Mega Millions $1.02 billion jackpot: Should you take a lump sum or annual payouts?

According to a personal finance expert, taking all your jackpot lotto winnings at once leads to greater problems than just a tax-induced headache. 

The Mega Millions Jackpot swelled to $1.02 billion after no one claimed the $830 million draw on Tuesday. The jackpot has grown from a meager $20 million in April, going 29 consecutive draws without a winner. 

Robert Pagliarini, a financial adviser and author of "The Sudden Wealth Solution," told FOX Business that most winners would want to take the lump sum upfront even though they only get to keep 60% of the total jackpot thanks to taxes — but that would be a mistake. 

"Most people want to take the lump sum: They want their money upfront, even though they know they're going to, you know, get a 40% hit when they take the lump sum," Pagliarini explained. "They want control, they want it now; they don't want to have it spread out over nearly 30 years.

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"All right: You can take that money, you can invest it… do whatever you want with it," he continued. "The problem with the lump sum is… there is a high chance that people will basically spend the jackpot down and basically run out of money, which we see that time and time again… you make bad decisions and you spend down the money, there's no reset button, there's no do-over."

Taking installments over 30 years carries two major advantages, according to Pagliarini: Winners get the full payment (even if it is over decades), but, more importantly, they get to learn from early mistakes that could arise from "sudden wealth." 

Those lessons might last as long as six or seven years as newly rich individuals learn to navigate the pitfalls of possessing so much wealth. 

Pagliarini noted that taking the lump sum, if handled well, does have its own distinct advantage in that it does provide a greater return on investment: If an investor can add 3%-5% value on their initial investment from that lump sum — roughly $650 million, in this instance — it nets more money than the annuity payments and investment of much smaller sums. 

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But he believes most people would be better off taking the 30-year annuity payments. 

With that much money suddenly in their hands, people often make bad investments, such as investing with people they know or in risky ventures like restaurants, clubs and bars. 

"They’re very, very hard to succeed in, and so especially if you’re mixing those types of businesses with family… not only do you have a high chance of losing your investment, but, more than that, you probably have issues with the relationship with the people that you’ve invested with," Pagliarini said. 

Instead, he suggested that the best thing to do is make "simple and plain vanilla" investments, such as diversified portfolios and index funds, because the bigger investments in hedge funds, limited partnerships, private equity and such are more challenging than people realize. 

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Most importantly, Pagliarini said that winners need to remember to "just breathe." 

"There's anxiety; there's fear; there's the feeling of, geez, am I going to screw this up? Like I don't know what I'm doing? You have these competing emotions of happiness, but then also fear," he said. "Those as a combination are not great when you have to make financial decisions and when you've won the lottery, you have to start making some financial decisions very, very quickly.

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"I would say try to relax, try to breathe: Don't tell a lot of people," Pagliarini added. "My rule is: Tell one family member and quickly hire an attorney who can help guide you, who has your best interests at heart."