The Million Dollar Question: In the September 2025 Powerball drawing — the second-largest jackpot in US lottery history at $1.787 billion — what was the lump-sum cash option actually worth?
Read on for the answer.
The number that runs in the headline is never the number that lands in the account. What follows is the real sequence – the clock that starts the moment you sign the ticket, the choice between two very different kinds of rich, the tax bill nobody budgets for, and the ninety days that decide whether the rest of it goes well.
The deadline clock starts the moment you sign the ticket
A lottery ticket is a bearer instrument – whoever holds it and can produce it is treated, for claims purposes, as the winner. The first move, before anything else, is to sign the back, photograph both sides, and get it somewhere more secure than a kitchen drawer, because an unsigned ticket that’s lost or taken is simply gone.
From there, the clock is shorter than most winners expect. Mega Millions’ own FAQ states that the deadline to claim a prize runs anywhere from 90 days to a year from the drawing date, depending on the jurisdiction – that’s the deadline to show up with the ticket at all, not to make any decisions about it. The decision that actually has to happen fast is the payout election: financial planner Robert Pagliarini, writing for CBS News MoneyWatch, notes that in several states winners get up to 180 days to claim the prize but only about 60 days from the drawing to choose between a lump sum and an annuity – and once that window closes, the choice is locked in for good. “Take your time” has a hard stop, and it arrives well before most winners have finished telling their families.
Pagliarini’s advice doesn’t stop at the ticket itself. He recommends photographing and filming the moment of discovery as informal proof of when and how the ticket was found, in case ownership is ever disputed, and he’s candid that the emotional reaction – a rush of anxiety, disbelief, or what some winners describe as an out-of-body feeling – is common enough that it’s worth planning for before it happens, not after. None of that requires a lawyer or an accountant yet. It just requires not doing anything irreversible in the first 24 hours.
Lump sum vs. annuity – what the choice actually is
Every major US jackpot pays out one of two ways, and the two are not scaled versions of the same money.
The annuity is the number in the headline. For Mega Millions, the official payout structure is one immediate payment followed by 29 annual payments, with each payment roughly 5% larger than the one before it – a built-in raise designed to track inflation over three decades. Powerball’s structure works the same way: 30 graduated annual payments rising 5% a year, administered by the state lottery that sold the winning ticket.
The lump sum – officially the “cash option” – is not a discount on the annuity. It’s the actual cash sitting in the jackpot’s prize pool on the day of the drawing, and Mega Millions’ FAQ ties its size to the 30-year US Treasury rate, which means it moves with interest rates and can differ noticeably from one jackpot to the next even at a similar advertised size.
The gap between the two numbers is the whole lesson. In the September 6, 2025 Powerball drawing – split between a Missouri ticket and a Texas ticket for a jackpot ABC News/Good Morning America reported at $1.787 billion, the second-largest in US history – the annuity totaled $893.5 million paid out over 30 years. The lump sum was $410.3 million. That’s less than a quarter of the number that ran above the fold, and less than half of even the annuity total, before a single dollar of tax came out.
The gap scales down to ordinary jackpots too, and the annuity’s shape is worth seeing in full. Mega Millions’ own payout illustration shows that on a $50 million jackpot, the first annuity payment runs about $752,000, climbing – at 5% a year – to roughly $3.1 million by the thirtieth payment. On a $600 million jackpot, the same structure starts at roughly $9 million and grows to about $37.1 million in the final year. The curve is identical in shape at every jackpot size; only the dollar figures scale. That’s also why comparing a lump sum to “the jackpot” is the wrong comparison in the first place – the honest comparison is the lump sum against the much larger sum of 30 payments spread across three decades, discounted back to what that stream is actually worth today.
Why most winners take the lump sum anyway
Despite the annuity’s bigger nominal total, most jackpot winners choose the cash. The reasons are less about the math and more about control: a lump sum can be invested, diversified, or put into a trust on the winner’s own timeline rather than a government-set one; it removes 29 years of exposure to whichever state or insurer is backstopping the annuity payments; and it lets an estate planner structure the money for heirs immediately rather than leaving a decades-long payment stream that outlives, or outlasts the plans of, the person who won it.
