Annuity prize payments are the default way big lottery jackpots are paid out: instead of one check, you get 30 payments spread across 29 years, and each payment is 5% larger than the one before it. Powerball and Mega Millions both use this exact structure, and both publish it in their own rules. The first payment comes right after you claim; the last one lands 29 years later.
Here are the real current numbers. Powerball costs $2 a play, and the jackpot odds are 1 in 292,201,338, with overall odds of winning any prize at 1 in 24.87, according to the official prize chart at powerball.com. Mega Millions changed on April 5, 2025: the ticket price went from $2 to $5, the starting jackpot rose from $20 million to $50 million, and the jackpot odds improved from 1 in 302,575,350 to 1 in 290,472,336, per Mega Millions and the Maryland Lottery’s game-change page.
The advertised jackpot you see on the billboard is the annuity total — the sum of all 30 payments. The cash option is a smaller number, because it’s the actual pile of money the lottery has on hand right now. Understanding that gap is the whole story, and it explains why almost nobody actually takes the annuity.
What annuity prize payments actually look like
Mega Millions describes it plainly in its own how-to-play material: a jackpot is paid as an annuity of 30 graduated payments over 29 years unless you choose cash. Powerball uses the same 30-payment, 5%-growth design.
Because each payment grows 5%, the schedule is front-light and back-heavy. Payment 30 is roughly four times the size of payment 1 — that’s just what 5% compounding for 29 years does. Your biggest year is your last year.
The 5% step-up exists to fight inflation. A flat payment split 30 ways would buy noticeably less by year 25 than by year 1.
Why the cash option is so much smaller
The advertised jackpot assumes the lottery invests today’s cash and lets it grow over 29 years. The cash value is what’s sitting in the prize pool right now, before any of that growth happens. Typically it lands somewhere around half to roughly 60% of the advertised total, and it moves with interest rates — when rates rise, the cash option rises as a share of the jackpot.
The record makes this concrete. The $2.04 billion Powerball jackpot won November 7, 2022 in Altadena, California, had a cash value of $997.6 million, as CNN and CBS News reported when Edwin Castro was named the winner in February 2023. That’s the same prize, two ways.
The key figures at a glance
| Figure | Powerball | Mega Millions |
| Ticket price | $2 | $5 (raised April 5, 2025) |
| Jackpot odds | 1 in 292,201,338 | 1 in 290,472,336 (was 1 in 302,575,350) |
| Overall odds of any prize | 1 in 24.87 | Improved with 2025 relaunch |
| Annuity payments | 30 over 29 years | 30 over 29 years |
| Annual increase | 5% | 5% |
| Starting jackpot | Varies by rollover | $50 million (was $20 million) |
| Largest US jackpot | $2.04 billion (Nov. 7, 2022); $997.6M cash | — |
Sources for the table: powerball.com’s official prize chart, megamillions.com, the Maryland Lottery game-change page, and CNN/CBS News reporting on the 2022 record jackpot.
How annuity prize payments are backed
The money isn’t just sitting in a lottery bank account hoping to last three decades. Under the Multi-State Lottery Association’s rules, annuity prize payments are funded by purchasing securities — U.S. government bonds are the standard choice — with the specific instruments selected at the discretion of MUSL’s finance committee or product group.
That’s the part casual readers find surprising: winning a jackpot on the annuity essentially makes the U.S. Treasury bond market your paymaster for 29 years. The lottery locks in the funding at claim time.
It also means the schedule is fixed. You can’t call and ask for next year’s payment early because you found a house you like.
What happens if the winner dies mid-schedule
This is the single most common worry about annuity prize payments, and the answer is more reassuring than most people expect. A lottery annuity is what’s called an “annuity certain” — the payments don’t stop when the winner does.
Powerball’s own FAQ states that if a jackpot winner dies before receiving all annual installments, the balance is paid to the winner’s estate, and upon receipt of a court order, payments continue to the winner’s heirs. Depending on the jurisdiction and the rules in force, an estate may also be able to have the remaining amount handled as a lump sum.
Estate handling varies by state and by individual circumstances, so that’s a question for the claiming lottery and a licensed professional, not a general article.
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Taxes on annuity prize payments
Federal tax rules treat jackpot money as gambling winnings. Per the IRS instructions for Forms W-2G and 5754, the withholding rate on winnings of $5,000 or more from lotteries, sweepstakes and wagering pools is 24%. That 24% is withholding, not your final bill — the actual amount you owe is settled when you file, and top federal rates are higher than 24%.
With annuity prize payments, that treatment applies to each payment in the year you receive it, rather than to the whole jackpot at once. Many states also withhold from lottery payments; a few have no state income tax at all. Rules differ by state, so the state lottery and a tax professional are the right sources for your own situation.
Why almost everyone skips the annuity
Despite the inflation protection and the built-in discipline, annuity prize payments are the road less traveled. Reporting drawing on Multi-State Lottery Association data has put the share of Powerball grand-prize winners choosing cash at more than 95% since 2003.
The usual reasons winners and their advisors give: immediate control of the money, flexibility for estate planning and charitable giving, and the belief that an invested lump sum can outpace the annuity’s effective return. None of that is guaranteed, and the annuity’s guaranteed, government-backed schedule is exactly why some financial writers argue it’s underrated.
What’s genuinely surprising is how rarely the “default” option gets picked. The annuity is what the game is designed around and what the billboard number describes — and it’s chosen by a small minority of the people who win it.
Frequently Asked Questions
Do annuity prize payments stay the same every year?
No. Each payment is 5% larger than the previous one, per Powerball’s and Mega Millions’ published rules. The first payment is the smallest and the 30th is the largest — roughly four times payment one.
Can you change your mind after choosing?
Generally no. The cash-versus-annuity election is made at claim time and is treated as final, though deadlines and any limited election window vary by state. Check the claiming lottery’s official rules.
Why is the cash option so much lower than the jackpot?
The advertised jackpot is the total of 30 payments funded by 29 years of investment growth. The cash option is the money available today, before that growth — commonly around half to roughly 60% of the advertised figure, depending on interest rates.
Are annuity prize payments guaranteed if I die early?
The remaining payments go to the winner’s estate and can continue to heirs, according to Powerball’s FAQ. The exact process, including whether an estate can take a lump sum, depends on the jurisdiction and a court order.
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Sources & How to Verify
The facts on this page are drawn from official government and primary sources. Rules and figures change, so always confirm the current details with the official agency or the promotion’s own published rules.
- FTC Consumer Advice: consumer.ftc.gov — prize, sweepstakes, and lottery scam guidance
- IRS: irs.gov — how prizes and winnings are treated as income
- Social Security Administration: ssa.gov — what SSI recipients must report
- The promotion’s official rules: every legitimate sweepstakes publishes them — the rules page is always the final word
Content last reviewed August 2026. If you notice outdated information, please contact us.
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Informational only — not legal, tax, or financial advice. Win Big Daily is an independent educational resource. Prize rules, tax treatment, and benefit-program requirements vary by state and program and change over time, so always verify the current details with the official agency, the promotion’s published rules, or a qualified professional before acting. If a topic involves government benefits, contact the program office about your specific situation.