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Powerball - How It's Calculated and How It Works


If you are alive and breathing then you like everyone else in the US knows what Powerball is. But, in case you don't, it's a multi-state lotto game that is actually administered by the Iowa based Multi-State Lottery Association and just about half of the states in the US participate. This lotto offers huge if not giant jackpots that change with each and every drawing and also include some smaller fixed cash prizes that can be won as well. If you live in one of the 42 states or Washington DC then you can be a part of this.

How it works is that the jackpot will always begin at $20 million dollars. When there is no winner the jackpot then will roll over to the next drawing and it will continue to grow with each of the next drawings and it will continue to do this until there is finally a winner or winners. The Powerball jackpot is required to grow by at least $5 million for each drawing until there's a winner. However, it usually grows by far more than that amount. There also is no limit to the size of the jackpot and some of these jackpots have gone beyond $350 million. The odds however of winning are quite steep and is generally 1:195 million.

The Powerball jackpot value is the total annuity value that will be paid out to the winner or winners in 30 instalments over a 29 year period and this is always before taxes. They calculate the jackpot annuity value for all of the drawings by counting off in what is called a jackpot cash pool. What this is, is 32.5% of the projected ticket sales of the Powerball jackpot which will then add all left over cash pools rolled over from drawings that had no winners and then they will multiply the total cash amount by the current market rates for long term investment securities. All participating states and the Powerball committee agree to assume all the financial risks and guarantees that the annuity that is advertised will be paid to the winner or winners in full.

Although it is set up to be paid in payments, the winners do have the option to take all of the money at once or go with the annuity payments. If a person does this though, they need to realize they will only receive 50% of the annuity value before taxes.

Most of the states that are in on the Powerball will give their winners only 60 days to decide if they want the jackpot as an annuity or in a lump sum, while a few others only give the winners 30 days to decide. No matter which choice the winner picks, it is the responsibility of Powerball to withhold income taxes from each instalment.

If the jackpot winning ticket isn't cashed in, then the funds in that jackpot cash pool will go back to the states participating in proportion to what they contributed to the pool. Depending upon the state but the time to redeem your jackpot prize can range from 90 days to a year after the drawing date.





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