Mega Millions At $1.6 Billion: Would You Take The Lump Sum Or The Annuity Payments?

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The highest jackpot in the history of the world will take place at 11pm EDT tonight when Mega Millions will raffle off a $1.6 billion grand prize.

Of course it’s only $1.6 billion if you take the payments over 30 years. If you want the payments in a lump sum today you would get $904 million.

DDF member farmbochur made this spreadsheet to calculate just how much you would get each year and what sort of interest you would earn over 30 years. It shows an initial annual payment of $24MM in year one which grows to a $37MM payment by year 10, a $60MM payment by year 20, and a $99MM payment by year 30.

He calculated an implied interest rate of 3.45%.

That’s not an amazing rate, but it’s a decent rate of return considering that there is zero risk of losing the funds.

Of course that’s hardly the only factor in play.

According to some estimates, 70% of people who hit the jackpot wind up going bankrupt. Taking the lump sum means you may just wind up giving it all away, overspending, investing poorly, etc. By taking the annuity you can mess up and spend your $24MM in year one, but you’ll still have $1.56 billion coming to you over the next 29 years.

Then again a good financial adviser should be able to help you invest the $1.6 billion in such a way that it earns more than 3.45% and provides you with enough income that you never need to touch that principal amount.

Another factor can be state and local taxes. If you take a lump sum payment you’re going to owe taxes on everything up front. That’s 37% to the federal government and potentially up to another 13% if you live in a high income tax location like NYC.  If you take an annuity payment you may be able to move to a income-tax free state, say Florida or Texas, where they won’t tax the following 29 years of payments. Then again your original state and city may go after you for the full amount, so you’ll want to talk to a good tax lawyer about that. And of course tax laws for the wealthy can change over the next 30 years for the better or for the worse.

So, what would you do and why?

Would you take the lump sum payment or the annuity payments over 30 years?

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131 Comments On "Mega Millions At $1.6 Billion: Would You Take The Lump Sum Or The Annuity Payments?"

All opinions expressed below are user generated and the opinions aren’t provided, reviewed or endorsed by any advertiser or DansDeals.


They should make lotteries on points and miles! I would take both the lump sum and the annuity… Lol


how valuable points and miles are, their value is that its a substitute to $, but you never had something that you can ONLY buy with point and $ cant buy it, so how much we love points, points cant get you $, but $ can get you a lot of points


Ask Dan, you can’t buy first pitch of a World Series game, etc.


Lump sums=> bonds, IF you dont want to get screwed when someone goes bankrupt.


Not going to live forever, might as well take the lump sum and and spend like theres no tomorrow!


Can’t trust the government .. take the money and run




It’s not “the government” giving issuing the annuity

Shop around

I’d see if I can get a better deal selling the annuity off to a market buyer. In the meantime, we’ll just be the biggest buyer in the country.


Sure, call JG Wentworth and sell it to them based on a 20% discount rate

Shop around

Gotta know the wholesalers


Right away, easy to beat that rate especially with so much money. With such a high amount the tax implications of spreading out will be minimal unless I move to no tax state which I don’t want to do for 29 years.

middle-aged man

If I were in my 20s I would do annual payments. Iny late 40s now I would do lumpsum


how do u know how long youre living


I think his point is that he’s more financially responsible at his current age


Why do you keep saying moving to an income free state can help for tax purposes. NYS clearly says if you win while you’re a NYS (and or NYC resident), you’ll be paying their taxes for the remainder of the annuity.

Sum dum guy

I don’t care what the state Officially says the fact is the law says if you live in New York state for more than 180 days out of the year you have to pay income tax to them if you Live somewhere else your subject to their rules but the cut off is 180 days
Now I’m not saying they won’t try to collect
I’m just saying if you plan this right & can prove that you live somewhere else for more than 180 days out of the year you should be able to win in a tax lawsuit against the state

Now I don’t know if this will work but it’s definitely worth looking at

Since you have six months to come forward and collect your lottery winnings first move to a state that has no income tax then come forward and collect your winnings it might work for even the first year if you don’t collect until the next fiscal year


thats a large sum of money. it doesnt even fit under my bed. 🙂


Maybe add an option of, “First let me win, then I’ll decide”.


does annuity transfer over to next of kin?


