What’s Chosen More: Cash or Annuity?

We got an interesting email this week that raises a question I’ll bet lots of people have asked through the years. So here’s the question and our answer to it in case you’ve wondered the same thing.   

A man named Dave from north-central Iowa sent us this email:   
 
“Was just wondering what percentage of people take their Powerball jackpots in one lump-sum or 30-year payouts? You lose so much of the money by taking the lump sum (although I’m sure the government likes it that way, that way they get the money quicker and can blow it)! To me, the 30-year payout would be the best pension there is!”

You know, back when Powerball® started in 1992, the only option for claiming a jackpot prize was to take annuitized payments over time. But lotteries heard from players over time who said they’d prefer to also have a lump-sum payment option, too, and that was added to the game in November 1997. Our Mega Millions® game also offers both the cash and annuity options for those who claim jackpots in it.

Through the years, more and more jackpot winners have chosen the lump-sum option. The vast majority of winners choose that option today, but it is the winner’s choice. We’re happy to make both options available.

And just to clarify, you don’t “lose” money when you choose the lump-sum option rather than annuity payments over time. It’s just that the interest money you would have earned with your payments through the years does not exist because you chose to take the winnings in one payment up front. Here’s a quick video from us that explains it in more detail: http://www.youtube.com/watch?v=0D2_3_qbjf0

Comments

[Mary Neubauer]

Iowa law provides that lottery winners' information is public, so anonymity is not possible in this state.

[Terron]

Can you remain anonymous on big jackpots on scratch tickets in iowa

[Mary Neubauer]

Great question, Jonathan! We do encourage people to sign their tickets as soon as they purchase them for the safeguarding reasons you raised. But we also recognize that there are situations where that wouldn't work, for example, if someone has gone to the store to purchase ticket on behalf of a group (such as co-workers or neighbors who are playing together); or someone who is making the purchase on behalf of someone else. Please do take the steps that you think are necessary to keep your ticket safe!

Mary

[Jonathan Sebert]

when a ticket is sold y isn't it required to be signed at the point of sale at the time of sale to prevent a ticket from being lost or stolen and claimed by the wrong person or is it just a way to tell people to make sure they don't lose it. Tickets should have the name and number of the person written before they depart the counter just so it cant be claimed without a photo ID and if it is lost or stolen the original person who purchased it can be contacted if it is a winner

[Chuck Baxter]

The assumption is that a prudent investor should be able to earn a higher rate of return than the annuity the lottery purchases to make the 30 years of payments.