Powerball’s $900 million bait and switch

Posted at 5:19 PM, Jan 09, 2016
and last updated 2016-01-09 19:19:02-05

By Chris Isidore and Ahiza Garcia

NEW YORK (CNNMoney) — The likelihood of someone winning $900 million in the Powerball lottery tonight is very slim.

And that’s not just because the odds of winning are 292 million to one.

Related: Massive lines in Malad as Utahns eye record-high $900 million Powerball jackpot

It’s because the jackpot is actually only $558 million (before taxes) if the winner decides to take a lump sum payment. And almost all winners opt for the lump sum.

Lotteries always advertise the larger amount, presumably to avoid confusion. But the jackpot would really only be $900 million if the winner opts for a 29-year payout.

The longer-term payout is a larger sum because it includes the interest that accumulates from the prize money that is invested over the 29-year period.

But out of the 102 Powerball winners in the last seven years, only one chose the larger, but deferred, jackpot. That was Vinh Nguyen, who bought a winning Powerball ticket in September 2014 in San Mateo, Calif., and took the $228 million annuity prize.

Another big advantage of the annuity versus the lump sum — besides the fact that you’ll collect millions of dollars more — is that you can’t blow all the winnings as fast.

Unfortunately, there are lots of stories about lottery winners who blow through their winnings only to end up paupers just a few years later.

One of them was Andrew “Jack” Whittaker of West Virginia, who took a $170 million lump sum in 2002. But after that he was robbed often, including one time when he had a brief case full of cash stolen from him at a strip club. Today he’s nearly 70 years old and still has to work, and says he wishes he had taken the annuity payments.

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