ialottery blog

Does Anyone Choose The Annuity?

We just got a letter from a man asking about the issue of cash vs. annuity in Powerball®, and whether anyone has chosen the annuity option lately. It is true that many jackpot winners in recent years have chosen to receive their prize as a lump-sum cash payment, but some also have chosen the annuity option.

The ultimate decision is up to you as the winner when you’re claiming your prize. Here in Iowa, you have 60 days to decide whether you want to receive your jackpot in annuitized payments over time or as a one time, lump-sum payment. On our home page, we give both amounts so you’ll understand the money involved.

There are any number of factors that go into the decision: Maybe you just feel like one of the options is better. Maybe your age is a factor, your other income or your type of employment. A financial planner or attorney can help you decide which option is best for you, so that’s why we always suggest you seek advice before claiming a jackpot prize. It truly is a life-changing amount of money and you want to be sure you’ve thought things through.

So, check out our home page for the latest jackpot amounts. Have fun daydreaming about what you’d do with the money, and just know the decision is yours when/if the time comes!   

Where’s The Rest Of The Money?

A Dubuque man’s recent top-prize win in the “Set For Life” instant-scratch game sparked an online conversation among some folks who questioned the amount he’d won. We’ll cover the issue here today to try to clear things up!

The situation involved in Set For Life is the same as in Powerball® or Mega Millions®. It all has to do with whether you choose to receive your winnings in a one-time, lump-sum payment or in annuitized payments over time.

When Sorin Ganea of Dubuque claimed the top prize in Set For Life on Feb. 8, he chose to receive his winnings in a lump-sum payment. The $20 scratch game features eight top prizes of $1 million. And, if you win the top prize like Ganea, you can receive the money in annuitized payments or as a lump sum. If you choose the annuity, you’ll be paid $40,000 a year for 25 years, which adds up to $1 million. If you choose to receive the prize as a lump sum, you’ll receive $650,000 before taxes.

The difference between the two amounts has to do with interest money. And when you choose the cash option, the interest money doesn’t exist – all you get is the cash that the lottery has on hand from the sale of tickets in the game. Let’s take a closer look at that.

When you choose the annuity option, the lottery invests the initial money from the sale of tickets in the game and then gives the player payments over a period of years. The money that’s invested earns interest over that time, so the initial cash plus all that interest adds up to the annuitized jackpot amount.

When you choose the lump-sum option, all you receive is the amount of money that’s on hand from the sale of tickets in the game. There is no interest money because you’ve chosen to get a one-time cash payment.

So the bottom-line answer is that when you choose the cash option, the interest that would have built up over time doesn’t exist. Nothing happens to “the rest of the money” and no one else gets it because it simply isn’t there. That’s why the cash option is always less than the annuitized prize amount.

Lotteries, lotteries everywhere?

The Iowa Lottery is a regular part of life these days, but we’re often asked about other states’ lotteries, and just how many U.S. states have them.

The map at the right paints a pretty clear picture: Americans like to play the lottery! The states in red are those with lotteries. Those in white do not have them. There are just seven U.S. states that don’t have lotteries: Nevada, Utah, Wyoming, Mississippi, Alabama, Hawaii and Alaska.

And, we can’t forget the District of Columbia and the U.S. Virgin Islands. They also have lotteries.   

The first modern-day lottery got its start back in 1964 when the New Hampshire Lottery sold its first tickets. The United States’ newest lottery is the Arkansas Scholarship Lottery, which just got its start in October 2009.

You probably already know this, but the Iowa Lottery sold its first tickets on Aug. 22, 1985, and marked the occasion with a kick-off celebration at the Iowa State Fair. That’s right, we’re almost 25!

They’re Funtastic!

It took them a couple tries to make it, but a group of 28 co-workers from Fort Dodge were finally able to claim their $200,000 Powerball® prize! Several members of the group tried to make it to Iowa Lottery headquarters in Des Moines to claim the prize last week, but were kept home by all the snow we’ve had this winter. The weather finally cooperated today and they made it in. Meet “The Fort Dodge Funtastics.”

Explaining The Odds

We’ve talked about it here before, but probably the most common question we get is about the odds in lottery games, especially instant-scratch games.

