Annuity or lump sum
A jackpot winner picks between the cash in the pool now and 30 payments over 29 years that add up to the advertised number. Neither is the bigger prize. They are the same money, paid on two different clocks.
How the annuity is paid
Powerball and Mega Millions pay their annuities the same way: one payment straight away, then 29 annual payments, each 5 percent bigger than the one before. Mega Millions describes the same schedule and gives an example: on its $50 million starting jackpot, the first payment would be about $752,000 and the payments would grow to about $3.1 million.
The arithmetic behind that is worth a look. Thirty payments that each grow by 5 percent add up to about 66.44 times the first one. Divide the jackpot by 66.44 and you have the first payment; multiply that by 1.05 twenty-nine times (about 4.12) and you have the last.
| Advertised jackpot | First payment | Last payment |
|---|---|---|
| $50 million | about $752,000 | about $3.1 million |
| $716 million | about $10.8 million | about $44.4 million |
The $716 million is the Powerball estimate on its site on 27 October 2026, for the 28 October draw. All of those are before tax.
What the cash option is
The cash option is the money in the jackpot pool on the day of the draw, which is what the lottery would otherwise invest to fund the 30 payments. For that $716 million Powerball jackpot, it was $307.2 million.
So the real choice is $307.2 million now, or $716 million paid out over 29 years. Work back from those two numbers and the annuity amounts to a return of about 5.4 percent a year on the cash. That isn't a figure the lottery publishes. It's what the two published numbers imply, and it moves with interest rates, which is why the jackpots page tells you to watch the cash figure.
How tax lands on each
Both are taxable income. The IRS says lottery payers withhold federal tax at 24 percent when the winnings minus the wager are more than $5,000, and that applies to annuity installments too: the payer files a Form W-2G every year for what it paid that year.
Withholding is not the bill. The top federal rate for 2026 is 37 percent, on income over $640,600 for a single filer ($768,700 for a married couple filing jointly). A jackpot-sized payment, taken either way, puts the winner well above that in the year it's paid, so the difference between 24 and 37 percent comes due at filing time. People who forget that spend the withheld-from amount as if it were theirs.
The annuity spreads the tax across 30 years, and there's a common belief that this saves a lot of it. On jackpot-sized payments it saves less than people think, because a payment of $10 million a year is already deep in the top bracket. What it does do is let the tax law change under you, for better or worse, over three decades. State tax depends entirely on where you live, and so do the state's withholding rules. The lottery taxes page has more, and a winner should have an accountant before choosing, not after.
The case for the cash
The cash is yours today. You can invest it, pay off everything, give it away or set up whatever you like, and if you can earn more than about 5.4 percent a year on it after tax, you end up ahead of the annuity. Money now also can't be affected by anything that happens to the lottery or the law later.
The risk is you. A pile of money with no schedule invites every bad decision at once, and a lump sum gets spent faster than anyone plans.
The case for the annuity
The annuity is a schedule you can't break. If you blow the first payment, there's another one next year, bigger by 5 percent. The growth is meant to protect purchasing power in periods of inflation, as Mega Millions puts it, and the return built into it is a fair one at today's rates.
The cost is control, and time. You collect the last payment 29 years after the first. Ask your state lottery, before you choose, what happens to the remaining payments if you die before then, because that's a question of state rules and your estate, and I won't guess at it.
What I'd do
A big sum all at once tests anyone's discipline, and I wouldn't bet on the money going where the plan said. If you are honest that you'd spend it, take the annuity; it's the one bet in the lottery that protects you from yourself. If you have advisers already and a habit of leaving money alone, the cash gives you more room, and over 29 years room is worth a lot.
Either way, the rules on when you have to choose, and whether you can change your mind, are your state lottery's (Mega Millions says the same). I'd make the decision with a tax adviser and a lawyer in the room, and I'd keep quiet about the ticket until they are. The first calls a new winner gets are not all friendly, and some are lottery scams.