Powerball what does cash value mean

And if you play the game, there is no secret to winning the lottery. Our Winners Lottery Stories. How Are Jackpots Calculated? Please enable JavaScript to view the comments powered by Disqus. The exact amount of the cash value, then, depends on the interest rates paid on government securities.

The higher the rate, the lower the cash value will be. The further an annuity payment is in the future, the lower its present value, because invested money has more time to grow through compound interest. Because Powerball puts the largest payments at the end of the annuity to keep up with inflation , that also reduces the present value, and thus shrinks the lump-sum payment. Which option is the "smarter" one from a purely financial standpoint really boils down to whether winners believe they can earn a higher return on money than Powerball would when it invests in government securities.

If you think you can earn a higher return, take the lump sum and invest it. If you don't, take the annuity.

Lottery winners can choose to take a one-time cash payout, or to receive annual payments for the next 30 years. That means the recipient would pay the income tax on that amount up front. You're even less likely to win Powerball than you think.

Powerball winners also have the option of collecting their prize money in annual payments, or an annuity. Powerball invests the rest and uses the interest to pay out bigger and bigger installments over the next 30 years. The same federal and state taxes still apply, but they're paid as each installment is distributed. Related: lottery millionaires are missing.

While the first chunk of prize money will be charged the current rate, future tax bills may go up or down probably up depending on how lawmakers change the tax code.