If you have a will – most states only allow for you to write only one beneficiary that will receive lottery winnings after you pass away. This can be a problem if you really want to have it go to multiple heirs. If there is no will – it will go to your “Estate” and be distributed to your heirs based on a percentage that the states determine.


Set up a trust as first beneficiary


“considering that there is zero risk of losing the funds” How about if the lottery goes bankrupt?


The risk of the government entities behind the lotteries going bankrupt is slim.


The lump sum is 904 million and buying every possible combination would cost 604 million. Why are people not doing this???


Because if someone else also wins, you just lost a LOT of money


I would like to have this problem


Correct. Also after taxes its down much more than 904 mil.


Cause others may win as well and you’d have to split the jackpot with all the winners.


Well that is called risk and reward. The risk is that happening and possibly splitting the pot but the reward is a net of 300 million. No different than any investment.


If another person wins you would lose


Because if 2 people or more split the jackpot you’re screwed, plus I imagine someone with $604 million lying around can think of better investments


1. After taxes the lump sum payout would be less than 604 million.
2. If multiple people win then the pot is split and you would end up getting way less than 604million once the pot is split.


Well, for point one, if you take the lump sum you will only pay tax on the net income which would be $300M

Sum dum guy

Somehow I think that would be extremely difficult to prove
The government on every level will demand taxes on the full amount & you would bear the burden of proof that it was an investment (if that is even an option) I just don’t think it would end well


Beside for needing the cash handy, if there is another winner or two, you’re out a couple of dollars…


Few if any people have $604 million cash lying around to invest in lottery tickets.


1) who has the money to do that?? 2) You have to fill out all the combinations by HAND (cannot be done with a computer) which would take months if not years and 3) If there are multiple winners then you have to split it with them and you might come out LOSING quite a bit of money.


1. Logistics is extremely tough
a) Need to have enough time to buy every combination (there are only 3 or 4 days between drawings)
b) Need to have enough cash on hand to pay for every combination (no credit cards!)
c) Need to have a good ticket management system to keep track of 10’s of millions of pieces of paper
Imagine if you only manage to get 85% of the tickets and not the winning numbers

2. Even if you win you might lose money. Multiple winners is a huge risk – it’s extremely likely that there will be 3+ winners

Taxes are not an issue though because you could deduct gambling losses $604M against the win and just pay on the net gain.


I’m sure Dan has a way on how to purchase lottery with credit cards. Mabey a different state how knows?


If you could buy 10 combinations every second, it would take 350 days to cover them all. And at least that long to find the winning one.


You can start doing this know for a future large jackpot. I believe the lottery slips are all all the same for each drawing. So let’s get to work now and hopefully in a couple of years when such a large jackpot rolls around again we’ll be ready!

Sum dum guy

You’re screwed if the lotto machine runs out of paper


Check the past for this. Think this was done years ago in florida and there was 60+ winners


U can’t buy all possible combinations, There isn’t enough time to print all this combinations(u only have 345.6k seconds)


A) if someone else wins with you…B)post tax you will maybe break even….and if you take it over 30 years the returns you will get by keeping your money in the bank for that period will be greater.


The lottery machine would jam, printing so many tickets.
You would have to have 10 machines printing 24/3


Is it possible to participate in this lottery online from outside US ?


Just drive down (or up) here, find a lotto store and stand online like everyone else. Eh?


Please add a “not sure” option to the vote.


$2 in my pocket vs giving up almost 8 years of sobriety. I’ll keep the 2 bucks.


Nice! You can’t put a price on recovery!


Congrats! Mad respect!


Major respect to you. Makes you realize no money can buy true happiness.


