When the jackpot of a major lottery game reaches hundreds of millions or even billions of dollars, excitement runs high. The eye-popping prize is hard to wrap one’s head around, but as attractive as it may seem, the winner won’t get to keep it all once lottery formulas and tax collectors have their say. In fact, many who win the jackpot have to share it with other winners and their families. That’s why it is important to understand the lottery prize payout process before purchasing a ticket.
How much you’ll get if you win the lottery depends on whether you choose a lump sum or an annuity payment. Most winners opt for the lump sum, which is cash right away. If you choose the annuity payment, the money will be paid out in a series of annual payments. The first payment is usually for 2.5 percent of the total, or $250,000 (some taxes are withheld). Each year the amount of each check goes up by a tenth of a percentage. The last payment is for 5 percent, or $500,000.
A lot of players treat the lottery like a fun hobby that provides the chance to fantasize about winning a fortune at a cost of only a few bucks per play. Unfortunately, this kind of behavior can hurt your financial health. Numerous studies have shown that people with lower incomes are disproportionately represented among lottery players. These low-income individuals spend a substantial portion of their budgets on tickets, which can have long-term consequences. Some critics say that the lottery is a disguised tax on those least able to afford it.
Although there are several factors that determine how big a jackpot will be, including ticket sales and the number of winning tickets, the most significant factor is interest rates. When the Federal Reserve raises or lowers interest rates, the expected return on a ticket changes. This is because advertised jackpot amounts are based on annuities, which are calculated based on current interest rates.
Another reason why lottery jackpots don’t grow quickly is that very few tickets are sold for a particular drawing. During the last Mega Millions drawing, only 22.6% of the possible number combinations were covered. That’s why it’s important to buy tickets with numbers that others are unlikely to choose. You’ll also want to avoid picking dates, as most people gamble based on them.
Despite the odds, it is still possible to win the lottery. If you’re interested in trying your luck, the USA TODAY network offers an official lottery app called Jackpocket that lets you pick your numbers and place your order. Using the app, you can also see your ticket and receive your winnings all from your smartphone or tablet. You can use Jackpocket to purchase lottery tickets in the following states and territories:
