Powerball FAQ

Powerball FAQ

Powerball FAQ

Answers to your questions about the news.
Aug. 27 2001 6:12 PM

Powerball FAQ

Lottery-crazed Slate readers want to know: Can Powerball winners remain anonymous? Where does the money from all those losing tickets go? When I win next week, should I take the annuity or the lump sum?

Advertisement

For 10 percent of your future lottery winnings, Explainer has the answers. Or you can find the same answers at the official Powerball FAQ, which Explainer has synthesized for your reading enjoyment. ("Synthesized" being a journalistic euphemism for "shamelessly ripped off.")

Lottery players spent $204 million between Wednesday's drawing and Saturday's drawing. What happens to that money?

For every $1 ticket sold, about 29 cents goes to the big jackpot, 21 cents goes to Powerball's other prizes (such as $100,000 for picking five numbers but not the Powerball), and 50 cents goes to the individual state lotteries that participate in Powerball. The state lotteries distribute their money in accordance with state law. Each state (and the District of Columbia) keeps the profit from its Powerball ticket sales and pays its own non-jackpot winners. States share only the money that pays for the big jackpot.

But what if the non-jackpot prizes exceed 21 percent of the ticket sales?

Advertisement

Powerball maintains a cash reserve in case that happens. But if the non-jackpot winnings drain the cash reserve, then Powerball will pay some prizes as "parimutuel" prizes, dividing the money there is among the winning tickets (the same way that Powerball's big jackpot works). But that's never happened.

The four winners of the $295 million jackpot get to choose between an immediate $41 million payday and a $73.7 million annuity, in the form of $2.9 million a year for 25 years. Is this some kind of instant gratification test? Why do you get more money if you wait for it?

Choosing the annuity means choosing to invest your winnings in government bonds. Powerball takes the $41 million and invests it in bonds that mature at $2.9 million every year for the next 25 years. If you think your investing prowess enables you to turn $41 million into more than $74 million, take the cash upfront.

OK, I've decided to take the annuity. What happens if I die before I get the full $74 million?

Advertisement

The IRS would require your heirs to pay estate taxes based on the present cash value of the remainder of the prize. (Unless you die in the special estate-tax-free year of 2010, that is. But that kind of luck would be like winning Powerball twice.) Powerball would allow your estate to sell all or some of the remaining bonds to pay taxes, and whatever was left over would be distributed among your heirs.

Do the winners have to be publicly identified?

Yes, except in Delaware. Most states require the name and city of the winner to be announced so the public can be certain the prize goes to a real person who isn't the governor's son.