How is Powerball paid out?
Before collecting a jackpot, a decision must be made. Collect all the winnings and once or over a longer period of time?
When someone wins there is the option of being paid in a lump sum or as an annuity plan.
For example, if you won a $1.5 billion jackpot then you would receive $930 million if you took a lump sum. If you chose the annuity plan then the money is spread out over 30 years, called an annuity. You would receive one payment each year, each one being 5% larger than the last. The money you haven't yet received is invested, taking you up to the $1.5 billion jackpot.
Taking the lump sum will also mean you will be in the highest band of tax income. As of 2020, this means you'll likely owe the IRS at least 37% in taxes. If the winnings are spread out over 30 years, you may not be in the highest tax bracket each year, depending on the size of your prize and your other income.
All winnings over $5,000 are subject to tax withholding by lottery agencies at the rate of 25%.
How do you play?
When you play Powerball you need to choose six numbers from two separate pools for the drawing. Players choose five numbers between 1 and 69 for the white balls and one number for a red ball, or Powerball, from 1 to 26.
There are a total of nine ways to win a prize in Powerball, ranging from $4, recovering your initial $2 buy-in plus $2, to the jackpot. Players can increase their prize amounts by spending an extra $1 for the “PowerPlay” option to win two, three, four or even five times as much. However the PowerPlay only applies to non-jackpot prizes below $1 million. Any PowerPlay number doubles the $1 million prize.
Powerball drawings are held every Wednesday and Saturday at 10:59 p.m. ET. The last winner from October 5 won a staggering $700 million pre-tax due to there being a streak of 44 roll-overs of the main prize.
What chance is there of winning?
The odds of winning the Powerball jackpot are 1 in 292,201,338, so you’re more likely to win at a slot machine than the grand prize.
To put that into context, there is a 1 in 500,000 chance of being struck by lightning, according to the CDC. That means you will be struck by lightning a whopping 584 times before you win the lottery. There is a much greater chance of being born with an extra toe or finger.