When wealth managers win the Powerball lottery

[Nords]

After the winning lottery ticket was announced, these guys were driving Connecticut nuts because they didn't immediately come forward. When they finally did it was because they'd formed a trust, lawyered up, and hired a publicist.

Powerball: Connecticut money managers strike it rich -- via lottery - latimes.com
3 Connecticut money managers who hit $254M Powerball jackpot to donate $1M to veterans groups - NY Daily News

A trio of money managers who shared a $254 million Powerball jackpot said Sunday they were kicking off charitable donations by splitting a $1 million gift among five veterans service organizations.
The trust was created by Greenwich, Conn., wealth fund managers Greg Skidmore, Brandon Lacoff and Tim Davidson after they learned they had won the jackpot.

The owner of the store who sold the ticket also won $100,000.

Judy Martel's Bankrate.com blog:
How to manage a lottery win | Bankrate.com

The partners in a wealth management company opted for the lump sum of $103.5 million instead of a 30-year annuity, a smart move if the highest income tax rate rises from 35 percent to 39.5 percent at the end of 2012. In addition, if one of the three were to die soon, heirs would be on the hook to pay estate taxes for the present value of the gift even if it were being paid in installments over 30 years. That would mean they'd have to come up with a big chunk of change before the estate even received all the lottery winnings.
Read more: How to manage a lottery win | Bankrate.com How to manage a lottery win | Bankrate.com

 

[arebelspy]

Wow. Usually people smart enough to make moves like that wouldn't be playing the lottery.

 

[Bestwifeever]

New preferred asset allocation: 99.99 percent in the markets, .01 in the lottery.

 

[GrayHare]

Wow. Usually people smart enough to make moves like that wouldn't be playing the lottery.

If the prize were "no taxes for life" lottery demographics would expand.

 

[RunningBum]

So they really did win it? There was speculation, especially given the deadpan faces they had, that they were actually acting as agents for an anonymous winner.

 

[TromboneAl]

Were they rich? Probably, but I haven't heard that said on the news. Even money managers can have too much debt.

 

[Sarah in SC]

They've sworn that they are the sole beneficiaries of the trust they formed, so probably it is legit.

 

[MikeD]

From a link in the article: "the three have said they plan to use their investment expertise to increase the amount in the trust."

Wow, too bad ordinary people can't do that themselves without the help of highly paid advisers!

Mike D.

 

[Sarah in SC]

Well, considering what most lottery winners do after they win, it should be interesting to see how pros manage the assets. I read all I can on lotteries and their "winners" and most are penniless in a remarkably short period of time after winning.

 

[Koolau]

Never played the lottery, so I won't have to worry about winning. My biggest fear of winning (even a mil or 2) would be the "poor" folks camped out at your door or the reams of mail you would receive begging for help. I watched one of those "Lottery Winners" shows once and one of the winners had to threaten the Post Office to get them to stop forwarding letters to him addressed "Lottery Winner, Podunk, IL".

 

[unclemick]

Hmmm - I read the Postscript chapter of Ben Graham's The Intelligent Investor and Goggle up Wm Bernstein's 15 Stock Diversification Myth periodically to remind myself the odds are against me BUT

I do have a few good stocks. Not a pure Boglehead.

heh heh heh - haven't bought a lottery ticket when I gassed the car in years BUT Do I feel Lucky? Well do I? This thread has me thinking.

 

[clifp]

Wow. Usually people smart enough to make moves like that wouldn't be playing the lottery.

There have been various article and stories I've read over the past several years, where very smart mathematically inclined people figure out ways of betting on lotteries when the odds actually favor the player. This doesn't happen often and it is generally restricted to the various scratch games, rather than Powerballs with huge winners. But I wouldn't necessarily assume that these guys are stupid for playing the lottery. Still one of the reasons I really dislike lotteries is I feel it is a tax on dumb people who already have a tough enough life.

 

[braumeister]

I wouldn't necessarily assume that these guys are stupid for playing the lottery.

Certainly not.
OTOH, I think it's dumb to buy more than one ticket, in hopes of "improving your odds of winning."

 

[HFWR]

I occasionally buy a lotto ticket; I figure I waste a dollar in lots of other ways, too...

With my current situation, I'm quite happy to manage my own finances. But if I was to [-]magically[/-] win $100M or so, I'd probably seek some advice, too, from pros in lawyering and estate planning, etc.

