On Wednesday afternoon, the winner of the largest sole jackpot in U.S. lottery history stepped forward to claim her winnings. Gloria C. Mackenzie, 84, bought the winning $590.5 million ticket at a Publix supermarket in Zephyrhills, Florida.
Mackenzie will take a lump-sum pretax payout of $370 million. And while the odds of winning that much money are steep -- 1 in 172.5 million in this case, according to one estimate -- it's not uncommon for people to come into a sudden windfall, such as an inheritance.
We won't presume to begin to tell Ms. Mackenzie what she should do with her winnings, but she might want to consider these first steps, compiled for DailyFinance by financial expert Lynette Khalfani-Cox.
1. Do Nothing for a While
If you get a particularly large windfall -- like a six or seven-figure payout -- you might be tempted to take major steps, such as making a very expensive purchase, offering a huge donation to your favorite charity, or even investing a large portion of money in the stock market.
But experts warn against hastily doing anything with a financial windfall. Instead, take at least a few weeks, preferably even a few months, before making any significant economic decisions.
"Don't make any life changing decisions for at least the first six months such as quitting your job or moving," recommends Mark Cortazzo, a Certified Financial Planner and founder of MACRO Consulting Group in Parsippany, N.J. He adds: "Don't spend more than 10% of the total lump sum in the first 12 months."
But that's not to say you can't have fun -- just do it in moderation.
2. Enjoy Yourself -- Within Reasonable Boundaries
Diahann Lassus is a Certified Financial Planner and the president and co-founder of Lassus Wherley, a fee-only wealth management firm headquartered in New Providence, N.J.
She thinks it's a bad idea for windfall recipients to put themselves into a financial straitjacket and never enjoy the money. Instead, she says: "Plan on taking some percent of it, maybe up to 5% or so depending on the size of the windfall, and then just go out and have fun to get that out of your system."
Afterwards, Lassus says, you should get serious thinking about the longer-term opportunities your windfall could provide.
3. Put Your Financial Windfall Into Perspective
Once you have your fun with a windfall, it's time to put your newly acquired money into perspective. "People often think, 'I'm getting all this money and I'm going to be rich,' but that's often not the case," Lassus says.
So consider this question: How much money are you really working with? For example: $500,000 is a huge sum of money, but it's a far cry from $5 million. The latter would be enough for most people to retire on quite comfortably. But depending on your age, personal goals and current levels of savings and debt, $500,000 might not be a sufficient nest egg to ensure a secure retirement.
Whatever the case, you should also think about what you want the money to do for you.
"Will it pay for your kids' education, pay down your mortgage, or pay for next year's vacation?" Lassus asks. Bottom line: consider what are the critical goals you have, and determine how the money can help you meet those goals.
4. Set Up a Separate Account
When big money comes your way, it's easy to focus on one aspect of the money: how to spend it. But you should also think about where you'll keep it. Experts say it's best to separate it from all your other accounts -- especially your checking account.
"Get it out of your checking account and put it into a special savings or brokerage account so that it's treated separated," Lassus says, "because we all know what happens to our checking account dollars. That money kind of goes into a black hole and gets more quickly spent."
5. Get Professional Tax and Financial Advice
Numerous financial complexities will likely come into play if you're the recipient of a large financial windfall: everything from gift taxes to income taxes, estate issues and more. Therefore, it's definitely advisable to seek out some professional advice concerning properly accounting for your cash, managing it wisely and using it to build wealth.
You may need to establish a trust, secure special type of life insurance, or perhaps get basic documents like a will created to make sure your beneficiaries are provided for in the event of your death.
For all these reasons and more, if you get a windfall don't be penny wise and pound foolish, and mistakenly think that it would be a "waste" of money to hire a qualified CFP or financial adviser for help and advice.
"Be aware of the tax impacts of all large transactions," says Cortazzo, the Parsippany, N.J., CFP. "What you have in gross dollars and what you net after taxes can be a very different number," he adds, "and if you are budgeting based on gross amount, there can be a big shock when the tax bill comes due."
