The Mega Millions jackpot has been growing every week since its last winner in June, reaching $740 million — the seventh largest in history — ahead of its next draw on Friday at 11 p.m. ET.
Assuming you’ll defy the 1 in 302,575,350 odds of winning Friday night’s draw, you’d still have to decide which payout to choose:
- A 30-year annuity, which pays out the full listed jackpot amount
- An upfront lump sum of cash, worth about half of the listed jackpot amount
Most winners take the lump sum, since they get a large amount of cash that can be invested and start growing right away.
Choosing the annuity would net you at least $230 million more, although it would be distributed in increments of $15.8 million or less over 30 years, according to USmega.com.
What financial experts recommend
Many financial experts agree that the safest thing you can do is take the annuity, especially if you’re not an experienced investor and want to minimize the risk that you’d lose money.
“The annuity is certainly the safest option,” says D.J. Hunt, a certified financial planner in Florida. “It saves the winner from blowing all the money and ending up broke, as so many lottery winners do. Additionally, it takes out the uncertainty of future investment returns.”
But if you’re an experienced investor who is disciplined with money, “the smart financial decision is to take the lump sum,” says Noah Damsky, a chartered financial analyst in Los Angeles. The annuity option is like “choosing the lump sum plus buying a bond,” which is “not as competitive as what you can achieve in the market,” he says.
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While each annuity payment increases by about 5% from the previous installment, you could increase the return on the larger lump sum much more quickly by investing in stocks. Historically, the average return on investment in the S&P 500 is closer to 10%, per financial platform Smart Asset.
“Do you really want to invest all that money so conservatively for 30 years?” says Damsky.
Whatever payout you choose, consider consulting with a trusted expert, such as a certified financial planner, first. They can advise you on the best investments based on your personal goals and risk tolerance.
“When people win this kind of money, lots of problems creep up that they didn’t anticipate,” including “many people who come out of the woodwork to ask you for loans or gifts,” says Monica Dwyer, a CFP in Ohio. Lottery winners “have a target on their backs” that attracts scammers offering phony investments, she says.
For that reason, Dwyer also recommends keeping quiet about winning the lottery, at least until you hire professional planners who can advise you on what to do with your newfound wealth: “People act weird when they find out you have money and sometimes it’s better if no one knows.”
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