Lottery players across Iowa win prizes each day, but everyone should remember that each play is based solely on random chance. There are many winning tickets, but your purchase does not guarantee a winner.

Let’s take the scratch game “Dough Plow” as an example. The overall odds of winning a prize in that $1 game are 1 in 4.65. So, the question we often get goes something like this: “The overall odds said 1:4.65, but I bought 5 tickets and I didn’t win, so your odds must be wrong.” In fact, they’re not.

The overall odds of winning on a scratch ticket apply to each ticket purchased in a game, not a series of tickets. So, if a scratch game has overall odds of winning of 1:3, that doesn't mean that if you buy three tickets that one will be a winner. It means that if you were to buy all of the tickets available in that game, approximately 1 in 3 of them would win a prize.
 
It’s also important to know that the distribution of tickets within our games is completely random. That’s part of the security process involved in running a lottery; not even our sales representatives who deliver tickets to stores know how many winning tickets are in a particular pack. So, there could be three winning tickets in a row in one of our games, and then several nonwinning tickets after that. Security is of the utmost concern at the Iowa Lottery -- people play our games because they understand the integrity behind our products.
 
The bottom line is, big winners happen all over the state at various retail locations, and higher ticket sales at a particular location do mean more winners there as well. Some busy locations where scratch tickets are sold sell several times as many tickets as others, and therefore replace ticket packs more often - creating more winners.

We keep a complete list of winners on our Web site, as well as a list of all the remaining prizes in our instant-scratch games.
 
We always encourage our players to remember the entertainment that lottery games have provided them and the help that lottery money has meant to the state of Iowa. Players not only are playing a lottery ticket in the hopes of winning money, they are entertaining themselves and enjoying the experience. Since the Iowa Lottery's start in 1985, its players have won more than $2.4 billion in prizes while the lottery has raised more than $1.2 billion for state programs.

Why Was The Jackpot Increased?

Last week, you may have noticed a change in the Powerball jackpot that doesn’t happen all that often.   

The jackpot for the Powerball drawing on Wednesday (Feb. 3) was originally set at an estimated $108 million. But before the drawing happened, that amount was raised to an estimated $115 million.  

The last time we had done something like that was during Iowa State Fair time, when the jackpot reached $259.9 million before it was won in the drawing on Aug. 19.

Some of you have asked us how the jackpot amount can go up for the same drawing. And whose decision is it anyway?

The answer to the jackpot question can be found in the Powerball Game Rules section on our Web site. First, it helps to know where the Powerball jackpot money comes from. From all the tickets that are sold for a particular drawing, 49.5 percent of the money is dedicated to paying prizes until the jackpot prize is funded at the guaranteed annuitized amount. In other words, the prize pool consists of 49.5 percent of sales until the full estimated jackpot amount is reached.

If sales exceed that amount, the money can either be held over for the next drawing’s prize pool or the jackpot amount for the current drawing can be raised. In instances like last week when sales were high due to the start of cross-selling in Powerball and Mega Millions, the decision was to increase the jackpot amount for Wednesday‘s drawing to $115 million.

And just who makes that decision? You likely know that Iowa is just one member of the Powerball game. The Multi-State Lottery Association (MUSL), which is based in Urbandale, Iowa, oversees the game on behalf of the lotteries that sell Powerball tickets. The directors of all the lotteries that are members of the Powerball game serve on the MUSL Board. It is that Board that makes the decisions concerning the jackpot amount in Powerball.   

And in case you’re wondering, tomorrow night’s Powerball jackpot is an estimated $20 million. The $141.4 million jackpot in Saturday night’s drawing was won in North Carolina.  

More, More, More Today!

We can’t get enough of the Mega Millions® news! Tonight is the very first drawing that will include tickets purchased in Iowa.

The estimated jackpot for tonight’s drawing is $12 million. This comes after a ticket purchased in Texas claimed the estimated $144 million jackpot for last Friday’s drawing.

As we’ve said before, the jackpots start at $12 million and grow until they’re won, so Iowans will have plenty of chances to win playing Mega Millions, along with Powerball and Hot Lotto.