Senior Managing Advisor

James R. Holloway, Sr. is the owner and Senior Managing Advisor at Texas Financial & Retirement, serving East Texans with financial planning and retirement assistance.

lottery balls

Could you retire, comfortably, if you won a lottery prize of $2,000,000?


Let’s just agree up front that if you won the grand prize in Powerball or Mega Millions, you could definitely retire, if you wanted to do so. That’s not really much of a stretch at all.

But the second place prize for each of those large multi-state lotteries begins at $2,000,000 - if you spend the extra dollar and get the enhanced PowerPlay or MegaPlier prize. Would that be enough to retire right away and live comfortably?

That depends a lot on your current living expenses and financial position. Let’s say, just for an extremely simplified example, that you’re married, approaching (or already in) your sixties, own a house on which you still owe about $75,000, have $30,000 in other debt (credit cards, loans, vehicles, etc.) and have about $120,000 in your 401(k) retirement account through your employer.

That would make you a slightly-better-than-average not-yet-retired Baby Boomer in 2018. Average total household debt for those ages 55-64 is just over $130,000. And the median household retirement savings for this same age group is $120,000.

Your pre-tax winnings are $2,000,000. If you won and cashed in your winning ticket fairly early in the year you wouldn’t have much other earnings yet for tax purposes, so we’ll say you’ve already earned about $5,000 for the year after your personal deductions.

That makes your total adjusted gross income for the year $2,005,000. At a married couple’s tax rates in 2018, you’d owe $681,229 in federal income taxes if you didn’t have any other deductions. With no special added lottery tax in Texas, and no state tax, that leaves you with $1,323,771.

$1,323,771 after-tax winnings

- $75,000 owed for current mortgage

- $30,000 owed for other debt



Then you want to buy a new house for about $250,000. The median home value in Smith County is currently $155,800 at the time of this writing, so 250K is enough for a nice fairly new house for an older couple in East Texas. Of course, if you want to retire to another area, or live in a more luxurious home, you might spend a lot more. As a rough guess, we’ll add 5% for closing costs and 10% for furnishing your new home (you’re a lottery winner, so you want new stuff to put in your new place). You also want two new vehicles at about $50,000 each plus sales tax.



- $250,000 new house

- $12,500 closing costs at 5%

- $25,000 furnish/upgrade new house

- $1,000 moving expenses

- $108,250 two new 50K vehicles plus 8.25% sales tax


$822,021 remaining

But you already have $120,000 in your retirement savings, so we’ll add that back in.


+ $120,000 retirement savings [401(k), 403(b), etc.]



If you use the traditional method of making your retirement savings last, you will live on 4% of your retirement savings each year. Some folks say that’s too much to take out if you want your savings to last your lifetime nowadays, others say it may be too little, but we’ll use that as a rough estimate.

For example, if your $942,021 is invested somewhat conservatively and you earn only 4% per year in interest, you’d have an annual amount of $37,680 to meet your ongoing expenses. That’s in today’s dollars, since the actual 4% “rule” tells you to increase that amount by enough to cover inflation each year after the first.

If your savings earned 5% per year, you’d live on the same $37,680 per year ($3,140 per month before taxes) and let the remaining 1% stay with your principal to grow your savings and help against inflation.

If you lived on the 4% interest, and taxes stayed as they are in 2018, you’d have…

$37,680 gross annual (4% of $942,021)

- $4,140 in taxes (for a married couple - higher if you became single, but not including any deductions at all)


$33,540 per year

That’s $2,795 per month, after taxes, to pay all your bills. Of course your mortgage is already paid in full, so you’ll only owe property taxes, insurance and ‘upkeep’ as far as your housing is concerned.

If that seems like plenty to you, then yes, you can probably retire if you win a $2,000,000 lottery. You’ll likely want to visit in person with a good tax planner and a financial advisor first, though.

If that’s just not enough to live the way you’d like (and pay your medical expenses - copays and deductibles and insurance or Medicare, cover any future long term care needs, maintain your home, pay property taxes, maintain your vehicles and buy new ones every few years as needed, keep up with inflation for the rest of your life, make any charitable donations you want, adjust for any changes to tax rates, etc.), then the answer is no, you probably could not retire comfortably if you won a $2 million lottery prize.

Again, this is a very simplified example. We haven’t planned for any cash savings to cover emergency expenses. We haven’t discussed what you might do with your old house after you move into your new one. Would you sell it and add that amount to your savings to increase your income? Would you rent it out and have that as an additional income stream? And when would you begin to receive your Social Security payments? Do you have heirs to whom you’d like to leave a significant amount or does your money only need to last until the end of your own lifetime? Our example assumes you are trying to preserve the savings principal, so it could be inherited by an heir, but maybe you’re not concerned about that and are comfortable spending more. Did you intend to tithe your $2 million winnings to your church? Or donate to some other charity? Were you expecting to travel more during your retirement? There are many other items to consider with regard to your retirement, and a financial planner or advisor can help you with that.

Really, though, as unlikely as winning such a prize is, that’s not going to affect many people, and it’s not likely to affect you.

A better way to prepare for a good retirement is to have a good written financial/retirement plan, save faithfully and follow your written plan. At Texas Financial and Retirement, we help people create a custom retirement plan that fits them. We look at an individual’s or family’s current financial position and projected additional savings, then help them to think through their own retirement dreams and goals. After that, we work to craft a personalized plan to assist them in maximizing their retirement income and minimizing any tax burden on their heirs.

We do our best to help people get retirement right.

Contact James Holloway, Sr. and the rest of the Texas Financial and Retirement team at or 903-534-5477 to ask about a free initial visit and consultation. Let us see if we can help you to get retirement right, your way, whether you’ve won a lottery or not. We’d love to help you.

Investment advisory services offered only by duly registered individuals through AE Wealth Management, LLC (AEWM). AEWM and Texas Financial and Retirement, Inc. are not affiliated companies. Investing involves risk, including the potential loss of principal.  Neither the firm nor its agents or representatives may give tax or legal advice. Individuals should consult with a qualified professional for guidance before making any purchasing decisions. 662339

Retire Ready

James R. Holloway, Sr. is the owner and Senior Managing Advisor at Texas Financial & Retirement, serving East Texans with financial planning and retirement assistance.

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