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For the two winners who have come forward to split the $687.8 million Powerball jackpot, investing is about to take on a whole new meaning.

A customer holds a handful of Powerball tickets.

Justin Sullivan | Getty Images
A customer holds a handful of Powerball tickets.

“At that level, you have access to the types of investments that university endowments and pension funds can use,” said Matt Chancey, a certified financial planner based in Orlando. “It doesn’t mean the investments are more risky, per se, you just have to qualify.”

For both Bailey and West, that shouldn’t be a problem.

To get access to more exclusive investments opportunities, wealthier people can be deemed “accredited” by federal regulators — meaning they meet the test of having at least $1 million in investable assets (excluding the value of their home) or average yearly earnings of $200,000 ($300,000 for married couples).

Top 10 lottery jackpots

Rank
Amount
Date won
Game
Winner locations
1$1.586 billionJan. 13, 2016PowerballCA-FL-TN
2$1.54 billionOct. 23, 2018Mega MillionsSC
3$758.7 millionAug. 23, 2017PowerballMA
4$687.8 millionOct. 27, 2018PowerballIA-NY
5$656 millionMar. 30, 2012Mega MillionsKS-IL-MD
6$648 millionDec. 17, 2013Mega MillionsCA-GA
7$590.5 million18-May-13PowerballFL
8$587.5 millionNov. 28, 2012PowerballAZ-MO
9$564.1 millionFeb. 11, 2015PowerballNC-PR-TX
10$559.7 millionJan. 6, 2018PowerballNH

Investment opportunities that will become available to the winners run the gamut. For instance, they could gain access to private equity funds that invest in companies whose shares don’t trade on stock exchanges. Or, they could get the chance to invest in commercial real estate, energy projects like oil exploration, or venture capital funds that invest in things like tech startups.

In other words, once you have real wealth, you’re considered to be a more sophisticated investor than the average person, Chancey said.

“But getting a windfall of that amount doesn’t necessarily mean you’re actually a sophisticated investor,” he said.

This is why enlisting the help of professionals is worthwhile for people who come into sudden wealth. Both Powerball winners could even look into hiring a dedicated team of professionals — a financial advisor, an attorney and an accountant — to exclusively handle their riches.

“You’re in a completely different position with that kind of money,” Chancey said. “You can build your own financial services team that is dedicated all day to your financial affairs.”

For both Bailey and West, minimizing taxes likely will factor prominently in their financial decisions. While both winners had taxes withheld from their share, it doesn’t mean the amount accurately reflects what will be due at tax time.

The federal withholding rate on lottery wins is 24 percent, although both winners will face the top rate of 37 percent — plus state taxes of 8.82 percent in New York and 8.98 percent in Iowa (8.53 percent as of 2019). Bailey also faces local taxation of 3.88 percent due to residing in New York City.

Depending on a variety of factors — including how the winners choose to spend, invest or give away through charitable causes — the final tax bill could me more or less.

More from Personal Finance:
Here’s how much workers in other countries need to retire
Most Americans aren’t saving nearly enough for retirement
The top three things you’re not doing that are keeping you from becoming rich

One of the ways to reduce the amount forked over in taxes is to set up a charitable foundation. Basically, the government gives you a tax break if you use private money to do public good.

West, the Iowa winner, already announced plans to start a foundation and to donate $500,000 to a group that serves wounded veterans. Bailey said he would “give back to Manhattan” without providing details.

Meanwhile, the holder of the $1.5 billion Mega Millions jackpot has yet to come forward. The winning ticket — which hit all numbers in the Oct. 23 drawing — was purchased in Simpsonville, South Carolina. Lottery winners in that state have180 days (about six months) from the drawing to claim their prize, so the winner (or winners) has until April 21 to come forward.

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