When a player wins a Hot Lotto or Powerball jackpot, whats the difference between taking the annuity or lump-sum payout?
An annuity is paid out over several years whereas a lump-sum payout is a single cash payment. When a jackpot is won, each state participating in the game forwards its share of the proceeds to make the jackpot payment. The shares are sent to the Multi-State Lottery Association (MUSL), based in Urbandale, Iowa. Once the money used to fund the jackpot is received, MUSL has two options: 1) MUSL obtains bids from brokers for zero-coupon bonds that match the various maturities needed to pay out winnings for several years (The first year is not included in the annuity, it’s paid immediately to the winner). Upon receiving and accepting the bids, the annuitized jackpot amount is set and the initial payment to the winner is calculated. 2) MUSL totals the amount received from sales and awards the all-cash jackpot. The exact amount of the all-cash jackpot can only be estimated and is usually about half the amount of the estimated annuity jackpot. Regardless of the method chosen by the winner, the
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