Lottery jackpot

A lottery jackpot is the prize money that is awarded to anyone who correctly picks all the numbers during a drawing. If no one wins, the jackpot rolls over to the next drawing and grows until someone gets lucky.

Lottery operators use a variety of strategies to grow the jackpot, from raising ticket prices to adding more number combinations to boosting jackpot payouts with higher interest rates. The bigger the jackpot, the more people will buy tickets. And that means a greater chance of winning, even if the odds are still long.

But if you’re the winner, what happens to that money? First, you’ll get a lump sum (a single payment) of the total amount of the jackpot after taxes. Most states also offer winners the option to take an annuity, which would pay out the prize in annual payments over 30 years. If you die before all the payments are made, your heirs will receive the remaining sum.

In addition to federal income taxes, you’ll probably owe state income taxes if you win the jackpot. NerdWallet has a calculator that can help you estimate your state tax liability. You’ll also have to decide whether you want to accept the lump sum or annuity option. Most winners opt for the lump sum, which is about half of the prize amount. This allows them to invest the proceeds of their winnings, potentially earning a bit more than the 5-percent interest that the annuity offers.