Yup I give it all up to you

Barry Lincoln

Risk free 3-month Tbills are now yielding 2.35%…. hitting north of 3.45% should be very doable… plus yields are increasing… lump sum is a no-brainer for the semi-sophisticated investors…


You can lose the money if the state or city were to go bankrupt such as the case of Detroit, anyone who hadn’t taken the lump sum lost the remainder of their money.


What a zchus it would be to get to give 90 million dollars to tzedaka for maaser!

Also, what happens if a non-profit wins? I saw a Chabad House in Israel offering the opportunity for donors to split the winnings if their tickets win. (I realize that them being in Israel complicates things but can you try answer it as if a Chabad House 🙂 in the USA won?)


If the winner chooses to take it over 30 years and then passes away a few years later do his/her descendents inherit the remaining amount or not? If not it may be smart to just take the lump sum


They’ll give the money to the inheritors.


“Then again your original state and city may go after you for the full amount, so you’ll want to talk to a good lax lawyer about that.”

Freudian slip? LOL.

I’d take lump sum. Historically, it’s been quite easy to beat 3.45%, and there are steps one can take to avoid spending it all in go a raunchy, indelible, and overblown trip to Vegas.

Steven Goldstein

Or as you have almost a year to claim it…you establish residence in a no income tax state..and then move out of NY for 180 days and you would not be considered a NY resident.


Although I agree with you on that, I figure you’d have the state hounding you for the rest of your life…


It’s based on where you buy the ticket not where you live

Your Old Friend

Never trust the government with anything. As countless citys an counties have shown, government is not immune to economic downturns and bankruptcies. Take it and run. Any competent financial advisor can invest in a mixture of treasury notes and AAA Corp bonds and will beat the <4% return from the annuity.

Good luck folks and remember your old friend when you win




Lump sum! The interest through investment could easily beat out the amount that could be got from the payment being spread out over 30 years. Plus, there is the worry that anything could happen to the payment over the next 30 years.


Uh, please define your use of the word “worry”…. ;-p

Am I the only one here davening to win second prize?

The billion is a headache and a half. Two million? Not so much!


daven you should get it next week this week youll make headlines


LUMP SUM! Any knowledgeable financial adviser should be able to earn way more than 3.45% over 30 years. AND federal tax rates are actually at a historically relatively low level


Annuity to me is like winning the lottery every year for the next 30 years. Roi on the lump sum is just not as exciting. Another thing is it can slowly get you used to having money instead of buying 5 yachts within 10 days.


Imagine the bank interest you could earn on the lump sum… that in itself is a small jackpot every year.


Bank interest would get you less than the annuity return. And there aren’t enough banks to get FDIC insurance on it all.


I hate to break the bad news but DDF member farmbochur is incorrect. If you are in NY or purchased the ticket from NY the actual first year amount would be $16,178,486. It really depends on the state that you live in (state taxes vary state to state). Here is a link if you win and live (or the ticket was purchased in) NY.

Here is a link so that you can check out the state that you live in (although it really depends which state the ticket was purchased from but this is a less complicated way of figuring it out – or at least close enough)


Any legit websites to buy a ticket from for Canadians?


I’ve decided to sell the winning ticket for $100 million to anyone who has that kind of money and leave me alone to enjoy myself in anonymous peace and quiet.


yep! i said the same thing! Question is how to go about finding a buyer………


I’ll buy it from you if you win


There are Wall Street investment firms that will buy your ticket at a discount. I would have a contract where I, the seller would remain anonymous and the cash would be deposited into a bank (or a few banks) that would also protect my privacy. No one really needs that kind of money and a smart person would realize that their privacy and lifestyle would be completely destroyed by the publicity and the constant banging on the door by lots of people, friendly and otherwise, looking for a handout. It would become hell on Earth and I for one don’t need more than $100m, or even $50m to be very happy for a long long time.

