Time is running out to buy your ticket for today’s Mega Millions lottery. The jackpot has topped $1 billion, officially making it the second highest jackpot ever and the highest ever Mega Millions jackpot. And according to researchers, the winner might gain in ways beyond just mere money.
A recent study finds that those who win big cash prizes won’t see a change in their day-to-day happiness, but could feel a boost in their life satisfaction overall. In fact, this satisfaction could last for at least 10 years and might not dissipate over time. And contrary to popular belief, these winners aren’t actually likely to blow through their financial windfalls.
The study, led by researchers out the Stockholm School of Economics, Stockholm University and New York University, was circulated by the National Bureau of Economic Research as a working paper earlier this year. “Large-prize winners experience sustained increases in overall life satisfaction that persist for over a decade and show no evidence of dissipating with time,” the researchers concluded.
As lead researcher Robert Ostling explained to MarketWatch, “life satisfaction” refers to how people feel about the quality of their lives overall, whereas “happiness” measures respondents’ day-to-day feelings. “Our results suggest it is more difficult to affect happiness than life satisfaction,” Ostling added.
Researchers studied 3,362 winners of lotteries from five to 22 years after winning. The participants’ overall gains totaled $277 million. The researchers measured happiness, mental health, satisfaction with their personal finance and overall life satisfaction through several questionnaires posing questions such as: “‘All things considered, how happy would you say you are?” and “Taking all things together in your life, how satisfied would you say that you are with your life these days?”
The researchers hypothesized that lottery money would make the large prize winners happier and improve their mental health, but that was not the case. When studying the psychological impact, researchers discovered that for those who won at least $100,000 in the lottery happiness and mental health weren’t significantly impacted.
Winners do, however, “appear to enjoy sustained improvement in economic conditions that are robustly detectable for well over a decade after the windfall,” the authors note. The long-term impact, they add, is one of the most substantial findings in the paper.
Winners, they found, also didn’t typically blow through their cash. This finding has been backed up by others, including the National Endowment for Financial Education.
In fact, NBER found that winners tend to exercise more self-control than you might expect. As one of the researchers explained to Time Magazine: “We saw that people who won large sums of money were still wealthier 10 years after the fact, compared to people who won small sums of money.”
Winners, according to the research, tended to invest a portion of their wealth in financial assets and spread out their spending evenly, which runs counter to common lottery winner stereotypes. Many even continued to work, even though they did cut back their hours.
The study mainly looked at the effect of receiving lottery prizes in lump sums as opposed to monthly installments, researchers warn. They also suggest that future researchers look at the short-term effects of winning the lottery, including the effects of receiving so much money at once.
While this study proves there can be a lasting psychological benefit to accepting a lump sum payment, in terms of life satisfaction if not happiness, many planners say that’s not a risk worth taking. “If you get a huge lump sum, it’s easier to make a mistake, whereas if you choose the annuity, then at least if you mess up and blow the first year’s worth, you have another chance,” said Betterment certified financial planner Nick Holeman.
Billionaire investor Mark Cuban agrees. In 2016, he advised the winner of a Powerball jackpot: “Put it in the bank and live comfortably. Forever. You will sleep a lot better knowing you won’t lose money.”
Still, CNBC’s “Mad Money” host Jim Cramer believes that getting the cash upfront is the way to go. “Take the money all at once,” Cramer said. “Don’t let them string it out like that. You want the time value of all that cash working for you. That’s vital.”
If you do find yourself winning the Mega Millions jackpot, make sure to avoid these 3 mistakes.
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This is an updated version of an article previously published on June 7, 2018.
