The Mega Millions jackpot for tonight, Friday, December 27 is estimated to be worth $1.15 billion dollars. That is if they choose to receive the annuity payment spread out over the next 30 years, but almost no one ever chooses that.
Give me the stats
Out of the last 100 Powerball winners, only 4 have chosen to receive the annuity payment for the next 30 years. That means 96% of lottery winners have chosen to receive a lump sum.
What’s the logic?
Most people believe they can make more money from investing the cash prize over the next 30 years than if they take the annuity payment, and they aren’t wrong.
The annuity pays out 5% more each year for the entire 30 years to compensate for the rate of inflation. For the year 2024, the Dow Jones Industrial Average is up 14.11 percent.
In the last 34 years, the Dow Jones Industrial Average index (in EUR) had a compound annual growth rate of 11.58%
Downside of accepting all that cash
You know what I’m going to say – family, friends, and people you don’t even know coming out of the woodwork with their hands out looking for a share of your prize.
According to the Certified Financial Planner Board of Standards, nearly one-third of lottery winners eventually go bankrupt within three to five years of winning.
Can you imagine blowing through $1 billion dollars in just a few years after “helping out” all those long-lost relatives that show up on your front step?
What would I do?
I’ve put a lot of thought into this every time I go to the gym or log a long run or swim. My mind can’t help but turn to the “what if” of the lottery.
First, I wouldn’t tell a soul outside of my immediate family that I won the lottery, and I’d choose to accept the lottery prize anonymously, which most states allow.
Second, I personally would choose the cash option, set aside a few million dollars to spend over the first few years in ways that wouldn’t arouse any suspicion from friends and family.
And third, I’d invest nearly the entire amount in dividend paying real estate ETFs like Blackstone Mortgage Trust Inc (BXMT), which has a 10.45% annual dividend yield, or the Arbor Realty Trust Inc (ABR), which has a 12.50% annual dividend yield. If you invested a lump sum cash prize in this ETF then you’d be looking at doubling your money in less than 6 years from the compound interest alone.
Top 5 Highest Lottery Jackpots
Curious what option some of the biggest lottery winners have chosen?
Here’s what payment option the top 5 highest-paying lottery winners in the world chose:
- $2.04 Billion – Powerball (November 2022)
This is the largest lottery jackpot ever won by a single ticket. They lived in California, and they chose the lump-sum payment of $997.6 million before taxes. - $1.765 Billion – Powerball (October 2023)
This was the second-largest Powerball jackpot and the second-largest US lottery jackpot overall. They also lived in California, and chose the lump-sum cash payment. - $1.602 Billion – Mega Millions (August 2023)
This is the largest Mega Millions jackpot to date and the third-largest US lottery jackpot overall. They lived in Florida, and chose the lump-sum cash payment. - $1.586 Billion – Powerball (January 2016)
For this one there were 3 winners from California, Florida, and Tennessee, and they each chose the lump-sum cash payment. Each of the winners received a lump-sum payment of approximately $327.8 million. - $1.537 Billion – Mega Millions (October 2018)
This winning ticket was won by someone in South Carolina who chose to remain anonymous, and chose the lump-sum cash payment.