As Mega Millions jackpot hits $1bn, what’s the best way to collect winnings: annuity or cash option?

The Mega Millions jackpot has been growing and growing since it was last won in April - and, for only the fifth time in the lottery’s history, it has now hit 10 figures. After there were no winning tickets in Friday’s latest Mega Millions draw, the top prize has rolled over from $940 million to $1.05 billion.

How to play Mega Millions

A Mega Millions ticket costs $2. To play, you have to choose six numbers from two separate pools: five main numbers between 1 and 70, plus a Mega Ball number from 1 to 25. To win the jackpot, all six numbers must match those that are drawn. If multiple participants get every number right, the prize is shared.

Annuity option vs cash option

Winners can choose to be paid their money in instalments (the annuity option), or as an up-front lump sum (the cash option). But which alternative is better?

If a single player secures the jackpot in the next Mega Millions draw, which takes place on Tuesday 1 August, they will be able to claim the full $1.05 billion if they opt to receive their winnings in 29 annual payments. These instalments grow in size by 5% every year. If the winner would rather pocket their prize in one fell swoop, meanwhile, they will have to settle for a reduced amount. For Tuesday’s draw, the cash option stands at $527.9 million.

In both cases, these are gross amounts - so lump-sum recipients will face a one-off tax bill, while annuity recipients will have to contend with levies every time they receive one of their yearly instalments.

As a result, choosing the cash option may prove more straightforward when it comes to fulfilling your tax obligations. It also allows winners greater immediate scope to use their money for major investments, such as stocks and real estate. On the other hand, the annuity option gives recipients a larger post-taxes slice of the jackpot - and protects them from blowing their winnings right away.

Where in the US is Mega Millions played?

Mega Millions is played in every state in the US except Alabama, Alaska, Hawaii, Nevada and Utah. It is also played in the District of Columbia and the Virgin Islands. Draws are conducted every Tuesday and Friday at 11pm ET/8pm PT.

What were Friday 28 July’s Mega Millions numbers?

Friday’s winning numbers were 05, 10, 28, 52 and 63, and the Mega Ball was 18. The Megaplier was 5x.