The Powerball jackpot has soared to an estimated $1.04 billion after no tickets matched all six numbers in Saturday night’s drawing.
Saturday night’s drawing produced white balls 19, 30, 37, 44 and 46 and red Powerball 22.
The $1.04 billion prize – an estimated $478.2 million in cash value – is the second-largest jackpot this year, topped only by a $1.08 billion prize won on July 19 by a ticketholder in California.
I’m not American, please explain, why is the cash value only 478.2 million? Is that after taxes or something?
It’s not after taxes.
The “jackpot” is what you get if you select an annual annuity over 30 years.
The cash value is what you get if you want it all today.
Taxes come after.
This site explains it well: https://www.usamega.com/powerball/jackpot
Yes. They withhold taxes, and at that point it’s all in the highest bracket, and you haven’t had the cash to get a bunch of credits and deductions.
Some lotteries offer an annuity style payout, over 20 years. This can reduce the tax implications over the whole life, but inflation and not having the money invested can eat it up.
It’s a trade off that would be great to have to worry about.
The taxes are not included in that figure. That’s the actual prize pool money they’d have on hand in case of a win. The advertised jackpot is an estimate of an annuity paid off investing that prize pool in securities over the course of 30 years
The lottery will withhold 24% for federal income tax – but you’d likely owe more as the vast majority of that income will wind up taxed at 37%. Then there’s also state income taxes in most places.
If I win this jackpot and take the lump sum it would break down something like:
$478,200,000
-$33,474,000 (7% state tax)
-$176,898,427 (37% federal tax)
= $267,827,573 (total after tax)
2 things: taxes are taken from the winnings, and the jackpot quoted is the amount you would get if you picked the regular payments rather than lump sum.
The regular payments include trust fund interest/growth I think, so you get more.
It’s confusing as all hell. I’d much prefer it tax free and lump sum. Tell me exactly what I get, don’t dress it up to make it look better than it is!
The tax-free annuity payment version is by far the better deal. But some people elect to get the lump sum in cash, and you end up getting far less than half of it, esp after taxes.
The annuity isn’t tax free. You pay taxes on that income every year just like (and in addition to) any other income you have.
Also, you could most likely beat the rate of return on those investments if you know what you’re doing. But on the other hand most lottery winners won’t know what they’re doing. Additionally the annuity can be a stopgap to keep you from losing everything all at once.
Even if you know what you’re doing, you’ll probably go bankrupt after winning. Annuity is, as you said, a stopgap against stupidity.
The taxes a far far less, though, and the total sum is far greater.
As for the rest, that’s all speculation. None of that is guaranteed. That annuity is guaranteed.
The taxes are far less on a yearly basis, but over the course of the annuity you’ll actually pay a lot more in taxes. Rough calculation, if I won this jackpot it would break down to:
Lump sum: Immediate payment of $478.2M with a tax bill of around $210M for my state and Federal income taxes. Net payout of $267.8M.
Annuity: $1.04B paid over 30 years. At current tax rates that’s a bill of $456.5M over that 30 years. Net payout of around $583.5M. If tax rates change during the term of the annuity those could rise or fall a bit.
Not like I’ll ever have to worry about the problem,but I think I would take the annuity because I’ve never had to manage a large amount of money, and it more gently eases you into it while giving some buffer to assure you don’t somehow blow through everything quickly.
If you get the lump sum though that’s a large amount growing when invested. You can easily take that and grow it into more than you’d get over time from the payments.
That’s not a guaranteed payout. The annuity payments, however, is. Plus, with a lump sum, Pam, you get hammered huge amounts of taxes.
If it takes you longer than 30 years to turn $200m into $1.08b then my friend you have a poor financial advisor. Also by then the $1.08b won’t be worth the same, considering inflation.
Possibly, but that’s still all speculation