I bought one ticket. If GOD wants me to win, then I better have a ticket in my pocket.


sounds good! thanks


The article points out that if you die while it’s being paid out, you will owe estate tax on the PV of the annuity upfront, which in states like NY can’t be converted to a lump-sum. So heirs could end up stuck in that way.


It’s a fixed annuity over 30 years, so it gets paid out to either your named beneficiaries, or your heirs and assigns.

Been There

Annuity is not that bad. I would like to think that $24MM would last me more than the first year!!! Even if the state goes bankrupt, the amount that you get in the first year sounds years sounds like plenty..!


Being as I don’t believe America as we know it will be around in 30 years, definitely lump sum… Also, Moshiach!!!


You left out one potentially serious issue with the 26 annual payments, namely Estate Tax.

Should the winner take the annual payments, and die, the family will be taxed as if the future payments is cash that they have.

E.g.. If person dies with 1 billion in future payments, they estate gets taxed on that billion NOW. There are stories where the families need to auction the future checks to pay the estate tax, and they end up still owing money even after they checks are auctioned.
Take the lump sum, invest it wisely, get taxed only on what you have.


To Quote Reb Yankle Miller: Buying a lotto ticket, means that you do not have Emunah that Hashem can make you lose 2 dollars some other way.


if you want to avoid taxes move to Florida before you claim your prize and take a on way flight and take an uber back to E.G. NY besides if you have most days 183 or more in the year in Florida you legally dont have to pay taxes so claim your prize January 1st and have fun in Florida


Domicile is NY even if out of State for over 180 days very hard to change domicile


Does everyone here have so much time on their hands that they’re discussing something which has less of a chance than getting hit by a meteorite three times on your way home tonight?
Why not discuss which hospital you’d recommend if someone gets hit?

And yes.. Guilty as charged because I too read the post.


The taxes make the actual rate on the annuity a little bit harder. On the annuity option, you pay income taxes on each payment, but the government essentially invests the entire $905MM principal on your behalf.

If you take the lump sum, you only invest the post-tax balance of the money (~500MM) and on top of that, you will pay taxes on the interest you earn. So while the interest rate on the annuity is only 3.45%, that’s interest off of $905MM – in order to “break-even” you’d need to earn almost double that, which would probably take riskier investments


If you don’t trust yourself, can’t you just put the lump sum in a trust? I would think that would easily beat the measly interest offered in the 30 year annuity option.


over 2 billion now

Judith Rosenfeld

Mashiach is coming. Take the money and RUN


Take it now. Who knows where this crazy world is headed. 900 mil less 180 mil (20%) to set up a tzedaka foundation. 720 mil to play with. ENJOY !


What people here fail to realize is that the remaining annuity payments can be auctioned off


Dan, no post about the new Citi Prestige?


for some reason when i download the farmbochur spreadhseet it says corrupt. anyone else have that issue?

Allison Marks

How do I win?


At 69, lump sum for me!


No thanks! Don’t wanna be a billionaire anytime soon. Marbeh nechasim marbeh daygis!


Emmunah hasn’t built our new shul (going on 7 years of a campaign), hasn’t prevented yeshivos from closing their doors due to funding, and doesn’t expand a long list of valuable projects. Emmunah is necessary in life, but doesn’t build the physical requirements in THIS world. If God wanted to make you a billionaire, one would be foolish to say he/she doesn’t want to be.


Dan, please correct the header, Mega Billion at 1.6b ….


Taxes are likely lower now than they might be going forward. But i think it’s pretty important to set up a personal annuity via a trust or something similar to protect you from yourself.


If I take it in payments can I decided after 15 years they should pay me the rest at once?


I’ll decide tomorrow 😉


I’m research which state to establish residence in Wednesday to minimize taxes. I’ll wait to claim the prize until residency in a low tax state is set. Any suggestions?


You buy real estate for aprox 1.6 billion and use the 27 year depreciation against your 30? year payouts
very little tax to pay


One small miscalculation:
You have to adjust for inflation rate.

