Best Ways To Invest If You Win The Lottery

Winning the lottery is incredibly rare, but someone has to win. If you’re one of the lucky ones, the financial windfall can be life-changing. 

But winning the lottery isn’t an instant ticket to lifelong financial freedom. Some sources suggest that as many as 70 percent of lottery winners eventually declare bankruptcy, while more conservative estimates put the figure closer to 30 percent. Either way, a significant number of winners find themselves in financial trouble down the road.

Investing your winnings and hiring a financial advisor to help you manage your money is the best way to ensure your money lasts for years to come. Here are some steps to take to make the most of your lottery winnings. 

1. Take your time and make a plan 

The winning ticket is still in your hand, and you’ve checked the numbers about 20 times. Yes, you are in fact the winner. Are your hands shaking yet?

Take a deep breath and pause. While it’s tempting to rush out and buy something exciting, the truth is, you don’t want to spend your money on an impulsive purchase. It’s a once-in-a-life opportunity you’ve stumbled upon, and the best thing you can do now is make a plan. 

One of the first decisions you’ll face is whether to take a lump-sum payment or opt for a series of annual payments over time, known as an annuity. The lump sum might seem appealing, offering you immediate access to your winnings, but this option exposes you to a hefty tax bill. 

And while we all like to think we’ll spend the money wisely, in reality, many lottery winners blow through their money in a few years. Not only is it tempting to splurge on things you’ve always wanted, it’s also hard to turn away friends and family who might push the limits of your generosity. 

On the other hand, a series of payments offers a steadier, long-term income stream, and you’ll be paying taxes along the way instead of all at once.

It’s crucial to think about your goals, personality, financial knowledge and how you want to manage your wealth in the long run. 

Danielle Harrison, a certified financial planner at Harrison Financial Planning points out another important consideration. 

“If you live in one of the states that allow lottery winners to remain anonymous, do so,” says Harrison. “Put the ticket in a safe place and make sure you have your team assembled before notifying anyone of your winnings.”

2. Consult with a financial advisor and other professionals

Speaking with professionals who specialize in managing wealth is the most important step you can take after winning the lottery. A financial planner, along with a lawyer and a tax specialist, can be part of a trusted team that will help you navigate your newfound wealth.

Paying for expert advice might feel unnecessary. But if you don’t consult with professionals, you risk making costly mistakes. You may have a friend or family member who’s good with money, but they probably haven’t managed a huge windfall before, and they might have a conflict of interest you aren’t even aware of.

Meanwhile, a team of professionals will help you avoid common pitfalls and ensure your wealth is managed properly. They will also likely be able to help you navigate some of the specific issues that come with sudden wealth.

For example, Harrison says it’s important to find an advisor who can help you navigate the emotional aspects of your sudden windfall. 

“It’s important to have someone to discuss your past and existing relationship with money, your anxiety, sense of isolation and potential relationship strains that could be brought on by this large windfall,” says Harrison.

Here are three pros to contact after winning the lottery: 

• A financial advisor can help you build a comprehensive financial plan for managing your money and provide advice on creating a diversified portfolio that aligns with your long-term goals. You’ll want to find a financial advisor who is also a fiduciary. (More on that below.) 
• A lawyer can assist with setting up trusts or other estate-planning strategies so your loved ones are provided for after you pass away. They’ll also ensure your wealth is protected in the event of a divorce or lawsuit. 
• A tax specialist can help you take advantage of deductions, tax-efficient investments and tax-deferred accounts. They’ll also be on-call to answer any tax-related questions you have and help you file your tax return.

Why is working with a fiduciary so important?

The term financial advisor covers a wide range of professionals, from investment advisors and wealth managers to certified financial planners (CFPs). Each one may specialize in different areas, but to ensure the financial advice you receive is truly unbiased, you want to find an advisor who is also a fiduciary. 

A fiduciary is someone who is legally or ethically bound to act in their clients’ best interests. Unlike other advisors, fiduciaries must prioritize your financial well-being over their own profits. 

The easiest way to confirm whether an advisor is a fiduciary is to simply ask. If their answer isn’t an enthusiastic “yes,” or they’re unwilling to put it in writing, they’re not a fiduciary. 

Bankrate’s advisor matching tool can get you started with an advisor in your area in minutes.

3. Pay off debt

Before diving into investing your newfound wealth, it’s important to tidy up other aspects of your financial life, including clearing any outstanding debts. Whether it’s credit card debt, student loans or a second mortgage, paying off these obligations will give you a fresh financial start while saving money on interest payments. 

Clearing your debt allows you to focus on other goals, like saving for retirement and investing for the future. 

4. Put some of the money into a high-yield savings account

Most people don’t have the luxury of saving one or two years’ worth of living expenses in cash, but if you have millions of dollars at your disposal, use the opportunity to fortify your emergency fund. 

And as you mull what to do next, parking your winnings in an account that earns some interest is a smart move, says Mike Hunsberger, a certified financial planner and owner of Next Mission Financial Planning.

“You’d want to ensure that the money is safe while you’re making initial decisions,” says Hunsberger. “You’d want to find short-term, very low-risk investments like a money market or high-yield savings account.”

Doing so puts your money to work right away. You’ll earn monthly interest on your cash without lifting a finger — truly passive income. 

Consider this. In January 2025, some of the best high-yield savings accounts offered a 4 percent APY. If you deposited $1 million, you’d earn $40,000 in a single year off of interest alone. 

If you’ve really hit the jackpot and have millions of dollars sitting in a bank account, you also need to consider if all that money is protected. FDIC insurance only covers up to $250,000 per account.

“So you may need to spread the money between different institutions and accounts,” says Hunsberger. This way, all of your money is insured by the U.S. government in case of a bank failure.

