lottery jackpots

**Bipolarcy** · 03-31-2010, 05:02 PM

Powerball currently has a jackpot estimated at $81 million with a cash payout of $38.4 million. The other major multistate lottery, MegaMillions, has a current jackpot of $63 million with a cash option of $38.1 million.

Does it seem fair to anyone that the Iowa-based Powerball has a jackpot worth $18 million more than MegaMillions, yet will pay only $300,000 more on the cash option? I wonder how they justify keeping all that extra money.

**CloneAggie** · 03-31-2010, 05:06 PM

Originally Posted by Bipolarcy

Powerball currently has a jackpot estimated at $81 million with a cash payout of $38.4 million. The other major multistate lottery, MegaMillions, has a current jackpot of $63 million with a cash option of $38.1 million.

Does it seem fair to anyone that the Iowa-based Powerball has a jackpot worth $18 million more than MegaMillions, yet will pay only $300,000 more on the cash option? I wonder how they justify keeping all that extra money.

MegaMillions says "the cash value amounts above are estimates, subject to market and/or interest rate fluctuations." They may be just using different interest rates when they make their estimates, or they may use different interest rates altogether when paying out the cash option.

**theshadow** · 03-31-2010, 05:06 PM

Powerball - Contact

WHY IS THERE A DIFFERENCE BETWEEN THE CASH PAYOUTS IN THE POWERBALL AND MEGA MILLIONS GAMES?
A fixed percentage of every Mega Millions and Powerball ticket sold goes into its CASH jackpot. The cash jackpot is all the money that the lottery has on hand from the sale of tickets in the game. If a player chooses the cash option, then the lottery will pay the entire cash amount to the winner (less income tax withholding amounts required by federal and state laws).

The lottery also offers an ANNUITY jackpot option that can help reduce taxes and offers the winner a 100% guaranteed income stream over time. The two games offer different types of annual income streams, giving the players more options. If a winner elects the annuity option, then the lottery will invest the entire cash amount before taxes are deducted. The difference between the CASH jackpot and the ANNUITY jackpot is the interest earnings that build over time. The Powerball annuity jackpot earns more interest for two reasons.

1. The Powerball Annuity Jackpot invests more money for a longer period of time. The Powerball annuity is paid out in graduated amounts (rising by 4% per year to keep up with inflation) over 29 years (30 payments). The annual payments grow larger to keep pace with the winner’s expected cost of living. The Mega Millions annuity is paid out over 25 years (26 payments) with equal payments each year. In both cases, the first payment is an immediate cash payment.

2. The Powerball Annuity Jackpot is invested in a wider variety of securities than the Mega Millions Jackpot, allowing more interest to be earned. All of the securities used to support both games’ jackpots offer significant levels of U.S. Government backing. It is important to understand that the lottery is invested in these securities; not the winner. The winner has a contract with the states to pay the annual prize payment, no matter what happens to the securities.

Since the two games' jackpots are invested differently, if the CASH jackpots are the same, the Powerball jackpot will pay a larger ANNUITY over time than Mega Millions. If the ANNUITY value of the jackpots are the same, then Mega Millions' CASH jackpot will be larger than Powerball's CASH jackpot. The CASH jackpot amounts present the true present-day values of the jackpots. A winner who wishes to take the CASH jackpot should compare only the CASH jackpot amounts. The ANNUITY jackpot amounts will be important for those winners who plan to select a long-term, fully guaranteed income stream.

**Cyclonepride** · 03-31-2010, 05:35 PM

Originally Posted by Bipolarcy

Powerball currently has a jackpot estimated at $81 million with a cash payout of $38.4 million. The other major multistate lottery, MegaMillions, has a current jackpot of $63 million with a cash option of $38.1 million.

Does it seem fair to anyone that the Iowa-based Powerball has a jackpot worth $18 million more than MegaMillions, yet will pay only $300,000 more on the cash option? I wonder how they justify keeping all that extra money.

Because people will take the immediate money. They'll probably keep lowering the cash payout until the nimrods quit accepting it.

**DaddyMac** · 03-31-2010, 05:47 PM

What's the payout term? 20 years? 30?

What's 300K get you after that long?

**Bipolarcy** · 03-31-2010, 06:35 PM

Originally Posted by theshadow

Powerball - Contact

WHY IS THERE A DIFFERENCE BETWEEN THE CASH PAYOUTS IN THE POWERBALL AND MEGA MILLIONS GAMES?
A fixed percentage of every Mega Millions and Powerball ticket sold goes into its CASH jackpot. The cash jackpot is all the money that the lottery has on hand from the sale of tickets in the game. If a player chooses the cash option, then the lottery will pay the entire cash amount to the winner (less income tax withholding amounts required by federal and state laws).

The lottery also offers an ANNUITY jackpot option that can help reduce taxes and offers the winner a 100% guaranteed income stream over time. The two games offer different types of annual income streams, giving the players more options. If a winner elects the annuity option, then the lottery will invest the entire cash amount before taxes are deducted. The difference between the CASH jackpot and the ANNUITY jackpot is the interest earnings that build over time. The Powerball annuity jackpot earns more interest for two reasons.