 

[arebelspy]

There have been various article and stories I've read over the past several years, where very smart mathematically inclined people figure out ways of betting on lotteries when the odds actually favor the player. This doesn't happen often and it is generally restricted to the various scratch games, rather than Powerballs with huge winners. But I wouldn't necessarily assume that these guys are stupid for playing the lottery. Still one of the reasons I really dislike lotteries is I feel it is a tax on dumb people who already have a tough enough life.

Yeah, I've read similar stories. One fun scratch one in Canada. I assume this wasn't the case here.

Certainly some smart people play the lotto for their own reasons. I gamble occasionally (live in Vegas and only gamble when friends are in town, categorized as entertainment in the budget). But I maintain that the statement "Most people smart enough to make moves like that wouldn't be playing the lottery" is correct.

Funny side note. Autocorrect tried to make "friends", above, into Freud. So it said "only gamble when Freud is in town." A literal Freudian slip!

 

[haha]

There have been various article and stories I've read over the past several years, where very smart mathematically inclined people figure out ways of betting on lotteries when the odds actually favor the player. This doesn't happen often and it is generally restricted to the various scratch games, rather than Powerballs with huge winners. But I wouldn't necessarily assume that these guys are stupid for playing the lottery. Still one of the reasons I really dislike lotteries is I feel it is a tax on dumb people who already have a tough enough life.

Be that as it may, nobody puts you in jail if you refuse to pay the powerball tax, but they will if you refuse to pay other taxes.

I favor any voluntary tax over a coerced one. The poor need agency as do the middle class and the affluent. We can bet all kinds of ways, including flights to Las Vegas, socks and bonds, commodities and the lottery. For many poorer people, the lottery is it. And if you don't think that gambling plays a meaningful part in a man's life, including a poor man's, just attend a few cock fights in Latin America. In fact, you should be able to find a few right there in Hawaii.

Ha

 

[DangerMouse]

Personally I am glad to see these folks win as I think it is safe to assume these guys won't be bust and back on welfare in a couple of years like lots of lottery winners seem to do.

As for comments about how dumb it is to play the lottery, I'll confess I play regularly and am not ashamed to admit it. Personally I don't think playing the lottery is any dumber than paying $3 for a coffee at Starbucks or paying for a soda when you could be drinking free water when you dine out. It's each to their own.

 

[FinanceDude]

I read all I can on lotteries and their "winners" and most are penniless in a remarkably short period of time after winning.

True, but it sounds like these guys are pulling down some pretty good money, so maybe they won't feel the need to buy ANOTHER cigarette boat or two or 10........

 

[Koolau]

Interesting discussion. I would never criticize anyone for playing the lottery - if they can afford to lose. I would only call it "dumb" if you thought it was more than entertainment - with the extremely thin chance of becoming an instant millionaire. Never played, but when I was feeling low at w*rk, I often considered buying one (1) ticket to stick in my desk. For the $1.00 entry fee, I could have fantasized for a week about winning enough money to escape. That would have been well worth it and the only way I would have ever played. Folks who buy multiple tickets do stand a statistically greater chance of winning, but it is still an extremely small chance. For this reason, multiple tickets never made sense to me. One ticket is all you need to fantasize. Any more than that and you are truly playing a loser's game (IMO). Still, if it weren't for those playing large numbers of tickets, the lottery would not work. The pots would not build up to the multi-multi millions as they do when many people buy 10's to 100's of tickets.

Without getting too political (I hope) the lottery is (arguably) the only tax that some folks pay. That at least gives them a little skin in the game. Personally, I don't favor lotteries as money makers for gummints, but, since they exist, they are fair game for discussion as FIRE vehicles or FIRE activities. Hope someone here wins a big pot. Love to hear how it affects your FIRE plans. I'll fantasize along with everyone else about that possibility. Good luck and, YMMV.

 

[mh]

Personally I am glad to see these folks win as I think it is safe to assume these guys won't be bust and back on welfare in a couple of years like lots of lottery winners seem to do.

As for comments about how dumb it is to play the lottery, I'll confess I play regularly and am not ashamed to admit it. Personally I don't think playing the lottery is any dumber than paying $3 for a coffee at Starbucks or paying for a soda when you could be drinking free water when you dine out. It's each to their own.

I will buy a starbucks coffee if i'm traveling because i want a decent cup of coffee (i'll concede it being overpriced.) i will also pay "a lot" for a beer i like at a jazz club instead of getting water. i'm willing to pay a premium for drinks when i can't supply my own if i'm in the proper mood for one. that's my rationale for the expensive drink thing.

So what is the "(irr)rationale" for lottery tickets ? Maybe it's not easily expressed ? Is it for the emotional bump / daydream that ensues when you muse on the possibly of winning ? I never got that so i don't buy lottery tickets (or gamble).

