How to Invest $100 Million Dollars If You Win the Lottery

Just for fun.

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I know I know.

Winning the lottery is impossible. It’s like saying you have a better chance of getting killed by a shark or getting hit by lightning on a sunny day.

However, people out there have won the lottery. In 2018, someone in South Carolina won over $1.6 billion dollars in the Mega Millions! It’s the largest lottery winning ever. To put this into perspective, you can spend about $16,500 every day for the next 100 years and still have $1 billion left over. Not including taxes.

The mega-million is over $100 million+ right now. This made me think, how would I invest $100 million from the lottery?

Why is this important?

A couple of reasons.

1. Financial responsibility — About 70% of people who win a lottery or win a large sum of money will end up going bankrupt sometime in the future. It is imperative to control and budget yourself because it is so easy to lose money when it seems like you have an unlimited supply. Hiring a professional can be considered.
2. Future — Planning for your future, your kid’s future, and anyone else you want to help out will make everyone’s life easy. This includes paying off debt, protecting yourself, investing, etc.

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Here are the steps I would take if you won over $100 million dollars.

Step 1

Do not tell anyone!

People will try and take advantage of you and your situation. There are countless stories out there where people who have won large sums of money let many family and friends have some of their money. Saying “no” will be your best friend.

Step 2

Get an attorney.

Depending on the state, there is a rule where you are legally required to make your name public if you win a lottery. This can come with many consequences as mentioned above and random people you do not know will know your full name. You never know how strangers can be and act especially when money is involved.

It is important to set up a blind trust, within a trust, to remain as anonymous as possible when claiming the prize.

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Step 3

Take the lump sum option instead of the annuity option.

You have a choice to take the money in full or get paid every money for the next 29 to 30 years.

Why take the lump sum?

1. Investing the lump-sum money will yield you higher ROI in the long-run. See Step 4.
2. The world in the future is unknown. You never know how the health of the country is going to be in the next 30 years. We could be in a huge war 10 years from now and they decide to stop paying you. Or we could be in the biggest economic crashes in history and they don’t have the money to pay you. Anything is possible.
3. The inflation rate on average goes up by 3% per year. This means that the purchasing power of the dollar decreases every year. For example, $1 today can buy 1 burger but 40 years ago, it can buy you 10 burgers. This is important because taking the lump-sum is more valuable today than getting fixed annuity payments in the next 30 years.

Step 4

Pay off all debts immediately.

This should not be a problem because you just won over $100,000,000 (before tax).

Pay off all your student loans, your mortgage, car loans, and anything that has debt written under your name.

Note - I know I mentioned do not tell anyone about your winnings. I am personally really close to my parents so I will definitely give them an amazing life to live: pay off all their debts, give them a nicer home, vacations, etc.

Step 5

Invest and Diversify.

Let’s first figure out how much you take home after taxes assuming you are a US taxpayer living in the United States.

This was difficult to figure out, so let’s use the $1.6 billion dollars winning as an example and proportionately calculate it to the $100 million dollars winning.

Taking the $1.6 billion dollars lump-sum option automatically left the winner with $900,000,000. However, the winner still has to pay federal and state tax, which will be about 50%. That means the winner took home $450,000,000 after paying Uncle Sam — almost a 4x decrease or about a 28.125% take-home pay from the original winning amount.

Using this percentage, you would have $28,125,000 to spend and invest. I have a feeling this amount should be way more because a $1.6 billion dollars winning and $100 million dollars winning are on different dimensions, but we’ll be conservative and use this proportion.

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What to Invest In

I am rounding up to $30,000,000 to make the investment numbers look clean.

1. Invest $10,000,000 in the Vanguard Total Stock Market Index Fund. This investment will earn you about $25,000/month ($300,000/year) assuming you spend about 3% annually and your portfolio grows by about 3% per year. The less you take out from your portfolio, the more your investment compounds. I would consider this a safe, stable investment in my opinion.
2. Invest $10,000,000 in the Vanguard Total Bond Market Index Fund. This investment will also earn you about $25,000/month ($300,000/year) assuming you spend about 3% annually and your portfolio grows by about 3% per year. The less you take out from your portfolio, the more your investment compounds. I would consider this a safe, stable investment in my opinion.
3. Invest $5,000,000 in real estate. I would invest in residential properties with large apartment buildings — multiple units properties in general — in densely populated cities such as Los Angeles or New York. This investment will earn you about $16,667/month ($200,000/year) assuming you spend about 4% annually and your portfolio grows a safe 4% per year. Again, the less you take out from your portfolio, the more your investment compounds.
4. Keep $1,000,000 in your bank account as a safety net and make sure it is accessible. Keeping this in a savings account with a 1% interest rate will earn you an extra $10,000 a year.
5. Spend the last $4,000,000 any way you want. You can buy the house you wanted, buy a boat, take an amazing trip, anything you want. Don’t go too crazy with it but definitely have fun with your winnings.

These investments are diversified and will make you about $67,500/month ($810,000/year) for as long as you live without ever touching the principal! It is that simple.

If this confuses you or you aren’t confident in your investing skills, hire a financial planner/advisor/professional for guidance. There are good and bad ones out there, so make sure they are looking out for your future…not money in their own pockets.

The Takeaway

Let’s buy lottery tickets!

I’m kidding. However, if you end up being one of those lucky winners this is what I would do in that exact order.

The #1 rule is to be smart and safe with your money, don’t let the winning control your life, and most importantly have fun. You just won $100,000,000!

This article is for informational purposes only. It should not be considered Financial or Legal Advice. Not all information will be accurate. Consult a financial professional before making any major financial decisions.