Powerball is a lottery game offered in 44 states, as well as in DC, the US Virgin Islands, and Puerto Rico. The lowest jackpot is set at $40,000,000, which is paid out over 30 years, but a lump sum amount can be taken, as well.
Winning numbers are announced every Wednesday and Saturday, showing 5 numbers, plus a Powerball number. The odds of winning are about 1 in 300,000,000, but for a minimum prize of $40,000,000 the $2 and $3 tickets are worth the risk, particularly given that the largest jackpot in the world was won in January, 2016 – over $1.5 Billion, which was split three ways by players in California, Tennessee, and Florida.
In this article we will discuss not just the basics of the Powerball USA Jackpot, but a deeper level of its history, where the money goes, and stories of two winners – one happy, the other tragic. Then we will discuss the smaller prizes (with odds).
History of the Powerball USA Lottery
Prior to the Powerball we know today there was Lotto America. In 1988 this multi-state game transcended to commonly known state lotteries and offered much larger jackpots. In order to increase the winnings there was a 6th number – the Powerball number – added in, turning a game that could make you well off, or at least debt-free, into one that could lead to obscene riches. This change occurred in 1992, and has been such a hit that it has never gone back.
What many people do not know is that while the Powerball is a nearly nationwide game, it does bow down to state sovereignty. For example, most people can buy tickets at the age of 18, but in Nebraska you have to be 19, and Arizona, Iowa, and Louisiana require players to be 21.
This plays into the rich history of the lottery in general, where states have always controlled their own destiny – whether to have a game or not, and who is allowed to participate.
Where Does the Money Go?
When you buy the $2 ticket, $0.10 goes to the store you purchased it from – a 5% margin. After that, there is money for the winners, which comes out to about $0.90 historically. The remaining funds go to the states where the sales are made. Whether they make great use of it is another story!
For more on this, read this article from Mental Floss.
When you win a jackpot, you get some sweet cash – up to a billion dollars, but you’re not the only winner. The store that sold it to you gets an amount equal to 0.5% of the prize (capped at $1,000,000). So if you come in with a $200,000,000 winner, the store will receive $1,000,000. This is pretty fantastic for the merchant who is likely going to do well, as well, simply for having the lucky operation where the ticket was printed.
Then the government gets its due. Before you are issued the $200,000,000 check, the government will withhold 25%, or $50,000,000. Then at tax time, you’re going to owe another $29,000,000 (equal to the top tax rate of 39.6%). If you live in New York, there will be state taxes. If you live in Tennessee, you’ll get to the keep the remaining $120,000,000+.
State incomes from lotteries have varied based on tickets sold, and jackpots claimed.
And when it comes to jackpots, there have been some very big ones, and they have yielded incredible difference results.
The Big Winner
Ed Nabors was a truck driver in Georgia who at 52 came out with $80,000,000 when he bought 10 tickets “on a lark” as he was getting a coffee at the store. When asked what he’d do with the money he said that he was thinking of getting a nicer boat and giving his current one to his son, because they both like fishing.
Well, Mr. Nabors did more than that, but he is still a very wealthy man. 9 years later he is not broke, in legal trouble, or finding himself like so many others who win the big prizes. He’s just a guy who loves fishing and his family, but who happens to have a lot more money for bait.
The Huge Loser
At the age of 46, David Edwards was unemployed and struggling with addiction. Then he won $27,000,000, which proved to be the final ingredient in this recipe for disaster.
In 2001 Edwards had a mansion built in an exclusive Florida development. He also bought a Lamborghini and a jet, which was way beyond the means of such a fortune. By 2002 he’d spent $12,000,000. At the age of 58, he passed away tragically having used a storage locker as his home, and it was said to be filled with his feces.
Had Mr. Edwards taken just $10,000,000 and made use of a 6% draw it would have provided him an income of $50,000 every month forever, and potentially tax-free, but he was ill-equipped to be rich, and the life he lived was done so with even greater gusto!
This is among the harsh realities of being a big lottery winner. But it is not the only one.
Harsh Realities of Winning the Big Prize
Three negative things you need to know about being a big lottery winner are that 1) your current friends and relatives are going to ask you about your money all the time, and some will ask you
1) your current friends and relatives are going to ask you about your money all the time, and some will ask you for some; 2) people with the same level of wealth won’t be interested in knowing you; and 3) this won’t solve all of your problems, but it will create new ones.
2) people with the same level of wealth won’t be interested in knowing you; and 3) this won’t solve all of your problems, but it will create new ones.
3) this won’t solve all of your problems, but it will create new ones.
1. Your Friends: Some friends will be excited that this happened to you. Others will be incredibly jealous and hateful. Regardless of which category they fall into they are going to want to know what you are going to do with the money. Are you flying to Hong Kong for lunch? Is it in growth stock mutual funds? Real estate?
Because you won this money publicly they are going to mistakenly forget that personal finances are personal. And because you did not get this as a result of hard work some will drop any sense of having boundaries, and ask you for some. ‘After all,’ they’ll think, ‘they have ten million; what’s thirty-five-thousand so that I can have a new Altima to start my Uber business? I’d do it for him!’
Sadly, like with any major change, some friends will go, some will stay, and some you’ll have to walk away from.
2. Rich People: Kristine White won $110,000,000 with her husband, and was profiled in the 2010 documentary “Lucky.” The family goes through a major transformation, moving to a very lush neighborhood into a mansion where her husband describes his new career as “managing their empire.” Kristine tells the camera that she would never tell anyone that she was a Powerball winner, and leaves it at that.
Why wouldn’t she tell people that? Because no one respects lottery riches. You’d be better off letting people assume you inherited the money and never worked a day in your life. At least then the other rich people can assume you went to the kind of schools they did, have vacationed where they have, and feel the same way about your mechanic that they do.
It’s sad, but true. Your old friends are going to change, and your new friends may not want to know you.
3. Mo’ Money, Mo’ Problems: Some of the problems that will arise have already been noted, but those deal with other people. What about you?
One fact about money is that it can magnify your personality. If you are a very generous and loving person, money will shine a brighter light on that. In fact, having tremendous wealth could lead to giving too much. You might find that you’re promising everyone because you don’t want to say no. Before you know it you’re on a dozen charitable boards and have lost control of your time. You’re writing checks to hospitals that don’t use the funds to replace antiquated ER equipment, but instead have updated private rooms for wealthy patients.
Just as generosity can be highlighted so can stinginess. The funds that you have obtained may become incredibly tightly gripped. Not only will you not give, but you may become a cheat, withholding funds from contractors who do work for you, or simply choosing to pay them late, and all because you can.
Lotto Resources You Should Look into
For those who are looking to learn more about the lottery, see the following:
You Should Win 4 Times a Year
Like the title says, you’re going to win the lottery. By playing the Powerball you have a 4% chance of hitting the $2 prize. If you play 104 times a year you are looking at about one win with each season. Are some people luckier than others? Sure. We’ve heard of players who get $20 or $30 by matching three numbers!
Obviously we’re poking a little bit of fun here, but it’s because we know the odds of taking home the big prizes are so remote. Also, it cannot go unsaid that winning the lottery isn’t all happiness and joy. There are some harsh realities that come with it, but by reading this piece you have likely ensured that you won’t fall into those traps.