On an amusing final note. I have found i'll irrationally go run firecalc on occasion just to see the heartwarming "yes you have enough money to retire" results even when i know that it will tell me that before running it. Maybe I should make a poll on the to see if there are any other "compulsive firecalcers"

 

[tightasadrum]

The probabilities of winning the lottery are so small that playing makes no sense to me. Having said that, I'll admit to buying one ticket each time the winnings exceed $200M when I get around to it. I've thought about "what if" and have concluded that winning would be equivalent to going back to work again. With say $100M parked in account it automatically requires me to "manage" that money. I really don't think I would change much of what I do now, so I would be force to become a philanthropist of some sort. And that seems like a job to me.

I still think the story of the three wealth manager winners doesn't hang together to me. Besides no smiles, why would three guys buy only one ticket? Did each one put $0.33333 in the pot to buy a single ticket? And if only one played the ticket, why did he feel compelled to share it with the other two? When something doesn't make sense, then there is more to the story than you know.

 

[RunningBum]

Maybe they pooled multiple tickets? I've heard of lottery clubs where everyone pools $1 or $5 or whatever equal amount and if any tickets win, they share equally.

I think I'd rather win $10M or $20M than $100M. Seems like less money would mean fewer people coming after me. But maybe any winner gets bombarded. I've never played, except for a couple weeks ago when my niece had a mildly Vegas themed wedding reception after coming back from a Vegas wedding. They had scratchers at every table and all 7 spots came up $2 winners. Thought maybe that combo might be some bigger prize. I was leaving town right after the reception so I gave it to her and said we were splitting it if it was over $500, It was only $14 so it's hers.

 

[Walt34]

As for comments about how dumb it is to play the lottery, I'll confess I play regularly and am not ashamed to admit it.

Well, that makes two of us. Most months we'll pony up $2 for one state lottery ticket and one regional ticket. We're well aware of the odds.

What we're buying is a month's worth of daydreams. Pretty cheap entertainment.

Reminds me of the old joke of the guy who prays to God to win the lottery and after listening to a long list of his troubles God says "Okay Fred, you will win the lottery."

The next week Fred didn't win the lottery. He prays again and God again promises "Fred, you will win the lottery." This repeats for several weeks.

Finally when Fred again reminds God of his promise that he will win the lottery, God says "Fred, you gotta work with me on this. Buy a ticket."

 

[tightasadrum]

Maybe they pooled multiple tickets?

Maybe. But what I heard was that they said they only bought ONE ticket! hum

 

[scrabbler1]

Interesting discussion. I would never criticize anyone for playing the lottery - if they can afford to lose. I would only call it "dumb" if you thought it was more than entertainment - with the extremely thin chance of becoming an instant millionaire. Never played, but when I was feeling low at w*rk, I often considered buying one (1) ticket to stick in my desk. For the $1.00 entry fee, I could have fantasized for a week about winning enough money to escape. That would have been well worth it and the only way I would have ever played. Folks who buy multiple tickets do stand a statistically greater chance of winning, but it is still an extremely small chance. For this reason, multiple tickets never made sense to me. One ticket is all you need to fantasize. Any more than that and you are truly playing a loser's game (IMO). Still, if it weren't for those playing large numbers of tickets, the lottery would not work. The pots would not build up to the multi-multi millions as they do when many people buy 10's to 100's of tickets.

Without getting too political (I hope) the lottery is (arguably) the only tax that some folks pay. That at least gives them a little skin in the game. Personally, I don't favor lotteries as money makers for gummints, but, since they exist, they are fair game for discussion as FIRE vehicles or FIRE activities. Hope someone here wins a big pot. Love to hear how it affects your FIRE plans. I'll fantasize along with everyone else about that possibility. Good luck and, YMMV.

Good post, Koolau.

As others have pointed out, buying lottery tickets through pools such as the ones at my old office boosts the miniscule chance of winning into something a miniscule more than miniscule. Over the last 25 years, I spent maybe $20 on lottery tickets, either through those pools or the rare ones I bought myself when the lottery grew to an unusually large amount (just for the thrill of being in it, nothing more).

But anyone who spends a lot of money each week on the lottery or somehow makes winning it part of some half-assed "retirement" plan is nuts.

I considered cashing out my company stock 3 years ago my own personal "lottery" winning. It was basically "found" money which I spent nothing to win it other than working at the company for 23 years (only the last 12 were when the ESOP was around). This was a $300k payout before taxes and I am now living off its dividends after I invested it wisely (see my signature line).