A dollar in 1990 (28 years ago) has the spending power of $1.93 today.
We can’t predict the future, but if that trend held steady, $900 million today are worth more than $1.7 billion 30 years from now.


It’s not like you get the full amount in 30 years. It’s in payments over 30 years. So inflation is a factor but not as bad as you make it sound.


I feel that one will need it all at the beginning considering the fact that you’ll have every org. begging u for money that you don’t have & they wont understand how you don’t give enough maser etc. also the idea that you won that much may get you higher spending habits which you cant afford.


So many people talk. But don’t forget only one or 2 win.. So I think he can ask the right person what to do. So it’s nothing to deal before


how can I avoid 8.8% state taxes if my address is in ny? can i quicklly buy a property in a no income tax/lotto state tax state? or am i stuck paying the 8.8% tax rate?



Alive again.


Oh, sorry. Was taking a pre-lotto nap and was having a nightmare about my wildest dreams….


Lump Sum for a couple reasons in priority order (some have been mentioned previously)
1) if you spread out by 30 years you are extremely likely to spend as if you earn that every year. what happens after 30 years? If you have lump sum it’s easy to plan for your complete future, no matter what age, just simple math of how much to budget each year.
2) likely to do better on investing it yourself
3) even if you do #2 very conservative, or your investments don’t do as well as you expected you’re still likely to do better after inflation (unless you made really risky investments and lost a ton of money)


It’s really the opposite. It’s far more likely that a person getting a windfall will overestimate their spending ability than someone who has 30 years to mull over how they are going to spend their money. At least the guy who is getting it in payments will have a chance to learn from their mistakes.

And if you think that you cannot mistakenly waste 600 million, let me give you some spending examples where a guy who doesn’t have brains spends most of it within five years.

Let’s say the lump sum is $650 net after all taxes.

1) Buys a penthouse in NY for $75 million & a ranch in California for 30 million.
2) Buys a private Boeing with all the custom finishes it’s $100 million (on the cheap side)
3) Buy mansions for all his friends and family ranging from 1 million to 10 million for a total of 70 million.
4) Buys a fleet of the most exotic cars on the market with a few vintage ones mixed in for a total of 40 million
5) Buys a medium size yacht for only about 5 million.
6) Maintenance on all the mansions (friends and family can’t afford the maintenance will come asking for money to maintain), cars, yacht and plane runs to about 25 million per year.
7) Buys expensive watches, jewelry & expensive vacations ranging from a 4.7 million dollar watch (from the cheaper watches because he wants to be frugal) to a 10 million dollar necklace, a 6 million dollar bracelet and 3 million dollar ring for their dear wife and finally a few week vacation in the North Island in Seychelles for 1.5 million. Total cost about 25 million.

By year six he is down to his last 100 million which will give him about 5 to maintain his vast amount of properties and expensive toys. He is well on the way to bankruptcy.


Of course if your an idiot you can blow all the money. If you spend like that then it doesn’t matter lump or not, you’ll likely be bankrupt either way. They might even take the annuity and then decide to sell it to get cash sooner.

If you are responsible enough and understand that you want the money to last the rest of your life then what I said applies. Otherwise, yeah, take the 30 year but your probably doomed either way.


What are the winning numbers?!?

Dan s fan

5 28 62 65 70 mega ball 5


any winners?


“$514,233,090: What the Mega Millions winner in South Carolina will net for a lump sum payout after federal and state taxes are paid. That’s 33.5% of the advertised $1.537 Billion prize.”


Put $400MM of that in a fund with 5% interest annually, and let it accrue for 30 years, and you get $1.73B. Plus the $114MM you would take upfront in this scenario and you get way past the $1.6B. Obviously, the lottery advertising the FV of the price instead of the PV is dubious, but it’s not like it’s impossible to get that 1.6B if you invest it well, even in pretty safe investments.


take all and invest- have double or more in 30 years!

Jonathan Medows

Great article. Love the poll.