Photograph by Stephen Dawson.
What the two numbers actually are
The advertised jackpot, the billboard number, is the annuity value: one payment now plus 29 further annual payments, each roughly 5% larger than the last, a fixed step-up schedule set by the Multi-State Lottery Association, not an inflation index. The "cash value" or "lump sum" is the present value of that entire 30-year stream. It's literally the amount of money sitting in the prize pool right now that the lottery would otherwise invest in US government securities to fund those future payments. Because of the time value of money, that present value comes in lower than the headline figure, typically around half to just under two-thirds of it. On the $2.04 billion Powerball jackpot (2022), the cash value was $997.6 million. On the $1.817 billion Arkansas win (December 2025), it was $834.9 million.
The one-sentence decision rule
Powerball's own payment schedule assumes a real rate of return doing the work behind the annuity. Financial adviser Jeremy Keil put the number at roughly 4.3% to the Associated Press. His rule of thumb is as clean as this gets: if you think you can beat that return investing the money yourself, take the cash; if you don't trust yourself (or the markets) to do better, take the annuity.
The case for the annuity
It isn't just for people who distrust themselves with money, though that's a real and often-cited reason. Financial planner Robert Pagliarini calls the annuity's built-in "redo every year" its biggest advantage, since a bad decision in year one doesn't sink the whole prize. The payments are backed by US Treasury securities, about as close to default-free as money gets. The 5% annual step-up offsets some inflation and lifestyle creep automatically. And because income arrives spread across three decades rather than all at once, slightly less of it gets taxed at the very top marginal rate in any single year.
The case for the lump sum
Cash gives you control immediately, to invest, to pay off debt, to fund something real, without waiting three decades for access to your own money. Historically, diversified investment returns have often beaten the ~4.3% baked into the annuity math, which is the entire premise behind Keil's rule. And a lump sum sidesteps the risk of a very long uncertain income stream: future tax law could change, and while annuity payments do pass to an estate or heirs if a winner dies early, that requires its own planning most people never think to do. It's telling that research on Powerball winners from 2003–2009 found over 93% took the cash, and more recent figures put the lump-sum take-rate at around 95–96%.
The tax myth, busted
The most common misconception is that the annuity somehow avoids the big tax bill. It doesn't. A billion-dollar prize lands you in the top 37% US federal bracket whichever option you choose. Both are withheld at 24% up front by the payer, leaving a real gap to the 37% true liability that comes due at tax time regardless of cash or annuity, a gap that catches out winners who assume the withholding was the whole story. The annuity's genuine tax advantage is modest, not magic: spreading tens of millions a year across 30 years keeps a slice of each year's income below the top bracket, and defers most of the bill rather than eliminating it.
Real winners, real choices
Almost everyone takes the cash. Mavis Wanczyk (Massachusetts, $758.7M, 2017) took $480.5M cash. Edwin Castro, holder of the current world record ($2.04B, 2022), took the $997.6M cash option. Manuel Franco (Wisconsin, $768.4M, 2019) reportedly leaned toward the annuity before ultimately taking the $477M lump sum. The annuity route is rare enough to be newsworthy when it happens: a Virginia Powerball winner from a March 2023 draw chose the full $156.7 million annuity over roughly $82 million cash, reportedly the first Powerball winner to do so since 2014. That same year, Vinh Nguyen, a San Mateo nail technician, chose the annuity on his own $228.5 million win.
Outside the US, this choice doesn't exist
The UK National Lottery, EuroMillions, and Australia's Powerball, Oz Lotto and TattsLotto all pay a single lump sum, full stop. There's no annuity option to weigh up. If you're playing one of those games, the number on the billboard is simply the number you'd receive; the entire lump-sum-versus-annuity dilemma is a US-specific quirk of how American multi-state lotteries structure their jackpots.
My take
Keil's rule is genuinely the whole decision, once the tax myth is cleared away: can you beat roughly 4.3%, after accounting for your own discipline and risk tolerance, or not? Neither answer is wrong. The near-universal preference for cash says more about how humans value certainty and control than it says about which option is objectively "better," because for most winners, both options are life-changing regardless.
Australian winners get the cash whether they want it or not, so the equivalent question here is what to do with it. Our tax and yield calculator runs the version that actually applies: a tax free lump sum, invested, with the ATO taking its share of whatever it earns from then on.
Verdict
As a real financial decision with real trade-offs: yes, genuinely worth thinking through properly rather than defaulting to whatever feels more exciting in the moment. As something a website can decide for you: no. This is exactly the kind of six- or seven-figure decision that deserves a real financial adviser, not a blog post, before you sign anything.
This is general information, not financial advice. If you're actually facing this choice, get independent professional advice before deciding. The right answer depends on your full financial picture, not just the maths above.
References
1. The Hill, "Cash vs. annuity: Which payout should you pick if you win Mega Millions, Powerball jackpots?" (Jeremy Keil's 4.3% rule of thumb): thehill.com
2. Bankrate, "You Hit The Jackpot: Now Make The Smartest Money Move" (the annuity's "redo every year" framing and cash/annuity trade-offs): bankrate.com
3. Powerball.com, official winner profile, Mavis Wanczyk: powerball.com
4. My Annuity Store, "Lottery Payout Options: Annuity vs. Lump Sum" (cash-value calculation and take-rate statistics): myannuitystore.com