A POWERBALL player stands to have more than $500 million of their $1.3 billion jackpot taken from them if they win.
A choice a potential winner would face could strip them of nearly half their prize.
A potential Powerball jackpot winner would need to choose between taking the money in a lump sum or in annuitant[/caption]
The Powerball jackpot has now risen to $1.3 billion from $1.1 billion.
If a player wins it, they will need to choose between taking it in a lump sum or in annuity.
A lump sum means they take their earnings in one go, but as a result, they will be forced to give up a huge chunk of their jackpot.
According to the Powerball website, the cash value of the $1.3 billion jackpot is set at $589 million before taxes.
If somebody wins that prize, they will be forced to give up $511 million on the spot.
The other choice for the potential winner is to take the jackpot in annuity, meaning in portions over the next several years.
For the $1.3 billion jackpot, this would mean taking payments of $5 million over the next 30 years.
This would net the player $150 million instead of $589 million.
POSITIVES AND NEGATIVES
There are positives and negatives to the lump sum and annuity options.
Taking it as a lump sum means you don’t have to wait to receive your payment.
But annuity guarantees you a huge income over the next several decades.
To win the $1.3 billion jackpot, a Powerball player would need to beat odds of 1 in 292 million.
The Wednesday night draw will be the 41st since the last jackpot was won in the Powerball.
The last time it was won was in California on May 31 and was worth $204.5 million.
Lottery winnings: lump sum or annuity?
Players who win big on lottery tickets typically have a choice to make: lump sum or annuity?
The two payout methods can impact how much money you get from your prize.
Annuities pay out slowly in increments, often over 30 years.
Lump sums pay all at once but in a smaller amount, as taxes are withheld in one go. That means 24% of your prize goes to Uncle Sam right away. Many states tax winnings as well.
Annuities can provide winners time to set up the financial infrastructure required to take in a life-changing amount of money, but lump sums have the benefit of being taxed only once.
Inflation is also worth considering when making a choice, as payouts do not adjust with the value of a dollar. That means that you’ll likely be getting less valuable money towards the end of an annuity.
Each state and game pays out prizes differently, so it’s best to check with your state’s lottery to confirm payment policies. A financial advisor can also help you weigh the pros and cons of each option.
Experts have varying opinions on whether to take the lump sum or take the annuity.
History is close to being made, as the longest Powerball rollover is set at 42 weeks, according to lotto officials.
PREVIOUS WINNERS
While nobody won the $1.1 billion on Monday night, some won smaller prizes.
A dozen lucky players took home $1 million each in a slew of US states.
Four of the $1 million tickets were sold in California, and the others in Connecticut, Florida, Illinois, Massachusetts and Pennsylvania.
Three other players managed to win $2 million each by choosing the Power Play option which can double your prize.
All it took for them to pick this option was to spend an extra $1 on their tickets.
To win the $1.3 billion jackpot, a Powerball player would need to beat odds of 1 in 292 million[/caption]