6. Put a Buffer Between You and Family/Friends
Lastly, try to avoid becoming a human ATM machine for those around you.
As anyone who has come into sudden wealth can attest, the act of receiving a huge pile of money often leads to requests for financial gifts or "loans" from needy family members and friends -- including some relatives you didn't even know you had.
Still, it's important for windfall recipients to shield themselves from a constant stream of people requesting handouts. Otherwise, your kindness can be exploited. You may wind up making unwise economic choices due to your own feelings of guilt, or due to the emotional pressure and manipulation exerted by others. Either way, you may later resent your generosity, feeling that you squandered money by giving it away so freely.
One way to avoid this problem is to have a trusted third-party serve as an intermediary to handle all requests for money. This person can be a close, responsible family member, or a neutral, financial adviser who can offer you some perspective.
Winning money, inheriting assets or somehow reaping a big financial windfall can seem like a dream come true. But if the money is too quickly spent or is just flat-out mismanaged, even hitting a multi-million dollar lottery jackpot can become a bittersweet event.
The 10 States That Pay Out the Biggest Lottery Jackpots
Six Money Tips for the Latest Powerball Winnner
Business news website 24/7 Wall St. has compiled a list of the 10 states that pay out the most in lottery winnings. The figures used are based on the most recently available full set of data, which is from 2010, but it turns out that the best states in which to buy a ticket don't change much from year to year. So which state holds the crown? Read on to find out.
Photo: The spectators gather in front of ABC studio at Times Square to watch the draw for MEGA Millions jackpot winning numbers of an estimated $370 million in New York, Tuesday, Mar. 6, 2007. The company officials have claimed the prize is the largest in the game's history, In a studio in frigid Times Square, lottery officials announced the winning numbers: 42-39-29-22-16; Mega Ball number 20. It wasn't immediately known how many tickets were sold nationwide or who, if anyone, held the winning ticket.
Largest Jackpot: $363 Million, (two-state lottery win shared with Illinois, 2000) Prizes Paid: $1.41 billion Ticket Sales: $2.35 billion State Profit from Sales: $704 million Government Use: K-12 education
The Michigan Lottery has been operating since 1972. In that time, it has generated more than $16 billion in revenue for the state's education fund. In 2006, Michigan joined five other states to found a multistate lottery called The Big Game, which would eventually become Mega Millions. Along with Powerball, it produces the largest jackpots in the country. In May 2000, when it was still called The Big Game, one Michigan resident won half of a $363 million jackpot, the third-largest combined jackpot ever won in a lottery in the U.S. The largest single-ticket prize in the state went to a couple in Port Huron, who won $208 Million before taxes.
Photo: In this photo provided by the Michigan Lottery, Fred Topous, Michigan Mega Millions jackpot winner, displays his lucky ticket on June 17, 2008 in Lansing. Topous, who vowed to continue to play the lottery, elected to take a lump sum payment of $33,989,267.
Largest Jackpot: $390 Million (two-state lottery win shared with Georgia, 2007) Prizes Paid: $1.47 billion Ticket Sales: $2.61 billion State Profit From Sales: $924 million Government Use: K-12 education
In 1969, voters from the Garden State approved a lottery system, and by 1971, the first drawing had been held. Though 2010, the lottery generated roughly $18 billion for the state's education budget. In 2005, Harold and Helen Lerner won a $258 million Mega Millions drawing. In 2007, the biggest jackpot in Mega Millions history at the time was shared by ticket holders in New Jersey and Georgia.
In January 2010, New Jersey began participating in the Powerball. Three months later, Sandra McNeil of Morristown was the single-ticket winner of a $211.7 million Powerball ticket.
Photo: Powerball winners Celeste and Joseph Tamburello display a ceremonial check for $70 million from the New Jersey Lottery on March 26 in Lawrenceville. They will get a $41.5 million lump sum payout for the cash value ticket, which they bought at the Little Silver Family Pharmacy in Little Silver, N.J. At right is Foster Krupa, the New Jersey Lottery's marketing manager.
