As I discussed yesterday, that's a fair chunk of money-- far too much to spend at once.
But it is fun to think about.
It also makes for a great discussion about how you would begin to invest such an enormous sum.
But here's the thing. Whether you have $656,000 or the entire $656,000,000 jackpot, your thinking is basically the same.
In this case, it is just a matter of scale. It may sound odd but it's true. Let me explain.
If you were lucky enough to hit the big one, here's how you might want to handle the winning ticket.
Mega Millions Decision Number OneBefore you did anything, your first decision is whether to take the jackpot in a lump-sum or in annual payments.
Admittedly, after tax and discounting, Saturday's jackpot comes to only $355 million as a lump-sum, or 26 annual payments of $19 million.
The discount rate between the two is only about 2.6%, so if you think you can make more than that on your money, you should probably take it as a lump sum.
Maybe if you wanted to be very conservative on your investments, or thought the stock market was hopelessly overvalued, an annuity would be preferable.
For example, if you had won that amount in early 2000 you might have invested some of the lump sum in the dotcoms before the crash. In that case, you'd have been better off with the annuity!
But market crashes aside, generally, the lump sum looks a better deal.
Then there's the amount you are going to need for your spending spree. I discussed this yesterday suggesting that a spending spree of more than $30-40 million, spread over a year or so, would probably not make you happy and might incur costs for the future.
In particular, you need to be careful not to buy large items that incur running costs.
By all means buy a really nice sailboat, but a $100 million yacht or a house that requires a full staff of servants are likely to drain your resources in years to come, and could lead you eventually to ruin.
To avoid that it probably makes sense to devise a budget for how much you can spend.
If you're fairly young, ideally you would want the money after your spending spree - about $300 million-- to last you the rest of your life.
With interest rates so low and inflation a risk, that means you shouldn't plan on spending more than about $10 million a year in today's money, with spending perhaps increasing along with inflation.
That should be ample for all the toys and lifestyle you want, again provided you haven't bought Downton Abbey or equivalent in a yacht.
How to Invest Your Mega Millions JackpotThe next thing to be clear about is that you shouldn't invest all the money in the stock market at once.
To continue reading, please click here...