5. Decide how to invest your winnings

Ultimately, there are three routes you can take to investing your lottery winnings: hire a professional, do it yourself or use a robo-advisor to do the investing for you. 

Each approach can be effective, so the best choice depends on what works for you. A key consideration is how much time you’re willing to dedicate to managing your investments. Another is your experience and comfort level in making financial decisions. 

That said, even if you typically manage your own money, winning the lottery is a once-in-a-lifetime event where professional guidance can make a huge difference.

Leave it to a pro

A financial advisor can do more than help you build a financial plan — they can also manage your investments. However, it’s crucial to find an advisor whose approach aligns with your goals. For example, you’ll want to find someone with experience with high-net-worth clients. 

If you work with an advisor, they’ll start by assessing your investment objectives and risk tolerance. From there, they’ll craft a diversified investment portfolio tailored to your needs. A full-service advisor handles everything: selecting investments, deciding when to sell, managing tax strategies like harvesting capital losses and addressing other investment-related matters to keep your financial life on track.

Most investment advisors charge between 1.0 and 1.5 percent of assets under management. For every $1 million, that’s $10,000 to $15,000 per year. 

Noah Damsky, a certified financial analyst and principal at Marina Wealth Advisors, says that working with an advisor who specializes in wealth management can also provide you with access to more sophisticated investment opportunities. 

“When I worked with lottery winners, they invested in private investment vehicles that locked the money up for 10 or more years,” says Damsky. “They loved this because they expected higher returns over the long term, and they couldn’t access the money, so it was a forced-savings mechanism.”

Consider a robo-advisor 

After speaking with an advisor to map out a financial plan, you might consider using a robo-advisor like Betterment or Wealthfront to create and manage your investment portfolio at a lower cost than most human advisors charge. 

Robo-advisors are automated investment platforms that use algorithms to create and manage a diversified portfolio based on your risk tolerance and financial goals. They can be an efficient way to invest your winnings with minimal effort. They can also offer other benefits, such as automated tax-loss harvesting and portfolio rebalancing to optimize your returns.

Robo-advisors generally charge 0.25 percent of your assets under management, while a human advisor may charge 1 percent or more for the same service. That might not seem like a big difference, but when you’re dealing with millions of dollars, those small differences really add up. 

If you are interested in pursuing this route, Bankrate offers a comprehensive guide to the best robo-advisors. 

Manage investments yourself 

Taking control of your investments means you’re in charge of every decision, which can be thrilling, intimidating or maybe a little of both. If you’re not sure where to start, a handful of diversified funds and a steady buy-and-hold approach is a strategy used by many investors. 

First though, you’ll need to decide which kind of investment account to open. 

A brokerage account is a good place to start, and they’re offered at all online brokers. 

With it, you can invest in stocks and stock funds, which are tired-and-true vehicles for building long-term wealth. Your gains can compound over time, and you won’t owe taxes on those gains until you sell — though dividends will be taxed as they come in. 

Unlike retirement accounts, brokerage accounts let you access your money anytime. That’s a win if you’re planning to retire early after hitting the lottery. Brokerage accounts don’t come with contribution limits either, which is an important consideration if you’re looking to put substantial lottery winnings to work. 

On the other hand, contributing to tax-advantaged retirement accounts, like an IRA or 401(k), can be a smart move if you’re looking to save for retirement. These accounts allow you to invest money tax-deferred, which can help you save thousands of dollars in taxes over time. However, keep in mind that these accounts have contribution limits, so you’ll likely need to spread your contributions out over several years.

Now that you’ve opened up one or more accounts, it’s time to decide which investments to buy. This is where things can begin to feel overwhelming. 

Fortunately, there’s a great investment option available to everyone: an S&P 500 index fund. This fund tracks hundreds of America’s top companies and has delivered an average annual return of about 10 percent over the long term. By adopting a buy-and-hold strategy, you’re likely to outperform the majority of investors, even seasoned professionals. This list of the best index funds can give you some top picks for your account, too.

Index funds are attractive because they provide instant diversification with a single purchase and do so at a low cost. Major fund companies like Vanguard and BlackRock offer index funds with expense ratios of less than 0.02, or $200 for every $1 million invested. 

However, how you choose to build your portfolio ultimately depends on several factors, including your age and your personal risk tolerance. 

A diversified portfolio of stocks or stock funds — such as an S&P 500 index fund — has a strong track record of delivering solid returns over time. However, these investments are known for their short-term volatility, which can make them a less-than-ideal choice if you anticipate needing the money within three to five years.

For greater stability, it’s wise to also incorporate safer options like bonds, bond funds, certificates of deposit (CDs) or high-yield savings accounts into your investment strategy. These assets provide steady income and can serve as a counterbalance to the market’s unpredictable swings, helping to reduce overall risk in your portfolio.

Harrison recommends a simple three-fund portfolio to get started. 

“By using a handful of index fund ETFs, you can create a well-diversified portfolio,” she says. “Start by choosing at least one domestic stock fund, one international stock fund and some short or intermediate-term bond funds.”

Bottom line

Investing your lottery winnings is one of the best ways to protect your newfound wealth and help it grow for the future. Winning the lottery is a rare, life-changing opportunity most people only dream about, so don’t squander it. Begin by thinking about your goals for the money and then build your investment plan from there. Consider working with a financial advisor and other professionals to help you. 

By following time-tested investing principles that have helped others build wealth, you can create a solid foundation that benefits you — and future generations — for years to come.

Editorial Disclaimer: All investors are advised to conduct their own independent research into investment strategies before making an investment decision. In addition, investors are advised that past investment product performance is no guarantee of future price appreciation.