Largest Single Jackpot: $267 million (2006) Prizes Paid: $1.51 billion Ticket Sales: $2.49 billion State Profit From Sales: $729 million Government Use: Education
The Ohio Lotto's motto is "Take a chance on education. Odds are, you'll have fun!" Since it began in 1974, more than $17 billion in lottery profits have gone to a state education fund. Since 1989, the state lottery association has hosted a game show called Cash Explosion Double Play on Ohio TV. The largest jackpot in the state's history went to an individual in the town of Lyons for $267 million.
Photo: Jeffrey Erb, general manager of Main Stop, and Linda Freeworth, manager of Lyons Main Stop Citgo, receive a check from the Ohio Lottery's Marie Kilbane, right, in the store in Lyons, Ohio. on March 1, 2006. They were given $100,000 for selling the winning ticket for the $267 million Mega Millions drawing.
Largest Single Jackpot: $333 million (two-state lottery win shared with New York, 2009) Prizes Paid: $1.61 billion Ticket Sales: $3.09 billion State Profit From Sales: $1.06 billion Government Use: Education
California instituted its lottery in 1984, when it was looking a method for increasing spending on education without raising taxes. The largest jackpot which included a California resident was a $336 million prize shared with a ticket holder in New York in May 2000. The largest single-ticket win for a California resident was a $315 million Mega Millions jackpot awarded in November 2005. That remains the third-largest single-ticket prize in history: An Oregon resident won $340 million in 2005 and a Nebraska resident won $365 million in 2006. In 2010, as one of his last acts in office, then-Gov. Arnold Schwarzenegger proposed a bill which would increase the efficiency of the California Lottery while increasing the percentage of ticket sales that go to state profits. Payout for ticket holders remained at 50%.
Photo: On June 22, 2005, after California joined the Mega Millions club, patrons lined up to purchase the newly available lottery tickets for the first time -- as well as Super Lottos, scratchers and other California Lottery games.
Largest Single Jackpot: $115.5 million (1989) Prizes Paid: $1.87 billion Ticket Sales: $3.07 billion State Profit From Sales: $916 million Government Use: Services for the elderly
Since the Pennsylvania State Lottery began, it has steered $20.6 billion to a variety of causes, but its profits have primarily been funneled into an elderly benefits fund. This fund includes subsidies for transportation, tax rebates and Medicare. Currently, about 61% of the roughly $3 billion in annual ticket sales goes to prizes, while 30% goes to the state, and the rest covers expenses. That's a higher percentage of prize return than most other states.
Photo: Kristine (center left) and Steven White (center right) of Skillman, N.J., the holders of the single winning Powerball ticket for the May 8, 2004 drawing, receive their ceremonial check from the Secretary of Revenue Gregory Fajt, (left) and Executive Director of the Pennsylvania Lottery Edward Mahlman in Harrisburg, Pa. The Whites won the largest prize in the Pennsylvania lottery's history, with an annuity value of $213.2 million.
Largest Single Jackpot: $390 million (two-state lottery win shared with New Jersey, 2007) Prizes Paid: $2.13 billion Ticket Sales: $3.65 billion State Profit From Sales: $884 million Government Use: Education
One Georgia resident was part of the largest jackpot in the history of the American lottery, winning half of $390 million on February 18, 2006. The other half went to a ticket holder in New Jersey. The state has one of the least efficient lottery systems in the country, with 17% of sales going to pay for the cost of operations. The Georgia lottery also only returns a third of total sales to the public fund, where the money goes to support education. The state didn't begin selling lottery tickets until 1993, making it one of the newest systems in the country. In its first year in operation, the Georgia lottery system sold roughly $1.1 billion in tickets, the most successful entry year on record. Georgia joined the Multi-State Lottery Association (MUSL) in 2010.
Photo: Mega Millions winners Margaret, left, and James Jones, right, embrace as they hold an oversize replica of their $77,744,832. check during a news conference at the Georgia Lottery Corporation headquarters in Atlanta on Jan. 21, 2005. When the Washington, Ga., couple claimed their prize, worth an annuitized $130 million, they became the second-largest winners in Georgia Lottery history. They selected the cash option.
