Annuity vs. cash: what a jackpot actually pays

The number on the billboard is not the number that lands in anyone's bank account. Here's how the two payout options work, why the cash figure is so much smaller, and what's left after taxes.

Two ways to take it

Every Powerball jackpot winner chooses between:

Annuity — the advertised amount, paid as one immediate payment followed by 29 annual payments. Each payment is 5% larger than the last, so the money is heavily back-loaded.
Cash — a single lump sum, paid now, that is always much less than the advertised jackpot.

The advertised jackpot is the annuity. The cash option is the amount of money that has to be in the prize pool on drawing day to buy the government bonds that would fund those 30 payments. In other words, cash is what the lottery actually has; the annuity is what that cash grows into over 29 years of interest.

Why the gap is roughly half

The ratio between cash and annuity moves with interest rates. When rates are high, a given pile of cash buys a bigger annuity, so the advertised jackpot balloons relative to the cash. When rates are low, the two are closer together. Over the past few years the cash option has run between about 45% and 55% of the annuity figure.

This is also why jackpots can grow between drawings even if sales are flat: the annuity factor is recalculated as bond yields change.

A worked example

Take a $313 million advertised jackpot with a $133.6 million cash value — a figure from September 2026, typical of a mid-size roll.

Annuity

Thirty payments that rise 5% a year sum to 66.44× the first payment. So:

First payment:  $313,000,000 ÷ 66.44 ≈ $4.71 million
Year 15:        ≈ $9.3 million
Final payment:  $4.71M × 1.05²⁹ ≈ $19.4 million

Notice the winner gets under $5 million in year one — about 1.5% of the headline number. It takes until the final decade for the big payments to arrive, and the full $313 million only exists if they live long enough to collect all 30. (Remaining payments go to the winner's estate if they don't.)

Cash

$133.6 million, once, now. That's 42.7% of the advertised amount.

Then taxes

Lottery prizes are ordinary income. For a US winner:

24% is withheld federally before the check is cut — on any prize over $5,000.
But a jackpot puts the winner in the top federal bracket, 37%, so another ~13% is owed at tax time. The withholding is a down payment, not the bill.
State tax ranges from 0% to over 10%. California, Florida, Texas, Washington, Wyoming, South Dakota, Tennessee, and New Hampshire don't tax lottery winnings; New York's top rate is over 10%, and New York City residents pay city tax on top of that.

Applied to the example, in a no-state-tax state:

Cash:     $133.6M − 37% ≈ $84 million
Annuity:  each payment taxed as received; ~$3.0M take-home in year one,
          ~$12.2M in year 30, ≈ $197M total over 29 years

So a "$313 million jackpot" is, for most winners, a choice between roughly $84 million today or roughly $197 million spread across three decades. Neither is $313 million.

Which is better?

Financially, the annuity is a guaranteed roughly 4–5% annual return on the cash value, backed by US Treasury securities, with taxes deferred on each payment until it arrives. Beating that with the lump sum requires investing it well and not spending it — historically the part winners struggle with. Almost everyone takes the cash anyway.

The honest answer is that it depends on age, discipline, and tax situation, and anyone who actually wins should hire a fee-only financial adviser and a tax attorney before claiming. This page is background, not advice.

What this means for the simulator

The simulator credits you the full advertised annuity when you hit the jackpot, because that's the number everyone talks about. Mentally halve it for cash, then take off another 37%, and you'll have the real figure. It makes the break-even math considerably worse.

Payment structure from the Multi-State Lottery Association. Tax figures are federal rates for tax year 2026 and are general information, not tax advice.