She Chose $1,000 per Week?!
You may have heard about a young woman from Montreal who won a million-dollar lottery recently. Instead of selecting the lump sum, she elected the annuity option of $1,000 per week for life.
From the little bit I read, most people were shocked at her choice: “Of course I’d take the million!” It seems obvious, doesn’t it?
However, the right choice is not necessarily that simple. Let’s consider a few complications:
- Taxes: Lottery winnings are tax-free in Canada, but income from those winnings is not.
- Inflation: $1,000 a week in 2026 is not going to have the same buying power in 2046 or 2066. But then again, neither will $1,000,000 in 2026 vs. 2046 vs. 2066.
- Longevity: I read that the winner was variously, “in her twenties” or “20 years old.” Let’s assume she is 20 years old. According to the “Probability of Survival Table” presented by FP Canada in their Projection Assumption Guidelines, a female aged 20 has 50/50 odds of reaching age 93. That’s 73 years.
- Behavioural risks: Two thoughts come to mind here. First, people who experience a large windfall may find themselves spending frivolously. While the incidence of lottery winners “blowing it all” is not quite as widespread as we are led to believe, it’s true that a significant proportion (approximately 1/3) of Canadians lack adequate financial literacy. Second, when word gets out that someone has won a lottery, people tend to come out of the woodwork asking to borrow money or receive it as a gift, etc. Guilt and pressure from others can make lottery winnings exceedingly stressful. Turning that lump sum into a weekly payout helps to alleviate some of these issues.
- Investment skill (or lack thereof): Someone who has been investing on their own for a decade or more may feel quite confident about investing a $1,000,000 windfall. A young person who has never invested at all may have different expectations about how they can handle that money.
The point that I hope comes across is that financial decisions aren’t about the headline number ($1,000,000!); they’re about how money interacts with the lottery winner’s real life.
Let’s Compare the Options
Time Value of Money
Let’s go through some simple calculations, based on the “Time Value of Money.” You can find formulas for these calculations in a Microsoft Excel spreadsheet or a financial calculator, such as the Texas Instruments BA II Plus.
We know that the lottery winner is receiving $1,000 per week. That works out to $52,000 per year. Over 20 years, her guarantee period, she will receive $1,040,000 ($52,000 x 20). Fantastic, we might say. She is guaranteed to get her $1,000,000, with a $40,000 bonus for stretching out that million dollars over 1,040 weeks (20 years).
However, as we all know from the impact of inflation, $1,000 received 20 years from now doesn’t have the same buying power as $1,000 today. We need to know what the present value of that stream of weekly payments is now.
For now, let’s just assume we are trying to keep up with inflation. Using the latest FP Canada Projection Assumption Guidelines, long-term inflation is projected to be 2.1%.
Rounded to the nearest $100, I calculate that $1,000 received per week for 20 years is worth approximately $849,100. In Present Value terms, then, the weekly $1,000 option is worth less now by about $150,900.
This reveals how inflation undermines the value of future dollars. Now, if we assumed that another winner invested the $1,000,000 received in a lump sum and the investment returned 5% per year, the difference between the two arrangements would be even greater.
On the other hand, investing the lump sum for the long term means that the money is not to be spent. It’s not intended to be a source of cash flow but rather an opportunity to generate long-term capital growth. The lottery winner who accepted the $1,000/week option may have been more interested in supplementing her income.
Longevity Risk vs. Investment Risk
Pros and Cons of Weekly Payments
What do weekly payments do for the lottery winner? They protect her against living longer than she expected. And at not a bad rate in fact. If you know about annuities, which this weekly payment is, essentially, she has turned her $1,000,000 into 5.2% ($52,000) per year for the rest of her life. And considering these payments are lottery winnings, there is no tax on this income.
This choice also protects her against bad investment decisions. Sure, she’s never going to quadruple her money over the next decades, but then, neither is she going to see it disappear in bad choices or poor advice.
On the other hand, this choice also means that she has no protection against inflation. It’s going to be $1,000 for the rest of her life, even though in 20 years, she will likely need to spend $1,500 or more to buy the same amount of goods that she can buy now for that $1,000.
