Longs man wins $1 million on Mega Millions

The Mega Millions jackpot reached $1.1 billion in March 2024, becoming the fifth largest jackpot of all time. The last two billion-dollar jackpots were in 2023; There was one each in 2022, 2021 and 2018.

More frequent billion-dollar winnings raise the question: Which payout option is better? Cash or pension?

Mark Cuban, self-made billionaire and star of ABC's “Shark Tank,” says winners should opt for an annuity rather than a lump sum payment.

Before we discuss his reasoning, let's examine the payout options for a $1.1 billion jackpot winner. If someone matches six numbers on their ticket, they can choose between a lump sum of about $525.8 million or the $1.1 billion paid out as a pension over 30 years.

With the annuity payments, the winner would earn about $23 million annually after federal taxes. Depending on their state's laws, they would still have to pay state taxes. Typically, most winners opt for the lump sum and can theoretically start growing and investing that amount immediately. However, Cuban has advised winners in the past to take advantage of the pension.

“Don’t take the lump sum,” he says. “You don’t want to screw everything up in one fell swoop.”

Taking the 30-year annuity will likely increase your net income, even after all tax obligations. Additionally, if you consider the lump sum with the idea of ​​investing, you would need to raise nearly half a billion dollars through investments to match the returns from the annuity, which is not guaranteed. In fact, Cuban is asking winners not to make any investments.

“You don’t become a smart investor if you win the lottery,” he says. Don't make investments. You can put it in the bank and live comfortably – forever.”

A billion dollars or even a few hundred million dollars is more than most Americans want to achieve with their retirement accounts. If you win such large amounts in the lottery, do you have to go back and invest the money?

Cuban seems to think it's wiser not to take any risks. He says, “You’ll sleep a lot better knowing you’re not losing money.”

But Cuban not only advises taking out a pension and warns against investments. He offers a few more words of wisdom for mass lottery winners. First and foremost, he recommends hiring a tax attorney.

The tax laws are already complicated enough, but adding large sums of money, particularly from lottery winnings, only confuses the equation further. And you don't need the tax authorities breathing down your neck. Your winnings should help ease the stress, not make it worse. Hiring a tax attorney can help you navigate the local and state laws surrounding your tax obligations for lottery winnings.

Cuban also says, “Tell all your friends and family no. you will ask. Tell them no.” Everyone seems to lose heart when they hear that someone they know has won the jackpot.

With that in mind, Cuban says, “If you're close to them, you already know who needs help and what they need. Feel free to help some, but talk to your accountant before you do anything and remember: Nobody needs help.” A million dollars for anything. Nobody needs $100,000 for anything.

There you have it. Mark Cuban's advice on winning the lottery. While most of us can only dream of it, winning the lottery isn't the only way to get rich. Whether you're one of the lucky few who have made big gains or want to grow your wealth in a more traditional way, everyone can benefit from a financial advisor to evaluate their portfolio and guide them on their path to a successful financial future.

This story was produced by Benzinga and reviewed and distributed by Stacker Media.