A financial expert has shed light on how much lottery winners will need for retirement.
Retirement can be tempting for lottery winners, especially when they win an astronomical sum.
The Mega Millions jackpot has grown to an estimated $1.55 billion, which could be the third largest jackpot in US history.
Finance expert Tim Cestnick told CBC that decades ago, $1 million was enough for retirement, but that’s not the case today.
He said, “It’s not easy to get a million dollars. But for most people, taking care of themselves for the rest of their lives will not be enough.”
Cestnick shared a general rule of thumb, saying you should multiply your income by 30, but cautioned that the formula wasn’t 100% accurate.
He said those who make $70,000 would pocket more than $2 million.
The Mega Millions jackpot is now over $1.5 billion since there hasn’t been a winner since April 18th.
More than 30 draws have passed since a player guessed all the numbers correctly.
Players have a one in 302.6 million chance of winning.
If someone wins this week’s jackpot, they could either get the full $1.55 billion paid out to them over 30 years of retirement checks, or they could opt for the lump sum.
The lump sum is a one-off payment with taxes already deducted, meaning the winner would only receive $757.2 million.
Financial and lottery experts warn that deciding on the lump sum or annuity is a mystery to all winners.
Pacifica Wealth Advisors’ Robert Pagliarini told The US Sun, “It’s the most important financial decision you’ll ever make in your life.”
“You make a life-changing decision right away that you can no longer change.”
Pagliarini said some winners who accept the lump sum find they want their prize right away.
He said, “They say, ‘Well, I’ll just take the money now.’ Those who take the lump sum just want their money, and they want it now.”
The financial expert said that while claiming the lump sum might be beneficial for some winners, it might not be the best option for everyone.
He said: “The upside is that they now have control of the funds, but that’s also the main downside.”
Legal expert Andrew Stoltmann estimated that around 90 percent of the winners receive the lump sum instead of the pension.
He told The US Sun that winners should receive their prize as an annuity.
Well-known billionaire Mark Cuban told the Dallas Morning News that the winners don’t want to squander their money in one place.