Lottery Jackpots and Rising Interest Rates

Lottery jackpot

As a prize grows, it draws more and more players and gives them the false impression that they too can become rich. That’s a dangerous game that could cost the average lottery player thousands in foregone savings.

It’s no wonder jackpot prizes have jumped to billion-dollar status. They generate buzz and free publicity for lottery organizers. They also help keep the games in the public eye, driving ticket sales and keeping people interested. But the wildly growing prize amounts aren’t all by chance. Lottery operators have made it harder to win, and rising interest rates have played a role too.

A jackpot’s advertised size is based on the amount a winner would receive if they chose an annuity payout over decades. That means higher interest rates mean a jackpot will grow larger faster. Rising interest rates also make it easier for lottery winners to take their winnings in one lump sum rather than over several payments, a move that increases the total payout by millions.

Choosing how to receive a jackpot may seem trivial, but it’s an important decision that can impact your tax liability and overall financial picture. If you win the big prize, consider talking to a financial professional about the best way to handle the money. And be careful: Some lottery winners have blown their newfound wealth. There are many stories of lottery winners who have squandered their winnings and ended up in bankruptcy court.