The Powerball jackpot reached a staggering $1.2 billion on October 3, 2023, making it the third-largest prize in the history of the game.
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The Powerball jackpot has soared to an estimated $1.2 billion, claiming its spot as the third-largest prize ever offered in the game’s history. Monday night’s drawing failed to produce a winner.
The winner will face the tough decision of choosing between a lump sum payout of $551.7 million or an annuitized prize of $1.2 billion. Both options are pre-tax estimates.
The next Powerball drawing will take place on Wednesday at 11 p.m. ET, with odds of winning the jackpot standing at 1 in 292.2 million.
According to Powerball, while the lump sum option provides the full prize immediately, the annuity offers an immediate payment followed by 29 annual payouts that increase by 5% each year.
Why the lump sum payout may be a mistake
“Virtually everybody who wins the lottery chooses the lump sum distribution,” says Andrew Stoltmann, a Chicago-based lawyer who has represented multiple lottery winners. “And I think that’s a mistake.”
Stoltmann believes that in many cases, the annuity is the better option because most lottery winners lack the necessary infrastructure to handle such a large sum of money so quickly.
“The typical lottery winner doesn’t have the infrastructure in place to manage such a large sum so quickly.”
Stoltmann argues that the annuity provides winners with protection against financial mistakes in the first few years while keeping the majority of the proceeds safe.
Consider the long-term plan for your winnings
“Flexibility and control over assets can be a good thing, but it’s not necessarily the right choice for everyone,” says John Loyd, a certified financial planner and enrolled agent at The Wealth Planner in Fort Worth, Texas.
While the lump sum payout may be a smart financial move for certain winners, Loyd agrees that others may benefit from the structured payment schedule of annuitized winnings.
However, some winners may choose to sell their annuity to a third-party company for a lump sum payment. Loyd warns that in these cases, winners may not receive the best value for their annuity.
The Powerball drawing on Wednesday comes just three months after a single ticket in California won the game’s $1.08 billion jackpot. This marks the first time the game has seen consecutive billion-dollar jackpots. The Mega Millions jackpot is currently worth an estimated $315 million, with odds of winning the grand prize standing at roughly 1 in 302 million.
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