The annuity has real defenders too – behavioral-finance advisors sometimes recommend it precisely because it functions as a forced savings plan, protecting a winner from the temptation (or the requests from family and friends) to spend a nine-figure sum all at once. But for winners who already have, or quickly assemble, professional financial management, the lump sum’s flexibility usually wins out.
There’s also a risk the annuity carries that the lump sum doesn’t: thirty years is a long time to depend on a single institution. An annuity is only as good as the state lottery and the insurance structure backing those future payments, and a winner who takes it is, in effect, extending credit to that system for three decades. A lump sum removes that exposure entirely – once it’s paid, it’s the winner’s money to invest, protect, or lose, with no further dependence on anyone else’s solvency.
The tax bill nobody budgets for
Whichever payout a winner chooses, the IRS takes its first cut immediately. The IRS’s own instructions for Form W-2G require the payer to withhold 24% of the proceeds on gambling and lottery winnings once they clear $5,000 – and that withholding applies to the full amount, not just the portion above the threshold. IRS Topic 419 is explicit that this income is fully taxable and that winners “may be required to pay an estimated tax” beyond what’s withheld.
That’s the part that catches winners off guard: 24% is a withholding rate, not a tax bill. A jackpot large enough to push a winner’s taxable income past $640,601 (single filers) or $768,701 (married filing jointly) lands in the top federal bracket for 2026, taxed at 37% – meaning a winner who banked the 24% withholding as their final number can owe another 13 cents on every dollar when the return comes due.
State tax then layers on top, and it varies by an enormous margin. According to CNBC, ten states charge no state tax at all on lottery winnings: California, Delaware, Florida, New Hampshire, Nevada, South Dakota, Tennessee, Texas, Washington, and Wyoming (California and Delaware both have broad income taxes but specifically carve lottery winnings out of them; the rest simply have no general income tax). At the other end, New York taxes lottery winnings at 8.82% at the state level, with New York City residents facing up to another 3.8% on top of that – meaning two winners of the identical jackpot, one in Florida and one in New York City, can end up tens of millions of dollars apart purely on where the ticket was bought and where they live.
Run the numbers on a nine-figure win and the stack adds up fast. Take a $400 million lump sum: 24% withheld immediately is $96 million gone before the winner sees a statement. If the winner’s effective federal rate lands close to the 37% top bracket once the full return is filed, that’s another roughly $52 million owed beyond what was withheld – and a state tax bill, in a high-tax jurisdiction, can run tens of millions more on top of that. None of those figures are optional or negotiable; they are the arithmetic that turns an advertised $1.787 billion jackpot into cash that’s a small fraction of the headline before any of it is spent, invested, or given away. Form W-2G documents the withholding for the IRS’s records regardless of which payout structure a winner chooses.
The weekly email
How wealth actually works, once a week
The new explainers, the Million Dollar Question and the numbers behind them, in one short email. Free, and no ads.
We send a confirmation link first. One-click unsubscribe in every email; your address is never shared.
Anonymity: possible in roughly half the country
Whether a winner’s name becomes public is almost entirely a function of which state sold the ticket, not a choice the winner gets to make unilaterally. According to NBC’s 2025 roundup of state lottery rules, ten states let any winner stay anonymous outright: Delaware, Kansas, Maryland, Mississippi, Missouri, Montana, New Jersey, North Dakota, South Carolina, and Wyoming. A longer list of states allow anonymity only above a prize threshold – Texas above $1 million, Virginia above $10 million, Georgia above $250,000, Arizona above $100,000, and several others with their own cutoffs.
In many of the remaining states, winners can’t disappear entirely, but they can claim through a trust or an LLC rather than as an individual – Florida is a notable middle case, where the trust route is allowed but the trustee’s name still becomes public record. Where no anonymity option exists at all, the only real decision left is a publicity plan: who speaks for the winner, what gets said, and when, rather than whether anything becomes public in the first place.
