January 2016 was an unforgettable month for lottery lovers. The US Powerball jackpot kept climbing until it reached a phenomenal figure of $1.5 billion – the largest in history. Every news station was following the story as the nation sat on the edge of their seats, eager for news that a winner had emerged.
Although lottery draws are exciting, especially for those with a ticket, the Powerball sent a stampede of people to their local lottery agent. Even foreigners were making use of online lottery suppliers to get a piece of the action.
All this ticket-buying fever just increased the jackpot, which was good news for the three lucky ticket holders who eventually walked away with the prize.
In its wake, it left experts trying to figure out how nobody could manage to win the jackpot for so long. The answer to that question has two possible answers. First of all, way back in November 2015, the Powerball underwent a small change to how the game is changed.
The field of numbers you could choose from for the white balls was increased from 59 to 69. At the same time, the red balls were reduced from 35 to just 26 options. Why the change? The US gaming commission figured that it would ultimately help to revive flagging ticket sales. The effect of this change would decrease a player’s odds of winning the grand prize, but increase their chances of winning a smaller prize.
The result was that the jackpot kept rolling over, and getting bigger every time. Which leads us to the second reason why the Powerball hit such a record high—ticket sales. When the jackpot started getting the news coverage it did, it prompted more people to dig into their pockets and splash out on a ticket. After all, that was a ridiculous amount of money and well worth the tiny investment in a ticket.
Now you may not know that each state contributes half of their ticket sales to the prize pot. As much as 68% of the funds collected go directly to the main prize. So the continuous flood of ticket sales just kept adding to the final prize money. And as it grew and grew, even more people bought tickets. It became a vicious, but profitable, circle of increasing prize money and ticket sales. So it’s safe to say that the gaming commission’s alterations to the game had a positive effect on ticket sales.
The big question is whether the current jackpot can reach or even breach the same record. It certainly seems to be a viable possibility. Now that the Powerball has garnered itself a reputation, you can be sure that even more people will be taking notice, and buying tickets.
What you should bear in mind is that the prize of $100 million only applies if the money is taken as an annuity payment. In other words, should someone win the next draw, this is the amount they could expect to receive in annual payments over the next 29 years. That’s because the lottery will re-invest the money, tax free, and pay out a yearly dividend to the winner. But even that will be subject to income tax every year.
If you opt to take a lump sum, you’ll only walk away with a total of $65 500 000. That’s because the IRS applies a tax to lottery winnings of 25% of the total prize money. If a non-US citizen wins the jackpot, they’ll see 30% of the prize money go the IRS. Then, depending on where the ticket was purchased, state taxes will have to be deducted. Only three states don’t apply tax to lottery winnings; California, Florida and Tennessee. But the rest of the country does and New York has the highest state tax of 8.82%. Even with those hefty taxes being applied upfront, most experts agree that it’s better to take the lump sum.
Since that massive jackpot in January, the jackpot has only been won once, after reaching a very respectable $291.4 million on the 2nd of March. It certainly seems possible that it could at least reach this figure and possibly climb a little higher if it continues to rollover. Of course, mathematicians will tell you that there is a certain point where it becomes more profitable for you to invest in a ticket. This usually happens when the jackpot becomes large enough that once taxes are deducted, the expected value of your ticket moves into positive figures.
But at the end of the day, there’s no telling how big a jackpot will get or when someone will finally select the right combination of numbers to make them a big winner. Aside for record-setting jackpots, there’s always the second $1 million prize. It may pale in comparison to the grand prize, but it’s still a nice little chunk of change to add to your bank balance. So don’t wait for someone else to claim it—get your ticket now and look out for the next draw.