Powerball Lump Sum or Annuity? What Each One Pays (2026)

The Powerball jackpot for the October 26, 2026 draw (opens in a new tab) was $691 million. That number is the annuity: 30 payments over 29 years, each 5% bigger than the one before. Take the lump sum instead and you get the cash value, $296.4 million before tax, or 43% of the headline.

The biggest winners take the cash. The winners of the six largest Powerball jackpots and the three largest Mega Millions jackpots all did. The annuity still pays far more in total, and the gap between the two numbers is interest, about 5.4% a year at today’s rates. Which one is worth more to you depends on what you could earn on the cash, how the taxes fall over 29 years, and what you’d want to happen to the money if you died before the last payment.

How does the Powerball annuity work?

You get one payment when you claim and 29 more once a year, each 5% larger than the last, according to Powerball’s own FAQ (opens in a new tab). Mega Millions (opens in a new tab) pays its annuity the same way. Because the payments grow, the later ones are much bigger than the first. On a $691 million jackpot, the first is about $10.4 million and the last about $42.8 million, before tax.

These rows are our math from the 5% rule, on the $691 million jackpot. By the 19th payment, the annuity has paid out more than the $296.4 million cash value.

The 5% raise also keeps the payments ahead of inflation, which a flat payment can’t do. The Federal Reserve aims for 2% inflation (opens in a new tab) over the long run, and if prices rise at that pace, each payment buys about 3% more than the one before.

Why is the cash value so much smaller?

The advertised jackpot is a 29-year promise, and the cash value is what that promise costs today. Powerball defines the cash value as the money that has to be in the prize pool on draw day “to fund the estimated jackpot annuity prize”. The lottery invests it, and interest makes up the rest over the 29 years. So the higher interest rates are, the smaller the cash looks next to the headline.

The six biggest Powerball jackpots and the three biggest Mega Millions jackpots show how far that share has moved:

Every one of those winners took the cash value. The Powerball rows come from Powerball’s list of its biggest jackpots (opens in a new tab), checked against the selling lotteries where they published the claim: Oregon (opens in a new tab), Texas (opens in a new tab) and Arkansas (opens in a new tab). The Mega Millions rows come from Mega Millions’ jackpot history (opens in a new tab) and its claim announcements for South Carolina (opens in a new tab), Maine (opens in a new tab) and Florida (opens in a new tab).

The cash share fell from 62% in 2016 to 43% in October 2026 because long-term interest rates went up. When rates are higher, the same pile of cash grows into bigger payments over 29 years, so the advertised annuity climbs faster than the cash behind it.

What interest rate is the annuity paying you?

About 5.4% a year before tax, on the October 26 jackpot. That’s the rate at which $296.4 million today pays for the annuity’s 30 payments. It’s close to what the US government pays to borrow. A 30-year Treasury bond yielded 5.31% on October 26, 2026 (opens in a new tab), and Mega Millions says its annuity is based on the 30-year Treasury rate.

So the annuity works much like a 30-year government bond with a 5% raise every year. The cash comes out ahead if you’d earn more than about 5.4% a year on it over those same years, which usually means owning stocks and staying invested through the years they fall. Earn less than that, or spend faster than the money grows, and the annuity would have left you with more.

In 2016, when rates were low, the same math put the annuity’s rate under 3%, which made the cash much easier to beat. Rates move, so this is a number to work out on the day you win, not one to assume.

Does taking the annuity lower your taxes?

Not by much, at jackpot size. The IRS taxes a lump sum in the year you get it and each annuity payment in the year it arrives (opens in a new tab). Even the smallest payment on a $691 million annuity is over $10 million, so most of every payment is still taxed at the 37% top federal rate for 2026. Spreading the prize out barely changes the rate. What it changes is which years’ rates you pay, because Congress and your state can raise or cut them over the next three decades. Our lottery winnings tax by state guide has each state’s rate and what it withholds.

Moving to a state with no income tax doesn’t always help either. New York treats a New York lottery prize over $5,000 as New York income for nonresidents, and says a winner who moves away still owes New York tax on the payments still to come (opens in a new tab).

What happens to the annuity if you die?

The payments keep coming, to your estate and then your heirs. Powerball’s FAQ says that if a winner dies before all the payments are made, “the balance of the prize will be paid to the winner’s estate”, and that once a court orders it, the yearly payments continue to the heirs.

Whether your estate can take what’s left in one payment depends on the state. Florida lets a winner’s estate cash out (opens in a new tab) the remaining Powerball and Mega Millions payments. California’s winner handbook (opens in a new tab) says the remaining payments go to the heirs and the payment option can’t be changed.

That matters because the unpaid payments are still part of your estate, which the IRS counts as everything you own or have an interest in (opens in a new tab) when you die. The federal estate tax applies above an exemption of $15 million in 2026 (opens in a new tab), far less than a jackpot annuity is worth, so your estate can owe tax on payments it won’t receive for years. With a lump sum, the money has already been paid to you, so your estate can use it to pay the tax, and your will decides where it goes.

Is there a lottery prize that pays for life?

Yes. Millionaire for Life (opens in a new tab), a $5 game with draws every night since February 22, 2026, in 30 states and Washington, DC, pays its top prize as $1 million a year for life. The annuity is guaranteed for 20 years, or you can take $18 million in cash (opens in a new tab). The second prize is $100,000 a year for life or $2.2 million.

The math is different from Powerball’s. On the top prize, the annuity passes the cash after 18 years, and the 20-year guarantee alone pays $20 million, even if the winner dies early. On the second prize, it takes 22 years to pass the cash, two more than the guarantee covers. With no 5% raise, the payments also lose ground to inflation every year.

Canada has a lifetime prize too. Daily Grand pays $1,000 a day for life or $7 million, with no tax on the lump sum, and our Canadian guide to the Daily Grand lump sum or annuity works through that choice by age.

A weekly prize for saving, coming to the US

Most people will never have to choose between $296 million now and $691 million later. Lodavo is built for a smaller, weekly version of the fun. It’s a free prize-linked savings app. The more you save, the more tickets you get for weekly cash prize draws, and you never buy a ticket. The money you save stays in your own bank account, so a week without a win still leaves your savings where they were. No purchase necessary. Void where prohibited.