Cash vs Annuity
If you win the jackpot, you have the option of receiving your winnings as either a cash lump sum, or an annuity payment.
The annuity option entitles you to the full advertised jackpot amount before tax, paid in 30 instalments over 29 years. The first payment would be made immediately, with each subsequent payment increasing by 5%.
The benefits of annuity payments are that you receive the full jackpot amount — as opposed to a reduced cash value — and you have the security of receiving a steady income for the foreseeable future.
However, you also have the option to receive the jackpot as a one-off cash lump sum, though 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, where 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.
Many players have chosen the lump sum over annuity payments, despite the lower overall value, because if they invest their winnings correctly, their return on investment could be higher than 5% per year – leading them to be better off in the long term.
If an annuity winner dies before receiving all of their payments, the money 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; check with your state lottery for more information.