Mega Millions jackpot reaches $1B

Yahoo Finance's Zack Guzman joined Yahoo FInance Live to break down why now may be statistically the best time to play the lottery.

Video Transcript

[MUSIC PLAYING]

ADAM SHAPIRO: There are 970 million reasons why you want to give your full attention right now to Zack Guzman, because that is the amount of money up for grabs in the jackpot tonight in the Mega Millions. Of course, you won't take home $970 million. But I'd suffer that tax consequences. But Zack has much more for all of us on what you do if you do win this thing. Zack?

ZACK GUZMAN: Yeah. Look, Adam, I mean, my thing is, you know, if you're going to make an irrational gamble of betting $2 on a 1 in $302 million chance, you might as well be rational about it, right? So I got mine here. So let's walk through why right now is a good time to get in here, starting with the size of the prize. Obviously, this jackpot, they upped to $1 billion, good enough for the third largest in history. That's behind the world-record Powerball jackpot of nearly $1.6 billion in 2016 and the record Mega Millions $1.5 billion back in 2018.

But that latter jackpot was won by a single winner, just one woman, where the Powerball jackpot was split by three winners so that's pretty important. Splitting the jackpot is a key factor that's often overlooked in calculating expected value. So it turns out, splitting jackpots comes down to how many tickets are sold for any drawing. And historical data from computer scientist Jeremy Elson shows that tickets sold actually increases exponentially as that advertised jackpot grows.

So if we look at the $1 billion up tonight, we might be sitting in the sweet spot right now, where everyone and their mom are not maybe buying tickets, because it's not a record. So it's a pretty sweet spot number here. And assuming we only see about 150 million tickets sold, odds are actually looking pretty good that we might see a sole winner here-- about a 30% chance that that happens versus the 8% chance of a split pot. Back in 2018, when we were sitting at a Mega Millions record, the odds of a split pot were much higher, at 23%.

So Adam, if you're thinking about the odds here, you want to be rational about it, not a bad time to play if you want to take the jackpot all for yourself.

ADAM SHAPIRO: Seana, are you going to share?

SEANA SMITH: Hard sell there, Zack. I think I know what I'm doing right after this show. I have to go out and try to win here, although I'm not too lucky, so I'm not too confident that I'm going to have the lucky numbers. But Zack, I think another question, if you're lucky enough to win-- so if you're lucky enough to win, I don't think this is going to be maybe the first thing that you're thinking about, but maybe in a few hours from now. You have to decide whether or not you're going to take the lump sum, if you're going to be taking an annuity. Kind of walk us through that, if you can, just in terms of why it would make sense in one scenario versus another.

ZACK GUZMAN: I think generally, it comes down to-- and I don't know how many people actually put in the prep work here to do that thinking. But really, I think the biggest thing is behavioral economists always stress it comes down to the personality type here. If you can trust yourself with that lump sum, odds are, you could probably do a little bit better if you're smart about managing it. But if you want to just put in the stopgaps to control yourself, that annuity might be a little bit better, considering how many jackpot winners actually end up--

ADAM SHAPIRO: [BLOWS RASPBERRY]

ZACK GUZMAN: --in some pretty rough financial spots after they go a little crazy with their winnings.

ADAM SHAPIRO: That raspberry was on your annuity comment. Take the lump sum, open up an LLC in Delaware, and then move from there.

SEANA SMITH: [LAUGHS]

ADAM SHAPIRO: The lump sum is the way to go. I mean, I'm not talking from experience here, but I'm hoping. I'm hoping to suffer this decision later on this evening. Zack--

ZACK GUZMAN: Yeah, good luck.

ADAM SHAPIRO: --thank you very much.