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By David K. Li
The next winner of Mega Millions will have to answer this huge question: do you trust yourself?
If a player matches the six draw numbers on Tuesday night, he will have to choose between a lump sum of nearly $ 905 million or receive $ 1.6 billion in 30 installments.
The initial $ 905 million represents the current value of $ 1.6 billion over 29 years.
"Oh, you have to put your money in now!" Excitedly said Philip Tew, an economics professor at the University of Arkansas State, at NBC News. "Typically, the market has an annual return of between 7% and 11%, which allows you to invest and end up with much more than $ 1.6 billion over 30 years."
But as winners of lotteries are not always renowned for their sound financial wisdom, Chicago lawyer Andrew Stoltmann insisted that it was slow and steady.
"One of the biggest mistakes made by the winners is to take the lump sum," said Stoltmann, who practices securities law and represents lottery winners who have lost money for bad investments.
"The average person who wins the lottery simply does not have the infrastructure in place to handle a revolutionary amount of money,"
If Tuesday's draw only brought one winner and that player took payments, he would receive an initial $ 24.08 million followed by $ 25.29 million a year later, according to those responsible for the lottery.
The annual payments continue to increase by 5%, giving a $ 37 billion on the 10th check, $ 60.86 million on the 20th and the last amount on $ 99.13 million.
"So, if you take annual payments spread over 20 to 30 years, you can handle all the initial mistakes made by most winners, learn from those mistakes and keep most of the body of work," Stoltmann said.
And even Tew, with his enthusiastic advice of money in advance, said that he would not denigrate anyone who protects himself against themselves. Taking three decades of guaranteed money, even if it is not fully optimized, can not be a bad thing, he said.
"I give financial literacy conferences all the time and tell people there's a way to make really smart credit card transactions – but if you know you can not do that, do not not this credit card, "said Tew. "It's a much wiser decision to save yourself from yourself."
Maryland Lottery spokeswoman Carole Genrty said that in 15 years of work, she could not remember the biggest winner in her state who ever took an annuity instead of the lump sum.
"In my day, I've never seen it," said Gentry. "I think it's all the excitement of the jackpot and the idea of controlling your own money (immediately)."
Bernard Georges, a 47-year-old New York resident of the Bronx, said the choice of lump sum versus annuity was obvious to him.
"Oh, definitely, I'm taking a lump sum. If you take the lump sum, you will be able to invest it and earn a lot more money, "said George, a few seconds after buying Mega Millions tickets in Midtown Manhattan on Tuesday," I trust myself. "
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