Earlier this week, Rich Dad Robert Kiyosaki stupidly suggested that there was little conceptual difference between lotteries and mutual funds. Just suppose for a moment, that Rich Dad Bob actually had a point, and you went down to the Seven-Eleven and bought a lottery ticket.
Taking this unlikely scenario a stage further, suppose that you won a massive payout. What do you then do with the money? Well, putting it in a broadly based set of mutual funds wouldn't be such a bad idea. Alternatively, you could go down to an investment advisor and see the money invested in loser tech stocks. This is exactly what happened to one lottery winner from Milwaukee. Moreover, it is common for lottery winners to blow their ill-deserved winnings on poor investments. Read on....
"From $5.5 million to living on a pension
On the day he rode home in a limousine from his security-guard job 12 years ago with a winning $5.5 million lottery ticket in his hand, Andrew Cicero of Muskego figured he had it made. But he finds himself now in far different straits than he imagined when he accepted a giant Wisconsin Megabucks novelty check.
Cicero, 72, has sold his Waukesha County house and lives in a Milwaukee apartment on a pension and Social Security income while he takes an investment counselor to arbitration. This month, he sued a Milwaukee accounting firm over tax advice he claims cost him at least $170,000.
His fiscal downfall followed what has emerged as something of a pattern among lottery winners nationally: Someone with little training in dealing with vast sums of money gets a sudden windfall, only to see it tumble maddeningly into the wind.
Court and arbitration documents tell part of Cicero's story. Under the state's rules at the time, the $5.5 million prize he won in 1995 was to be paid out as 25 annual payments that would start at $98,000 and increase each year. But by 2000, he decided on a different approach: sell the future annual payments off to a private firm for an immediate lump sum - in his case, about $2 million - that he could roll into investments. He'd just live off the earnings and interest.
He alleges that within a few months, the Smith-Barney advisers had 98 percent of his money invested in individual stocks, substantially technology companies. The year was 2000, which would prove a spectacularly bad time to sink one's entire fortune into tech stocks. Cicero's lawyer has alleged the advisers were "breathtakingly irresponsible" to put a lottery winner's windfall wholly into individual stocks. The court and financial-arbitration filings tell the story in flat terms, claiming Cicero lost $600,000 or more in bad investments. And he ended up paying $240,000 more to the IRS for penalties and interest after he learned the hard way that a lump-sum lottery buyout doesn't count as capital-gains income."
Taking this unlikely scenario a stage further, suppose that you won a massive payout. What do you then do with the money? Well, putting it in a broadly based set of mutual funds wouldn't be such a bad idea. Alternatively, you could go down to an investment advisor and see the money invested in loser tech stocks. This is exactly what happened to one lottery winner from Milwaukee. Moreover, it is common for lottery winners to blow their ill-deserved winnings on poor investments. Read on....
"From $5.5 million to living on a pension
On the day he rode home in a limousine from his security-guard job 12 years ago with a winning $5.5 million lottery ticket in his hand, Andrew Cicero of Muskego figured he had it made. But he finds himself now in far different straits than he imagined when he accepted a giant Wisconsin Megabucks novelty check.
Cicero, 72, has sold his Waukesha County house and lives in a Milwaukee apartment on a pension and Social Security income while he takes an investment counselor to arbitration. This month, he sued a Milwaukee accounting firm over tax advice he claims cost him at least $170,000.
His fiscal downfall followed what has emerged as something of a pattern among lottery winners nationally: Someone with little training in dealing with vast sums of money gets a sudden windfall, only to see it tumble maddeningly into the wind.
Court and arbitration documents tell part of Cicero's story. Under the state's rules at the time, the $5.5 million prize he won in 1995 was to be paid out as 25 annual payments that would start at $98,000 and increase each year. But by 2000, he decided on a different approach: sell the future annual payments off to a private firm for an immediate lump sum - in his case, about $2 million - that he could roll into investments. He'd just live off the earnings and interest.
He alleges that within a few months, the Smith-Barney advisers had 98 percent of his money invested in individual stocks, substantially technology companies. The year was 2000, which would prove a spectacularly bad time to sink one's entire fortune into tech stocks. Cicero's lawyer has alleged the advisers were "breathtakingly irresponsible" to put a lottery winner's windfall wholly into individual stocks. The court and financial-arbitration filings tell the story in flat terms, claiming Cicero lost $600,000 or more in bad investments. And he ended up paying $240,000 more to the IRS for penalties and interest after he learned the hard way that a lump-sum lottery buyout doesn't count as capital-gains income."
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