The Powerball jackpot had no winner this weekend and is up to $700 million as of Tuesday, the second largest in U.S. history.
Experts broke down the numbers and explained that the first thing consumers should look for when playing the lottery is expected value.
“The expected value of a randomly decided process is found by taking all the possible outcomes of the process, multiplying each outcome by its probability, and adding all those numbers up. This gives us a long-run average value for our random process,” writes Andy Kiersz for Business Insider.
“The $650 million jackpot is paid out as an annuity, meaning that rather than getting the whole amount all at once, it's spread out in smaller — but still multimillion-dollar — annual payments over 30 years. If you choose instead to take the entire cash prize at one time, you get much less money up front: The cash payout value at the time of writing is $411.7 million.”
Today on “Pat & Stu” the guys discussed the take home value after annuity, lump sum, and taxes.
“The $650 million jackpot is at annuity, so that's not exactly right. If you take the lump sum, your expected return goes to -.27 cents. So, right off the bat, you’re already in the negative if you take the lump sum,” said Stu Burguiere. “So, you’re losing your investment now. Now, you go to the idea of getting taxed. Sadly after taxes, it goes to a -.57 cent value.”