Lottery winners taken advantage of by investment firm

[scrabbler1]

I have no interest in buying a Powerball or any other lottery ticket. That being said, I did have to develop a plan for dealing with the $500k in my former company's 401k/ESOP plan when I left the company in late 2008. I had to empty the entire account if I wanted to use NUA to sell to ESOP shares back to the company to get the lower tax rate, a key part of the total plan, to get my ER set up.

I had an informal, unpaid advisor ("Account Executive") with Fido who helped me with the money transfers and how to work with the Fido website, something I had done very little with through late 2008. I would have never used a paid advisor to actually take over the management of my account.

If the 401k/ESOP I had at my former employer were worth more, say a few million, my plan would not have been much different. I might have bought different funds, maybe more than the 1 in taxable or 2 in the rollover IRA.

And what might seem small to me might be large to others. My ladyfriend, for example, had a retirement savings plan run (and fully funded) by her former employer before they got bought out by a larger company back in 2011. Her account balance was about $25k but the challenge was to get that amount transferred to her new employer's 403b plan as a nontaxable ("trustee-to-trustee") event. I knew how to do that, and we got it done for her, with some minor difficulties. However, some of her coworkers did not, so they faced considerable taxes and penalties when the default option was to cash out the old accounts.

 

[Route246]

In a sense, I hit the lottery when my father died and we sold his home. It was a windfall but we do not need this money for living, BTD or otherwise. I got a low-7-figure cash tax-free inheritance. I lecture, advocate, preach and recommend to everyone who might listen to DCA into 500-index fund monthly over 12 months. This was my opportunity to eat my own porridge. After 2 years it grew 42% due to luck of market conditions. It could have been worse and possibly have been better.

The point is, without any better ideas or opportunities and with high risk tolerance (every lottery-like windfall should be treated as high risk tolerance in my mind and by high risk tolerance I mean equities vs treasuries) I am a firm believer in DCA+indexFunds. I'm eating my porridge and it tastes pretty good so far.

 

[Koolau]

Correct. I think most of the regulars here could EASILY manage an investment portfolio 10x or 20x bigger than their present one.

Problem is: it seems a lot of folks who win lotteries are NOT savvy investors to begin with. So you have a train wreck waiting to happen...

A lot of folks who win lotteries have a financial plan of buying lottery tickets. My BFF who recently died half a million dollars in debt had such a plan. He bought 10 - $2 lotto tickets each week. THAT was his financial plan. Had he won, I swear he would have still ended up in debt if he had lived long enough. He had a hunger for "things" which could never be satisfied. Very sad.