Why is the Powerball cash value less than Mega Millions?
You may have noticed that when Powerball and Mega Millions have the same annuity jackpot amount, the cash value for Mega Millions is higher. But from an accounting perspective, you are looking at it backwards. Most people think of the cash value as something that is calculated based on the annuity amount, but in fact the lotteries start with the cash value. The advertised annuity jackpot amount is calculated based on the cash available for the jackpot, plus whatever interest will be generated over the annuity years. So in reality, the question you should be asking is, “When the Powerball and Mega Millions cash values are the same, why is the Powerball annuity jackpot higher?” And the answer to that question is that Powerball uses an annuity formula that lasts an additional 4 years, plus the annuity increases its payout every year. So Powerball’s annuity formula will generate more income over its lifespan than Mega Million’s will.