Another issue at hand is the opportunity costs her decision has presented to her. One such potential cost arises if she were to die early. If she’d received a lump sum, she would have had it to use for herself or pass it on to the beneficiaries of her estate. However, if she dies shortly after the 20-year guarantee period has passed, any future money she might have expected is forgone.
Now this sort of argument is similar to the position many Canadians take about starting CPP as early as possible. What happens if I die early? Certainly, we have no guarantees about our lifespan, but if we think in probabilities, which should be at least part of our thinking when we are dealing with uncertainties, the better choice is usually to start receiving CPP payments after age 65, if not waiting all the way to 70. But this is a story for another blog post…
A second opportunity cost has to do with flexibility. If she wants to buy a house, it will take her a lot longer to build up a down payment than if she had the lump sum she could draw on.
Pros and Cons of a Lump Sum
Taking the $1,000,000 lump sum and investing it in the stock market is one of the best ways to combat inflation. In 2022, when post-COVID inflation reared its ugly head, few people may have believed that to be the case, but the ability for equity markets to recover should not have been discounted. For example, while VEQT, the Vanguard All-Equity ETF Portfolio, lost about 11% in 2022, it bounced back to 17% in 2023 and 25% in 2024, far outstripping the Consumer Price Index. Our lottery winner may have gotten her steady returns, but a high-inflation year like 2022 will permanently damage the value of that weekly payment.
In addition to offering protection against inflation, lottery winners are also protected against missed opportunities. By fully investing the lump sum, there are no missed opportunities. This is one of those times when the truism that “time in the market,” through the ups and downs, applies.
However, a lump sum isn’t a foolproof choice. In fact, it is all the riskier because it concentrates control, responsibility, and temptation all in one moment when that giant cheque is placed in the lottery winner’s hands. Among the concerns:
- Behavioural mistakes: A large sum of money, received all at once, may be perceived as “found money” that permits the lottery winner to be more easily spend, lend, or gamble (including in speculative stock trading) with it. Social pressures and guilt play their role as well. A request that would have been unreasonable a week ago suddenly feels like the right thing to do.
- Sequence-of-returns risk: This con assumes the lottery winner invests a substantial portion of the prize and just when it is needed for spending, say perhaps for retirement income, the investment markets are hit with a big and persistent loss, compounding the effect of the withdrawal dramatically.
- Overconfidence: Despite the sheer luck of winning a lottery, a large sum of money tends to create a false sense of financial competence. Among the conclusions one might unreasonably draw are that winning the lottery means skill in stock picking, going into business, or perhaps real estate speculation. On this last point, just a very few years ago, real estate was thought to be a no-lose investment, especially in Toronto in Vancouver. Not so much at the moment, however.
As you can see, there are pros and cons to each option. Both paths address some risks while simultaneously creating others.
The Behavioural Finance Angle
The strongest argument against taking the lump sum isn’t mathematical; it’s behavioural. A sudden $1,000,000 creates immediate freedom, but it also concentrates temptation, social pressure, and decision-making at precisely the wrong moment. Large purchases tend to come early, generosity becomes harder to refuse, and the money is often treated as “found” rather than as long-term capital. By contrast, a weekly payment functions as a form of forced discipline. It limits how quickly money can be converted into irreversible choices and quietly protects the winner from lifestyle inflation and overconfidence. The real question is not which option earns more, but which option better protects her from herself… and others!
Life Design and Values-Based Planning
We don’t know what the winner’s lifestyle was before she won the lottery. But questions we could probably ask are about the kind of life she wanted that prompted her decision. Maybe she wants to start a business, and $1,000 a week will give her the freedom and flexibility she needs. Maybe her income was insufficient and unstable. She wanted that regular income to reduce those stresses in her life. While a lump sum can accomplish both those things, too, I would tend to think that $1,000,000 in the hands of someone who has barely reached adulthood would present more stress than relief from stress.
This raises a question for me: How would a lump sum vs. income-for-life change how you think about work, risk, or generosity, especially at age 20? I might be inclined to be very protective and conservative with that lump sum because I don’t want to lose it. On the other hand, $1,000 a week means I can be a little more relaxed because I know another sum of money is going to drop into my lap to help me make my way, no matter what happened the previous week.