This is also why the attorney has to come before the claim, not after. Setting up a trust to receive a prize is typically something that has to be done before the ticket is turned in, not retrofitted afterward – which means the anonymity decision and the entity-structuring decision are really the same decision, made on the same short timeline as everything else. A winner who wants privacy and discovers the trust paperwork isn’t ready by the time the claim window closes has usually lost that option for good.
The first 90 days: assembling a team before you claim
The advice that shows up consistently across financial columnists boils down to the same order of operations, and it starts before the ticket is ever turned in. Pagliarini’s CBS News list begins with an estate attorney – someone who can both advise directly and bring in the right specialists – followed by a CPA and a Certified Financial Planner with experience handling sudden wealth. Only after that team is in place does it make sense to finalize the lump-sum-versus-annuity decision, decide whether a trust should be the one claiming the prize, and settle on the publicity plan discussed above.
The things advisors consistently warn against are just as specific: no major purchases, no abrupt resignations, and no large loans or gifts to family and friends in the first weeks, before the tax exposure and the real, after-tax number are fully understood. A nine-figure headline number creates enormous pressure to act immediately. The entire purpose of the first 90 days is to resist that pressure long enough to find out what the money actually is, once the IRS, the state, and the calendar have all had their say.
That sequencing matters more than it sounds like it should, because the order of operations is also the order of leverage. An attorney retained before the claim can help structure how the prize is received – individually, through a trust, or through an entity – in ways that are difficult or impossible to undo afterward. A CPA brought in after the first big check has already been deposited can still manage the tax exposure going forward, but can no longer change decisions, like the lump-sum election or the claiming entity, that were made weeks earlier under pressure. The team isn’t a formality; it’s the mechanism that turns an irreversible, 60-day decision into one that’s actually been thought through.
What people get wrong – the “70% go broke” myth
The single most repeated lottery statistic may also be the least sourced one in personal finance. The claim – that roughly 70% of lottery winners end up broke – gets attributed constantly to the National Endowment for Financial Education, which has published a direct statement saying the number “is not backed by research from NEFE, nor can it be confirmed by the organization.” NEFE traces the figure to an unverified remark, apparently made by a participant at a 2001 think tank on life-changing financial events, that was never independently checked and simply got repeated until it calcified into received wisdom.
The real research is more specific, and more useful, than the myth. A study of nearly 35,000 Florida lottery winners by economists Hankins, Hoekstra, and Skiba, covered by Vanderbilt University and published in the Review of Economics and Statistics, found that winners who received $50,000 to $150,000 and were already in financial distress didn’t avoid bankruptcy – they postponed it. Those winners were about 50% more likely to file for bankruptcy three to five years after winning than winners who received less than $10,000. The money didn’t solve the underlying debt problem; it delayed the reckoning. That’s a genuinely sobering finding, but it describes a specific subgroup of winners who were already struggling financially, not “most winners” in general, and it’s a different claim entirely from the 70% figure that gets passed around as settled fact.
Bottom line
D. The lump-sum cash option on that $1.787 billion September 2025 Powerball jackpot was $410.3 million – less than a quarter of the advertised figure, and that’s before the IRS’s mandatory 24% withholding or the additional tax most large winners owe once their return is filed. Every number in this story turns out to be less certain, or less favorable, than the headline version: the jackpot isn’t the payout, the 24% withheld isn’t the final tax, and the “most winners go broke” line isn’t a researched statistic at all. A lottery jackpot is a liquidity event like any other sudden-wealth event – it rewards patience, a good team, and an accurate read on the real numbers far more than it rewards speed.
Related reading:
– Sudden Wealth: Liquidity Events, Lottery Winners, Athletes, and Inheritance Shocks
– What Is a Trust Fund? What It Does, What It Costs, and Who Actually Needs One
– Taxes: How Wealth Is Structured and Preserved
– Celebrity Wealth: Athletes, Entertainers, and the Short-Window Economy
– Is $1 Million Enough to Retire? The 4% Rule, Run Honestly
