(NEXSTAR) — The Powerball losing streak carries on after no ticket was able to match the winning numbers drawn Monday night.
The jackpot, which has been building since New Year’s Day, now sits at an estimated $1.09 billion. While someone will, eventually, win the record-setting Powerball jackpot, they won’t be an instant billionaire.
How is that possible, even though the jackpot has surpassed a billion? Let’s explain.
The Powerball jackpot can be paid out to a winner (or winners) in one of two ways: the annuity option or the lump sum payout.
You’re likely most familiar with the annuitized value of the jackpot, as this is the dollar amount we see advertised. In this case, it’s the estimated $1.09 billion. Every jackpot also has a cash value — for this prize, it’s an estimated $527.3 million.
There is no $1.09 billion awaiting a winner. It’s the $527.3 million that does exist, Carolyn Becker, deputy director of public affairs and communications for the California Lottery, previously explained to Nexstar. That lump sum is fueled by ticket sales, which, along with the annuity factor, is crucial in determining the jackpot’s estimated size.
The cash value is “the amount of money required to be in the jackpot prize pool, on the day of the drawing, to fund the estimated jackpot annuity prize,” Powerball officials explain. So, to fund the $1.09 billion annuity option advertised for the current Powerball jackpot, officials believe they need $527.3 million.
Already, you can see why a Powerball jackpot winner — if they select the cash payout — won’t be an instant billionaire. Even when the Powerball jackpot crossed the $2 billion mark in 2022, the jackpot winner walked away with only $997.6 million in cash.
Should the winner of the current jackpot select the annuitized payout, they still won’t be an overnight billionaire.
With the annuitized option, the jackpot winner receives 30 graduated payments, which increase by 5% annually, over 29 years. According to Powerball, the annuity factor is calculated based on the interest rates for securities – U.S. Treasury bonds – that are purchased to fund the annuity prize payments. Higher interest rates, like those we’ve seen recently, allow the advertised jackpot prize to climb.
After those 30 payments, a jackpot winner still wouldn’t be a billionaire (unless, of course, they invest their funds). According to an analysis by USA Mega, after state and federal taxes (which would also impact the cash payout), the most money a jackpot winner would receive in annuitized payments is about $688 million — but only if they live in a state without a tax on lottery prizes, like California.
In states with lottery taxes, the total payout from the annuitized option on this Powerball jackpot would be between $569.1 million and $660.7 million.
Jackpot winners most often select the cash prize, including Yanira Alvarez, who recently came forward to collect her payout from the $1.08 billion Powerball prize she scored last summer. Her cash payout was $558.1 million.
It is possible that the Powerball jackpot grows to a size in which the winner could be an instant billionaire. But, as we already saw, it would most likely need to surpass $2 billion to outperform the tax withholdings.
At its current size, the jackpot ranks as the fourth-largest in Powerball history and ninth-largest in U.S. history, just shy of the $1.13 billion Mega Millions jackpot won by a New Jersey ticket last month. The next Powerball drawing is set for 10:59 p.m. ET on Wednesday, April 3.
Powerball is played in 45 states, the District of Columbia, Puerto Rico, and the U.S. Virgin Islands. Drawings are held every Monday, Wednesday, and Saturday, and your odds of landing the jackpot are 1 in 292.2 million.