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What to do if you win the lottery

Forget the 401(k) contribution. Ignore your IRA. We’ve got a new retirement plan, and it only costs $2 and a dream.

It’s called Mega Millions. Don’t worry, you can thank us later.

OK, OK, we’re just kidding, but the estimated prize for Tuesday's Mega Millions drawing is $810 million. There have been only three lotteries ever won, in any game, with a larger jackpot than Tuesday’s prize, two of which were Mega Millions

The lucky winner can either opt for the cash payout of $470.1 million or take the prize as an annuity in 30 payments over 29 years. Of course, Uncle Sam will take his share, too, but even after he does, the fortunate individual should probably be able to retire in reasonable comfort with the tens of millions left over.

With that in mind, InvestmentNews asked financial advisers if they would recommend taking the lump sum or the annuity if one of their clients hits it big.

Slide 2: Melanie Jones, senior vice president, Evoke Advisors

The principle of the 'time value of money' suggests that taking a lump-sum lottery payment is better than an annuity. Alongside a prudent adviser, one can invest their winnings and likely outperform the annuity payments. While taxes are due on the lump sum immediately, you take out the risk of having potentially higher taxes in the future and therefore higher taxation on the annuity.