Canadian-Specific Considerations
We have already observed that lottery winnings are tax-free in Canada. What are some ways that the winner could use her weekly payments, assuming there was money to spare?
TFSA contribution: This seems like the most likely place to start. If we assume she turned 20 in 2025, meaning she will turn 21 this year, she has $27,500 in accumulated contribution room as of 2026, to which she can contribute over time, as most of us would do, via a “dollar-cost averaging” (DCA) approach.
If she had taken the lump sum, however, she would have no trouble funding her TFSA.
RRSP contribution: Although not impossible by any means, young people are by definition at the beginning of their careers, except perhaps for professional athletes, so they are probably not making huge sums of money. The tax deduction incentive doesn’t apply to the lottery winner’s weekly payments, so that element of the RRSP contribution would only apply if she had significant income from other sources. Although the tax-deferred growth inside the RRSP could be meaningful, it’s quite likely that with a lower income, she hasn’t even built up much in the way of contribution room. Hypothetically possible, yes, but not likely. Someone a bit older, however, who is nearer to the peak of their earnings and with substantial RRSP contribution room, could make use of this opportunity, too.
Another consideration might be to contribute to an FHSA. If eventually used to purchase a home (within 15 years of starting the account), the FHSA can be very tax-efficient since qualifying home purchases mean the money can be withdrawn tax-free, as though it were a TFSA. FHSAs permit annual contributions of $8,000 per year, irrespective of taxable income. Furthermore, if she eventually chooses not to purchase a home, she can transfer the accumulated funds into an RRSP.
While a lump sum of a million dollars means that she would have the cash to fully fund her RRSP and FHSA as well as her TFSA, without meaningful earned income, the arguments for and against choosing to fund these accounts remain the same.
Estate considerations: As I understand the story, the 20-year guarantee means that the weekly payments will continue to her designated beneficiaries until the guaranteed period ends. At that point, payments would stop. If, however, she’d received 20 years of payments, a death at any time after that date would result in the payments ending. On the other hand, she could live well into her 90s and receive nearly four million dollars in payments by the end of her life. Nothing from the lottery would remain for her heirs.
Receiving the lottery in a lump sum would lead to different considerations. To the extent lottery winnings remained, the beneficiaries of her will would be recipients of what was left. Potentially, there may even be more money if investing had gone well, or significantly less if her behaviour had led to excessive spending or if there were poor returns.
Comparing Three Versions
Let’s assume scenarios with three different types of 20-year-olds showing up to collect the prize.
The disciplined investor is the rare person for whom the lump sum likely makes sense. She is comfortable delaying gratification, can separate capital from spending, and can ignore both market noise and social pressure. For her, the lump sum offers flexibility, inflation protection, and the possibility of converting a windfall into long-term financial security. Behavioural risk still exists, but it is manageable.
The average human is not reckless, nor is she unusually disciplined; this is where the weekly payments often shine. Turning a windfall into a predictable, tax-free income stream reduces the fatigue of decision-making, restrains the tendency toward lifestyle inflation, and removes both market timing concerns and longevity risk. For this person, the weekly payments function less as a financial product and more as a behavioural structure.
The risk-averse peace-seeker is harder to identify because risk aversion cuts in different directions. Some may prefer the annuity for its stability and simplicity. Others may choose the lump sum, not because it is financially superior, but because the risk of dying before receiving the equivalent amount of money from the weekly annuity is too great to tolerate. Having that money all at once also serves to eliminate conflict, obligation, and repeated requests. In that case, the lottery winnings are exchanged for emotional relief, whether through generous giving or rapid spending, which can recreate the familiar story of the undisciplined lottery winner, but not out of excess, but rather, out of a desire for peace.
The Best Option?
Rather than asking, “Which should she choose?” or reacting, as many did, “She should have taken the lump sum!” it is probably wiser to step back and ask a different question. Which option best fits this person, at this stage of life, given her behavioural tendencies, her goals, her tolerance for risk and complexity, her financial knowledge, and the support system around her? In that light, the surprising choice may not be the weekly payments at all, but our assumption that there was ever a single obvious answer.
This is the 308th blog post for Russ Writes, first published on 2026-01-12.
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