Mega Millions vs Powerball and Cash vs Payments
May 5th, 2007 by Brian A. Thomas
It looks like that the cash value of Mega Millions is worth more than the cash value of Powerball as a percentage. Powerball’s prize right now is $20 Million, with a cash value of $9.4 Million, or about 47%. Mega Millions meanwhile has a prize of $96 Million with a cash value of $47.7 Million, or about 49.69% (let’s call that one an even 50%). Both are near enough to 50% that they may as well both be that. Perhaps that is due to the higher cash value of this Mega Millions cash value seems higher.
Let’s work things out here with a few estimates made by the Lottery Payment Calculator.
Powerball. Prize $20 Million, cash value is $10 Million, which is $6,900,000 or so after taxes, or $530,769.23 (after taxes) a year for 26 years.
MegaMillions. Prize $96 Million, cash value is $48 Million, which is $33,120,000 after taxes, or $2,547,692.31 (after taxes) a year for 26 years.
Over the course of 26 years, in theory the $6.9 million should grow to be about $32,708,480, while the $530,769.23 grows to be about $34,703,734, both assume that you don’t spend anything and don’t account for tax on the 6% interest. However, let be realistic, you are going to spend $500,000 the first year, and $104,000 to live off of each year there after and with payment’s that leave you with $26,026,629. I can’t find a calculator that will let me calculate that part out of the cash option, that is none will let me put in the $6.9 million and take out $104,000 a year, so getting a more realistic version of that total is a bit harder, figure it isn’t as good as the $32 million, but most of that $104k a year earns interest during that time. Anyhow, it looks like you may indeed be better off taking the payments, unlike I thought.
Update:The Straight Dope reports that things aren’t so easy. It looks like you really need to seek a professional that will work out all the interest rate details. So you need to hire a lawyer for the trust fund (just in case you die, the trust continues to collect regardless of what rules the state may have setup, since some stop payment on death of the winner even if they have an heir), a tax consultant and a financial planning adviser (who I would hope would be able to hand the tax consultant duties) all before you walk into the office and claim your prize. Personally I would still probably take the lump sum as if the lottery closes or other problems arise, you still have your money, but you do have to be more disciplined.
Update 2: USA Mega has some really cool stuff on both the Mega Millions and Powerball. Of interest to the topics above are their Jackpot Analysis for each. Check them out.