Largest Single Jackpot: $330 Million, (four-state shared lottery win, 2007) Prizes Paid: $2.30 billion Ticket Sales: $3.75 billion State Profit From Sales: $1.10 billion Government Use: Education, state general fundThe Texas Lottery began operating in 1992, just a year before Georgia. Since then, the program has raised $17 billion for the state, with $5.1 billion of that going to the state's general fund, $180 million going to health care programs, and the lion's share -- $11.6 billion -- going to education. In its relatively short history in the MUSL, Texas hasn't had an truly big winners. In August 2007, one resident won part of a $330 million jackpot, but the winnings were split between holders in three other states.
Photo: Lottery posters are displayed at the Times Market in Bishop, Texas. Bishop native Joan Ginther, who now lives in Las Vegas, won $10 million in June 2010 on a $50 scratch-off ticket. Overall, she has won four Texas Lottery jackpots for a combined $21 million, and the last two winning tickets were purchased at the Times Market.
Largest Single Jackpot: $189 million (2011) Prizes Paid: $2.35 billion Ticket Sales: $3.90 billion State Profit From Sales: $1.25 billion Government Use: Education trust fund
Florida's lottery benefits the state education trust fund, to which $20 billion has gone since system began operating in 1987. At the moment, lottery income represents about 5% of the state education budget. Florida joined the Multi-State Lottery Association in 2009. Because of its late entry into the MUSL, Florida hasn't had a winner whose jackpot was on the scale of some of the others. However, in October, just nine months after joining MUSL, a Florida resident hit the Powerball jackpot and won $189 million. The MUSL now has 33 members (including Washington, D.C., and the Virgin Islands).
Photo: Scott Adams, one of the three Powerball hosts, announces winning numbers. The drawings are broadcast nationally from a studio in Universal Orlando Resort.
Largest Single Jackpot: $294 million (2004) Prizes Paid: $3.17 billion Ticket Sales: $4.42 billion State Profit From Sales: $903 million Government Use: City and town funds, compulsive gambling, the arts
In 2009, the Massachusetts lottery paid out roughly $3.2 billion in prizes to lottery winners, making it the second highest paying state in the country. The extent to which the state profits, however, is low compared to other states. In 2009, the state beneficiaries, which include city and town governments, a state arts fund, and a compulsive gambling support group, received only $859 million. Florida's respective payouts were less, $2.4 billion, but the state still earned $1.28 billion.
Photo: Judith Zahn of Hatfield, receives a giant check from Massachusetts State Treasurer Tim Cahill at the Massachusetts Lottery Commission Headquarters on July 5, 2007, in Braintree, Mass. Pictured at left is Steve Zahn, Judith's husband, and second from right is Judith's daughter, Hannah. Judith Zahn, a nurse at the VA Medical Center in Northampton, Mass., won a $20 million lottery jackpot. She'll receive a lump after-tax sum of $14 million.
Largest Single Jackpot: $333 million (two-state lottery win shared with California, 2009) Prizes Paid: $3.95 billion Ticket Sales: $7.82 billion State Profit From Sales: $2.67 billion Government Use: EducationBesides having the largest lottery system in dollar terms in the country, New York has one of the richest histories of government-run gambling. Since the late 1880's, lotteries and raffles have been used to raise funds for regional public works projects. New York was one of the first states to begin a state-wide system as well, voting in the program in 1966. Since the lottery began in official capacity the following year, more than $36 billion has been raised to fund education. This sum accounts for approximately 13% of all the money that has been raised in the history of U.S. state-run gaming.
Photo: Mega Millions Winners Richard and Mary Morrison of Miller Place, N.Y. were elated after being presented with their ceremonial check for $165 million by New York Lottery jackpot announcer Ralph Buckley and the Lottery's Yoland Vega at the New York Lottery Customer Service Center on Thursday, Jan. 7, 2010, in Garden City, N.Y.