How Does the Powerball Annuity Work?

Powerball jackpot winners have two options when it comes to collecting their prize -- a lump-sum cash payment that's less than the advertised jackpot, or an annuity that spreads the entire prize out over a 30-year period. There are benefits and drawbacks to each option, so here's how the Powerball annuity works, and how to determine which option is the smarter choice for you.

If a Powerball jackpot winner chooses the annuity option, they will receive an immediate payment, and additional annual payments for the next 29 years, for a total of 30 payments. In order to keep up with the cost of living, the annual payment is increased by 5% each year. The total of all 30 payments will add up to the total jackpot amount.

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Source: Fool.com