The winner of the latest $1.7 billion Powerball boasts the second-biggest jackpot in history — but could take home just 44% of the advertised total.
When it comes to cashing in the golden ticket, lotto winners can choose to receive their money in one of two ways; an immediate lump sum deposit or through 30 annual payments invested in government bonds.
The advertised jackpot is actually a projection of the total received over the 30-year investment, whereas the lump sum is how much money the Powerball actually has on hand to give out.
In the latest case — won by a one person in Kern County, California — Wednesday’s lucky ticket holder would take a lump sum of around $774.1 million, less than half the advertised jackpot.
The $1.7 billion figure is higher than the lump sum because of currently high interest rates on investments.
The stark difference between the two options represents the lowest lump sum percentage since 2003.
Although experts continually advise winners to go for the annuity option because it boasts the full jackpot and would serve as a steady income stream over the next 30 years, it remains largely unpopular with winners.
Despite the one-off payment averaging around 52% of the jackpot, all but five of 239 big winners since 2003 have chosen that option.
Leon LaBrecque, chief growth officer of Sequoia Financial Group, told USA Today one of the reasons people skip out on the annuity option was because of the possibility they would die within those 30 years.
If the winner were to die before all the annuity payments came in, they would be subject to estate taxes as large as 40 percent per installment.
“The estate would have to pay the estate taxes, even though the installments haven’t arrived,” he warmed.
Regardless of which option is chosen, it is subject to federal income taxes, with the IRS able to take a minimum of 24% of the winnings.
Fortunately for Wednesday’s winner — whose identity has not yet been revealed —California does not impose state taxes on lotto winnings, so only the federal government would stake its claim.
However, the person will not remain anonymous as the state requires all winners of over $250,000 to disclose their identities.
The winner of Wednesday’s Powerball bought the ticket at Midway Market & Liquor in Frazier Park, California.
The night cashier at the store, Duke, told local station KCAL: “Somebody owes me a truck! A lot of customers come in religiously and say if they win they’d get me a new truck, so I’m counting on that, I’m waiting.”
In the last year, California has proven it really is the Golden State — especially when it comes to the lottery.
The largest jackpot winner of all time Edwin Castro, won the largest-ever Powerball jackpot, $2.04 billion, in Nov. 2022.
However, he didn’t become a billionaire overnight as he chose the lump sum, which amounted to $997.6 million.
Another winning ticket for $1.08 billion, the eighth largest prize in history, was bought in California in July but has mysteriously never been collected.
Currently, the government is seeing a plethora of winnings as billion dollar jackpots have become increasingly more common, which only makes the lottery harder to win.
Lottery expert Victor Matheson, an economics professor at the College of the Holy Cross, said the rising jackpots lotteries are attracting more and more sales. This makes the odds of winning lower but fuels the larger jackpot numbers.
With individuals actually winning the bloated jackpots, lotto players continue to hold out hope they will be the next one regardless of the odds stacked against them.
“Because the lottery is all about selling hope,” Matheson told CNBC.