If you win the Mega Millions jackpot tomorrow (March 30), you could either choose to receive $540 million paid out over the course of the next 26 years, or you could opt for $359 million in instant cash. Which is the better move?
Neither option has clearly superior monetary value. The long-term payout is larger because Mega Millions would earn interest on it over the course of the 26 years, and because inflation ensures that $540 million paid mostly in the future may have roughly the same buying power as $359 million today. Put differently, if $359 million were received and invested today, it would earn interest and grow to an estimated $540 million in 26 years.
They're roughly equal in value, but both payment options have certain advantages. An immediate lump sum allows the winner to live lavishly, or invest in a major enterprise that promises large returns. But all too often, lottery winners squander their prize and end up no better off than before their lucky day. Twenty-six years of smaller (though still sizable) payments guarantees a lifetime of comfort.