News writer
A new game called Millionaire for Life is slated to take multiple state lotteries by storm beginning February 22. The grand prize is $1 million a year in annuity or $18 million as a cash option, making it the biggest lifetime prize in the lottery. It is expected to be offered in dozens of states.
Millionaire for Life is a shift from Mega Millions and Powerball, which advertise eye-popping jackpots. But between a lifetime of prizes or an unbelievable sum of money, which is truly better?
What is Millionaire for Life?
In Millionaire for Life, players will pick five numbers from 1 to 58, plus an additional number from 1 to 5, and pay $5 per play.
If a ticket matches all six numbers, the winner can choose to receive $1 million every year for life, or to take out a cash sum of $18 million.
Lower-tier prizes include $100,000 for life with a cash value of $2.2 million, as well as payouts ranging from $8 to $7,500.
Odds of winning the grand prize in Millionaire for Life are 1 in 22,910,580. This is far more likely than winning the big jackpots at Powerball (1 in 292,201,338) or Mega Millions (1 in 290,472,336). Powerball tickets cost $2, while Mega Millions tickets cost $5.
Millionaire for Life was conceived by the Multi-State Lottery Association and participating state lotteries.
Bye-bye, Lucky for Life
In many participating states, Millionaire for Life will replace the existing lifetime prize lottery.
Lucky for Life. Those games offered grand prizes of $1,000 a day.
Lucky for Life drawings take place every night at 10:38 p.m. Eastern time, costing $2 a ticket. It's currently available in 22 states and the District of Columbia. Players must match five numbers from 1 to 48, and a Lucky Ball number from 1 to 18. Odds of winning the top prize are 1 in 30,821,472, which are lower odds than Millionaire for Life.
Lower-tier prizes include $25,000 for life for picking five balls, and $5,000 for matching four numbers and the Lucky Ball.
Millionaire for Life could be replacing Cash4Life in some states, too - though it hasn't been confirmed. Cash4Life drawings take place nightly at 9:00 p.m. Eastern time. The game is available in five states, with standard tickets costing $2 each. Odds of winning the top prize are 1 in 21,846,048, which are slightly higher than Millionaire for Life. Players must match five balls numbered 1 to 60, plus an additional Cash Ball, to win the grand prize. Lower-tier prizes include $1,000 a week for life and $2,500 for four numbers matched, plus the Cash Ball.
While life-changing for many, these sums couldn't compete with the juggernaut jackpots of Powerball and Mega Millions. Thus, the stakes have been raised.
Cash4Life and Lucky for Life are still available for now
In most jurisdictions, Cash4Life and Lucky for Life will continue at least until Millionaire for Life takes its place in February, though they won't be able to buy tickets for advance play beyond the sunset date.
Growing pains
In New York, annual Cash4Life sales have exceeded $110 million in recent years, while in Massachusetts, Lucky for Life sales have fluctuated between $3.5 to $4.6 million. It's a bit of a gamble to replace these popular games with something new. The increase in ticket prices from $2 to $5 has also given some participating states pause.
The transition won't be without bumps in the road, but changes in lottery games are usually accepted when players see big wins and even bigger jackpots. Mega Millions increased its ticket prices by $3 last year, but they also increased their odds and automatic multiplier features, leading to strong revenue - albeit fewer overall sales.
Will Millionaire for Life be a good replacement?
While there may be some issues during the transition, Millionaire for Life has all the makings of a successful game. Lucky for Life states will appreciate the higher odds, and states that use Cash4Life or Lucky for Life will flock to the $1 million a year jackpot. The ticket price increase may lead to fewer individual sales, but higher revenue for the state.
Pros of a lump sum
When a lottery player wins a Powerball or Mega Millions jackpot, they're offered a lump cash sum or an annuity.
A lump sum receives the entire jackpot all at once, with taxes removed. If Millionaire for Life winners choose the $18 million sum, they will receive all of that money at one time, with substantial taxes removed.
Most winners choose a lump sum format. Here's why:
Immediate control. With a lump sum, players obtain their money immediately and are able to control it freely, without dealing with further hassles or hurdles.
Immediate investment. Financially savvy lump sum winners may want to invest a large amount of money right away. With inflation, it can be argued that a large lump investment could be worth more now than in the future.
The winner is older, or heirless. If a winner isn't going to live long enough to collect a 30-year annuity payout, or if they don't have heirs, they have little reason to think long-term. They want the money now. A lump sum also makes for simpler estate planning.
Pros of an annuity
The Millionaire for Life lifetime prize option is a lot like an annuity. An annuity is a jackpot that has been broken up into smaller payments over 30 years. It's regulated and meted out.
Here's why some people opt for annuities:
Higher overall amount. In an annuity option, there is a lower tax liability and a higher overall prize value. So, while it takes longer to receive an entire annuity, it is worth far more than a lump sum win.
Stable income. Stability is guaranteed over decades. There's less volatility or risk of blowing through an entire jackpot.
Big jackpot annuities are worth more, of course
If you're lucky enough to win a massive Powerball or Mega Millions jackpot, you can earn far more than $1 million a year using an annuity.
For a Powerball jackpot advertised as $930 million, for example, the first annual annuity payment is estimated to be $10.6 million in tax-free states. This number gets higher over 30 years until the entire jackpot is paid out. The jackpot will be paid out even if a winner has passed away - the remaining annuity will be channeled to the winner's estate.
A lifetime prize vs. an annuity?
The Millionaire for Life lifetime prize option is different from a traditional big jackpot annuity in a key way: it's not a capped payout drawn out over 30 years. Technically, it's $1 million a year for a winner's natural life, period.
Available sources explaining Millionaire for Life have a caveat: “lifetime prizes claimed as annuities will be paid for a minimum of 20 years.” This means that, even if the winner dies after winning Millionaire for Life, the payouts are still guaranteed for 20 years, even if the payments are directed toward the winner's estate.
Millionaire for Life, or Powerball and Mega Millions?
Powerball and Mega Millions are renowned for their cartoonishly large jackpot sums. The prizes offer far more money than smaller multi-state games ever could.
However, odds of winning these jackpots are far lower than odds of winning Millionaire for Life - and according to most financial sources, $1 million is far, far more than a comfortable annual salary for an American in any state.
Besides, all the games offer massive lower-tier prizes as well - making them all worth playing.
The verdict
Choosing a lump sum or an annuity is a personal decision based on the winner's age, values, and financial goals. Annuities are for prudent, long-term thinkers, while lump sums are for short-term, big-ticket investor types.
Despite trends to the contrary, most people will probably live more comfortably and securely with an annuity. However, there's a case for a lump sum when it's appropriate - for example, if a winner is elderly and heirless.
Financial responsibility
Everyone's situation, level of financial literacy, and options are different.
It's easy to get impulsive and starry-eyed around big sums of money. But anyone who wins the lottery - playing any game - should consult reliable, professional financial experts when choosing between an annuity and a lump sum.
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