth noting that the 30% of lottery winners who kept their winnings tended to have experienced advisors helping them plan their spending and investing. There are also experienced advisors who can help you with your retirement planning.