Lump sum or annuity: the break-even return after tax
Cash today or 30 payments over 29 years: the comparison below uses the Powerball jackpot of October 21, 2026, $635 million advertised and $267.5 million in cash.
- Cash option
- $267.5 million
- Annuity total
- $635 million
- Break-even return, Texas
- 5.5 %
Annuity ahead after 29 years
$125,594,693
Lump sum after tax $168,557,820 today; annuity $401,034,592 after tax over 30 years. The two are equal at a return of 5.5 % a year.
| Lump sum after tax | $168,557,820 |
| Annuity, sum of 30 payments after tax | $401,034,592 |
| Tax on the lump sum | $98,942,180 |
| Tax on the annuity, 30 years | $233,965,407 |
| Lump sum invested at 4.0 % for 29 years | $525,673,089 |
| Annuity payments invested at 4.0 % | $651,267,783 |
Same 2026 brackets every year; a later tax change or a move to another state changes the annuity side.
Compiled by Radif Partners · How we calculate · brackets, state rates and lottery rules read on official sites · estimate, not tax advice
Comparing the lump sum with the annuity means comparing money now with money later, after tax on both. For the $635 million Powerball jackpot of October 21, 2026, a single filer in Texas keeps $168,557,820 from the cash option, or $401,034,592 from the 30 annuity payments added together, each taxed in its year at the 2026 federal rates. The annuity total looks far larger, but it arrives over 29 years. The fair comparison asks what yearly return, after tax, the cash would need to earn to end up with the same amount as the annuity payments invested at the same rate as they arrive. For this Texas winner that break-even return is 5.5 % a year. Below it, the annuity ends ahead; above it, the cash does. In California the break-even is 5.5 %, in Oregon 5.5 %, nearly the same. The break-even depends on the cash ratio of the drawing, which follows interest rates, far more than on the state.
Your break-even return
Annuity ahead after 29 years
$125,594,693
| Lump sum after tax | $168,557,820 |
| Annuity, sum of 30 payments after tax | $401,034,592 |
| Tax on the lump sum | $98,942,180 |
| Tax on the annuity, 30 years | $233,965,407 |
Why the totals mislead
The advertised jackpot is the sum of 30 payments; the cash value is what those payments are worth today at the interest rates used to fund them. Comparing $401,034,592 of annuity after tax with $168,557,820 of cash after tax is comparing dollars of 2055 with dollars of 2026. The game itself states that the annuity is based on the cash value and on the 30-year Treasury rate (Mega Millions FAQ): the annuity is the cash, invested by the lottery in safe securities and paid out in rising installments.
The break-even return
The calculator invests the cash after tax for 29 years at a return you choose, and invests each annuity payment after tax, from the day it arrives, at the same return. It then compares the two totals at the date of the last payment, and searches for the return at which they are equal. With your own assumption for the return, the result says which option ends ahead and by how much.
| Winner | Cash after tax | Annuity after tax, 30 payments | Break-even return | Ahead at 4 % |
|---|---|---|---|---|
| Texas, single | $168,557,820 | $401,034,592 | 5.5 % | annuity |
| California, single (California ticket) | $168,557,820 | $401,034,592 | 5.5 % | annuity |
| Oregon, single | $142,076,101 | $338,193,021 | 5.5 % | annuity |
| New Jersey couple, $140,000 of wages | $139,844,592 | $334,062,760 | 5.6 % | annuity |
The break-even barely moves from state to state, because the federal 37 % rate (Rev. Proc. 2025-32) dominates both options and the state rate applies to both in the same way. What moves it is the ratio between cash and jackpot, set by interest rates on the drawing day: the lower the cash compared with the jackpot, the higher the return the cash must earn.
A worked example at 4 %
Take the Texas winner and an after-tax return of 4 % a year. The $168,557,820 of cash, left to grow for 29 years, reaches $525,673,089. The 30 annuity payments after tax, each invested at 4 % from the day it arrives, reach $651,267,783 on the day of the last payment. At that return the annuity ends ahead by $125,594,693. Change the return in the calculator and the answer moves: the break-even of 5.5 % is the point where the two totals meet. Nothing on this page predicts which return a winner will earn; the figure is there so that the choice rests on an assumption you state, not on the size of the advertised number.
What tax changes between the two options
Three tax effects separate the options, and none of them is large on a jackpot. First, brackets: the annuity spreads the prize, but each installment of a big jackpot still sits almost entirely in the top bracket, so the saving on the rate is a fraction of a percent. Second, the state: the cash is taxed by the state where you live in the year of the claim; each installment, by the state where you live in its year. A winner who plans to leave a high-tax state may pay less on later installments, unless the state that sold the ticket keeps taxing them (moving after winning). Third, future law: the annuity exposes 29 years of payments to rates nobody knows, in either direction.
What the arithmetic leaves out
The comparison is arithmetic, not advice. It does not price what people actually weigh in this choice: the security of payments made by the lottery against the risk of spending or losing the cash, the use of money for a family now, the estate on death (annuity payments continue to heirs, per the Mega Millions FAQ), or the tax on the income earned once the cash is invested, which the after-tax return you enter must already include. A return of 4 % after tax on investments means a higher return before tax, since dividends and interest on hundreds of millions are taxed too.
Pros and cons beyond the arithmetic
The choice between cash and annuity is made with the lottery that sold the ticket, within the period its rules allow, and it cannot be reversed afterwards. The Powerball payout schedule and the Mega Millions payout show the annuity side line by line; the cash value page the other side. Playing for either is a game of chance; help is free at 1-800-MY-RESET.