1. The Powerball Annuity Jackpot invests more money for a longer period of time. The Powerball annuity is paid out in graduated amounts (rising by 4% per year to keep up with inflation) over 29 years (30 payments). The annual payments grow larger to keep pace with the winner’s expected cost of living. The Mega Millions annuity is paid out over 25 years (26 payments) with equal payments each year. In both cases, the first payment is an immediate cash payment.

2. The Powerball Annuity Jackpot is invested in a wider variety of securities than the Mega Millions Jackpot, allowing more interest to be earned. All of the securities used to support both games’ jackpots offer significant levels of U.S. Government backing. It is important to understand that the lottery is invested in these securities; not the winner. The winner has a contract with the states to pay the annual prize payment, no matter what happens to the securities.

Since the two games' jackpots are invested differently, if the CASH jackpots are the same, the Powerball jackpot will pay a larger ANNUITY over time than Mega Millions. If the ANNUITY value of the jackpots are the same, then Mega Millions' CASH jackpot will be larger than Powerball's CASH jackpot. The CASH jackpot amounts present the true present-day values of the jackpots. A winner who wishes to take the CASH jackpot should compare only the CASH jackpot amounts. The ANNUITY jackpot amounts will be important for those winners who plan to select a long-term, fully guaranteed income stream.

I'm sorry, but none of that answers the question. I could see some disparity in the cash payouts, depending on how it was invested, but this is a HUGE disparity. I mean if you are investing $18 million more and receiving only $300,000 more, that seems either a little shady or a lot incompetent as an investor.

**Tre4ISU** · 03-31-2010, 06:56 PM

Originally Posted by Cyclonepride

Because people will take the immediate money. They'll probably keep lowering the cash payout until the nimrods quit accepting it.

I would like to know what the payments are if you don't take the cash. To me, the cash seems more reasonable to take. You take it, invest it in something safe and live off the interest and I think you come out ahead. I don't know all the numbers so I don't know this for sure but it seems right.

**acgclone** · 03-31-2010, 07:18 PM

Based on this, I wish that my state would get MegaMillions instead of Powerball.

**cytech** · 03-31-2010, 07:35 PM

Originally Posted by acgclone

Based on this, I wish that my state would get MegaMillions instead of Powerball.

Iowa has mega millions now I thought all powerball states got it starting this year

**Cyclonepride** · 03-31-2010, 07:35 PM

Originally Posted by yaman3

I would like to know what the payments are if you don't take the cash. To me, the cash seems more reasonable to take. You take it, invest it in something safe and live off the interest and I think you come out ahead. I don't know all the numbers so I don't know this for sure but it seems right.

You could also invest some of the money from the payments you receive, and I would imagine that your tax rate would possibly be lower? Depends on the jackpot I suppose.

**cytech** · 03-31-2010, 07:45 PM

Originally Posted by Cyclonepride

You could also invest some of the money from the payments you receive, and I would imagine that your tax rate would possibly be lower? Depends on the jackpot I suppose.

If you win right now while the jack pots are higher it likely wouldn't matter

**aeroclone08** · 03-31-2010, 07:45 PM

Originally Posted by Bipolarcy

I'm sorry, but none of that answers the question. I could see some disparity in the cash payouts, depending on how it was invested, but this is a HUGE disparity. I mean if you are investing $18 million more and receiving only $300,000 more, that seems either a little shady or a lot incompetent as an investor.

I think you've got it backwards, they're investing $300K more and receiving $18 million more on the annuity. With the above quote from the lottery site, investing in an annuity with a higher return for a longer time period could definitely turn $300K into $18 mil. Compound interest is a powerful thing...

**Bipolarcy** · 03-31-2010, 07:50 PM

Originally Posted by aeroclone08

I think you've got it backwards, they're investing $300K more and receiving $18 million more on the annuity. With the above quote from the lottery site, investing in an annuity with a higher return for a longer time period could definitely turn $300K into $18 mil. Compound interest is a powerful thing...

Maybe I do have it backward.

Anyone who takes the annuity has screws loose. You can take the lump sum, invest it and still get annual payments equal to or greater than the annual annuity. MegaMillions is the much better deal.

**kilgore_trout** · 03-31-2010, 08:37 PM

Fair? You are comparing the guy who stole your car with the guy who stole your car and took the change in the cup holder.

The losses aren't that different - 99.9999999...%.

**cytech** · 03-31-2010, 08:39 PM

Originally Posted by Bipolarcy

Maybe I do have it backward.

Anyone who takes the annuity has screws loose. You can take the lump sum, invest it and still get annual payments equal to or greater than the annual annuity. MegaMillions is the much better deal.

Odds to win powerball
Grand Prize 1 in 195,249,054.00

Mega Millions
1 in 175,711,536.0000

you are right mega millions is better