Most newlyweds expect traditional wedding gifts like food processors, silverware or new linens. But bride and groom Kiana and Aaron Andrews of Prince William County, Virginia, received something much more valuable.

Shortly before their wedding in April, Aaron’s father, a frequent lottery player, bought a ticket for the Virginia Lottery’s Cash4Life drawing – and won. He had the choice of $1,000 every week for the rest of his life or a lump sum of $1 million.

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But instead of cashing in the ticket, Aaron’s father decided to give the winning ticket to his son as a wedding gift. His father jokingly told Fox 5, “That was the best way to get him out of my basement.”

Before receiving the ticket, Aaron and Kiana had decided to move in with Aaron’s father to save money, but now, with the help of a financial advisor, they’ve decided to take the $1 million lump sum payment that will help Aaron’s grandmother, set up a college fund for their future children, and one day buy a home.

“I have a great dad who has always looked out for me!” Aaron told Virginia Lottery officials when he claimed his ticket.

Lump sum payment vs. weekly pension payments

After speaking with a financial advisor, Aaron and Kiana decided to accept the lump sum payment of $1 million rather than receive $1,000 every week for the rest of their lives. The lump sum payment offers several advantages.

The $1,000 weekly payment is only valid while Aaron lives. If he were to die at a young age, for example, the payments would stop and could not be passed on to his heirs. However, the cash payout means he has access to the funds now.

It is also important to remember that while $1,000 a week may seem like a lot, the value of that money changes over time due to inflation.

If Aaron also chose to receive the $1,000 weekly payment, he would have to live about 19.23 more years to receive $1 million – and in the meantime he would miss out on the benefit of compound interest.

Of course, the lump sum option has tax implications. While the $1 million payout puts Aaron in a higher tax bracket, it also allows him to access and invest the funds now. Let’s look at what would happen if Aaron invested that money.

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The average annual return of the S&P 500 is about 10% over 20 years. If Aaron had invested his $1 million payout and earned an average return, that $1 million would be worth $5.7 million over the 20 years it takes the $1,000 payments to reach $1 million.

However, Aaron will not have the full million dollars to invest due to taxes. But even if he pays, let’s say, half of the lottery winnings to the tax authorities, he would still have $2.8 million left after 20 years with an average return.

By withdrawing the lump sum, Aaron can invest the money and thereby potentially protect it from inflation.

For example, if you buy a certificate of deposit (CD) or invest it in a high-interest savings account, you will receive an average of 4% or slightly more, depending on which financial institution you choose.

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How to deal with unexpected financial income

A large influx of money, whether from an inheritance, a lottery win, or another source, can be an exciting and stressful situation. By carefully planning your next steps, you can build long-term financial prosperity.

First, don’t make any big purchases right away. Give yourself time to get used to the idea of ​​having an influx of cash, then talk to a trusted financial adviser. They can look at your personal situation and give you advice. They will also take into account your current debts (if any) and help you set realistic financial goals.

If you can avoid it, don’t tell family and friends about the windfall. Many people who experience a windfall find that friends and family are happy to help them spend the money.

Finally, consider setting up a trust. This can help protect your assets from legal challenges and make it easier to withdraw them after your death.

Trusts can also have set withdrawal rules. For example, you can only withdraw a set amount each year. This means you won’t be tempted to overspend and can make the most of your funds – and meet your long-term financial goals.

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This article is for informational purposes only and should not be construed as advice. It is provided without warranty of any kind.