Why does the lottery keep the interest on the prize? Shouldn all of the money earned from investing the prize over time be paid to the winner?
All of the prize money is paid to the winner. When we advertise a prize of $25 million paid over 29 years (30 payments) , we may actually have about $13 million in cash. When someone wins the jackpot, we take bids to purchase government securities to fund the prize payout. We take the $13 million in cash and buy U.S. government-backed securities to fund these payments. We buy bonds that will mature in one year at $1 million, then bonds which will mature in two years at $1 million, etc. Generally, the longer the time to maturity, the cheaper the bonds. So you can see that the “interest” earned from the time value of the prize is, in fact, paid to the winners. When you see an estimated jackpot prize, we are estimating both what the sales and the market’s bond prices will be. As this can be a tricky proposition, the estimated versus actual prizes amounts can be (and usually are) slightly different. Changes in Federal Tax law allow you to choose payment option AFTER winning. We were part o
Related Questions
- Why does the lottery keep the interest on the prize? Shouldn all of the money earned from investing the prize over time be paid to the winner?
- HOW WILL POINTS BE PAID OUT AND DO ALL PLACINGS EARN PRIZE MONEY OR IS THERE A SPECIFIC PLACING THAT GETS AWARDED?
- If a winner dies before collecting an entire lottery prize, what happens to the remaining prize money?
