By Mike Winters -
CNBC
For the sixth time in Mega Millions lottery history, the jackpot surpasses $1 billion ahead of Tuesday's drawing at 11:00 pm ET.
If you match all six numbers on your ticket, you can choose between collecting $1.1 billion in annual payments over 30 years or taking home a one-time payment of
$525.8 million
, according to usamega.com.
Most winners choose the lump sum option, even if it is less than half of the total prize amount.
Millionaire Mark Cuban, on the set of the ABC show Shark Tank.Getty Images
This way,
they get as much money as possible right after they win
, instead of receiving annual payments.
In this case, those payments would be about $23 million a year after federal taxes are deducted.
With the one-time payment, winners can, in theory, invest and start growing funds immediately.
However, Mark Cuban, a self-made billionaire and star of ABC's
Shark Tank
, believes winners should opt for an annuity.
These are the reasons.
Why should Gordo winners opt for annual payments according to Mark Cuban?
Cuban advises winners not to opt for a single payout, largely because there are no guarantees that he will invest it properly.
“Don't go for the lump sum payment,” Cuban told the Dallas Morning News in 2016. “You don't want to waste all of [your money] at once.”
Instead, by opting for annual payments, you ensure that you will receive the highest possible take-home earnings.
The payments will also be spread out per year, so it is impossible to spend the entire sum.
To take home the same amount with the lump sum option, you would have to make up the nearly half a billion dollar difference you won't receive with smart investments.
But
not everyone is good at investing
.
“You don't become a smart investor when you win the lottery,” Cuban said.
“Don't invest.
“You can put [your money] in the bank and live comfortably for the rest of your life.”
If you keep your profits in the bank, you probably won't get the highest returns possible compared to riskier investments.
But by doing so, “you'll sleep much better knowing you won't lose your money,” he said.
“If you were happy yesterday, you're going to be much happier tomorrow,” Cuban told the Dallas Morning News.
“Life is easier when you don't have to worry about bills
. ”
Cuban also offered this advice to jackpot winners: “Hire a financial lawyer first,” before claiming the money.
It will help you make a plan to make sure you get the most out of your annual payments.