Cash vs Annuity
Powerball jackpot winners have the option of receiving their winnings as a one-off cash lump sum, or as annuity payments.
The annuity option entitles you to the full advertised jackpot amount (minus taxes), in 30 payments over 29 years. The first payment will be made immediately and each subsequent payment increases by 5%.
The benefits of annuity payments are that you receive the full jackpot amount, as opposed to a reduced cash value (see below), and you have the security of receiving a steady income for the foreseeable future.
Many winners choose to receive the jackpot as a one-off cash lump sum. However, the value of a lump sum payout is always less than it would be for the annuity option. This is because the cash prize represents the actual funds in the jackpot pool at the time of the draw, while the annuity value is based on the lottery’s expected return from investing the cash sum over 29 years. The annuity sum is guaranteed to the player and they receive the full amount even if the lottery makes investments that do not achieve the expected return.
If an annuity winner dies before receiving all of their payments, the prize transfers to their estate or to a beneficiary designated by them. Different states have different rules on whether the estate receives annual payments or the balance of the award.