The Powerball jackpot has surged to an impressive estimated amount of $1.2 billion, making it the third-largest prize in the game’s history. Monday night’s drawing failed to produce a winner.
The lucky winner, when they do emerge, will face a significant decision between two payout options. They can choose to receive a lump sum of approximately $551.7 million or opt for an annuitized prize of $1.2 billion. It’s important to note that both of these figures are estimates before taxes.
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The upcoming Powerball drawing is scheduled for Wednesday at 11 p.m. ET, but it’s important to remember that the odds of claiming the jackpot are quite slim, at 1 in 292.2 million.
When it comes to the Powerball jackpot, winners face a significant choice between two payout options.
First, there’s the lump sum option, which offers the full prize amount upfront.
Alternatively, winners can choose the annuity option, which involves an initial immediate payment followed by 29 annual payouts. What’s interesting about the annuity is that these annual payments increase by 5% each year, providing a gradual increase in the total prize amount over time.
The Lump Sum Payout is ‘a Mistake’
According to Andrew Stoltmann, a Chicago-based lawyer with experience representing lottery winners, the common choice among lottery winners is the lump sum distribution. However, Stoltmann believes that, in many instances, opting for the annuity is the wiser decision.
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His reasoning is that the typical lottery winner often lacks the necessary financial infrastructure to manage such a substantial sum all at once. Stoltmann contends that the annuity provides a safeguard against financial missteps in the initial years after winning, ensuring that the majority of the winnings remain secure.
Weigh the Long-term Plan for Winnings
John Loyd, a certified financial planner and enrolled agent from Fort Worth, Texas, points out that while the lump sum payout offers financial flexibility and control, it may not be the right choice for everyone. He agrees that annuitized payments provide a structured approach to spending for some winners.
It’s worth noting that some winners who initially choose the annuity option might later decide to sell it to a third-party company in exchange for a lump sum payment. However, Loyd cautions that this may not yield the best financial outcome.
In less than three months, the Powerball game has seen two consecutive billion-dollar jackpots, with a recent win in California totaling $1.08 billion. Simultaneously, the Mega Millions jackpot stands at an estimated $315 million, though the odds of securing that grand prize are approximately 1 in 302 million.
