The winner of the Mega Millions jackpot’s new $1.28 billion cash prize has been revealed. However, reports claiming that the winner will get “only” $433.7 million can confuse some people. Did the winner really pay taxes at a rate of 70%?
Any organisation, including the Multi-State Lottery Association, which oversees the Mega Millions jackpot, may find it challenging to quickly raise billions of dollars. Because of this, lottery winners are given the option of getting a single, larger amount or several smaller ones over time.
When calculating the prize money for the Mega Millions lottery, the total of the instalments that a winner would get if they choose to take the annuity is used. The most recent valuation for this annuity payment option was $1.28 billion. The enormous amount garnered media attention as the second-largest jackpot in Mega Millions history.
Although winners who choose the lump sum option receive cash in hand, they do so at a reduced amount compared to the annuity award. This phenomena is explained by the time value of money concept, which states that money received today is worth more than money received tomorrow. In the recent Mega Millions winner’s situation, $747.2 million was worth more to the winner today than $1.28 billion dispersed over several years.