Money Management

Holding a winning Powerball ticket isn’t enough. You have to claim your prize in a timely fashion if you want the cash. Here’s what happens if you don’t. 

I know I’m supposed to be a sensible personal finance writer providing sound advice about how to help your money go further, but I’m also human. And that means that huge lottery jackpots like Powerball’s estimated $1.4 billion drawing for Saturday still catch my eye. There’s almost no one on earth that kind of money wouldn’t be life-changing for, and I have plenty of ideas for how I’d like to spend it.

But like most people who have ever played the lottery, I’m all too familiar with the sting of defeat when the jackpot’s finally won and I’m not holding the golden ticket. You might try to console yourself by hoping that the winner doesn’t come forward to claim their prize, but what happens then? It’s possible the money could come back to you, just not in the way you think.

How long do Powerball winners have to claim their winnings?

First things first, we have to talk about what it means to claim — and not claim — your prize. All Powerball prizes have to be claimed in the jurisdiction — that is, the state or territory — where the ticket was purchased. It’s not possible to buy the ticket in one state and claim it in another. However, it’s totally fine to buy a ticket in a state you don’t live in. You just might have to make a trek across state lines to get your cash if you win.

Claiming Powerball winnings under $600 is pretty straightforward. You can take the ticket to any licensed lottery retailer — think anywhere where you can buy a Powerball ticket — and exchange it for cash. But things are more complicated for larger prizes.

When you win more than $600, you need to claim your winnings at a lottery office or even your state lottery headquarters. You can find yours by looking up the lottery offices in the state where you purchased the ticket.

And no matter the size of the prize, you also have to claim it within a reasonable amount of time after the drawing. That depends on the jurisdiction where you bought the ticket. You typically have 90 days to one year after the drawing itself. The back of your ticket may have the expiration date listed on it. If not, check with your state lottery office to learn how long you have to claim.

If you fail to turn in your ticket to the appropriate lottery location by the deadline, you forfeit your prize.

What happens when the winner doesn’t claim a Powerball prize?

You might expect that unclaimed Powerball prizes would go back into the Powerball jackpot, giving you another chance at the winnings, but that’s not what happens. Once the deadline is up, Powerball distributes the jackpot proportionally to all jurisdictions.

Let’s use the current $1.4 billion jackpot as an example. Say someone wins that on Saturday and they fail to claim their prize. After the jurisdiction’s claiming deadline has passed, Powerball splits the money amongst all jurisdictions where people bought tickets. And with the jackpot this high, that’s basically everywhere.

If one state sold 5% of all tickets during the draw run — the series of consecutive drawings with no winner — then it would get 5% of the $1.4 billion jackpot, or about $70 million. And if another state sold 3%, it would get 3% of the jackpot, or $42 million.

What happens next is up to the jurisdictions. Each has its own rules about what to do with unclaimed prize money. Some put that money into other lottery games within the state. Others put it into the state’s general fund, where it might be used to pay for things like the salaries of government employees or education or infrastructure costs within the state.

So while you probably won’t notice the benefit directly, it’s possible you still could gain from an unclaimed Powerball prize if your state chooses to reinvest that money into state programs. I know, that’s not nearly as fun as getting another shot at fattening your savings account, but it’s better than nothing, right?

If you’re curious how your state uses unclaimed lottery winnings, check with your state’s lottery office or look up your state’s laws regarding lottery winnings online. And if you’re lucky enough to be the one holding the winning ticket at the end of this draw run, please do yourself a favor and claim it promptly so you don’t have to worry about any of this.

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All you need to do is win the lottery, and all your problems will be over, right? Probably not. Read on for some Powerball myths and misconceptions. 

Big lotto jackpots are in the news again, thanks to the recent kerfuffle over Powerball — when no one wins, the eventual payout gets higher and higher. When it passes $1 billion, it’s all but guaranteed to make the evening news (and the morning news).

As a result, you might be hearing a lot of myths, falsehoods, and flat-out lies from friends, family members, and colleagues about winning that Powerball jackpot. Let’s consider a few lies people believe about big lottery wins and how they might impact your personal finances.

1. “If I play the same numbers every time, my chances go up.”

You might assume that choosing the same lucky numbers to play every time you buy a Powerball ticket will give you an edge. After all, different numbers are chosen every game, right? Actually, no. Lottery numbers are drawn at random, and numbers that have already won are thrown right back in after being pulled. So playing the same numbers on every ticket doesn’t give you any kind of edge.

2. “I should definitely take the lump sum if I win.”

Ah, the eternal question: lump-sum payment or annuity? If you win a big Powerball jackpot, you may choose to receive a lump sum when you cash in your ticket. This gives you a solid chunk of money all at once (less taxes, of course). It’s an appealing prospect for a lot of people — imagine turning several hundred million dollars into cash and diving into it, Scrooge McDuck–style. There’s also a case to be made that cash loses value over time, so if you invest that payout wisely, you could beat inflation with it.

However, many of the tragic lotto winner stories we’ve all heard hinged on people being completely unprepared to handle that much money and losing it all. Taking your other option might be a better idea — or at least worth considering. You can have the money paid out in 30 equal payments and receive one per year — this is the annuity option, and it’ll give you more money in the end. You should definitely weigh your options with trusted advisors, but if you’re playing the long game, the annuity is worth considering.

3. “I can handle new-found wealth without help.”

You might be fantastic at spending money — I know I am! However, not many people are equipped to manage a large sum of money that will absolutely change your life, for good or for ill. If you did win the Powerball, your first move (besides signing your ticket!) should be to seek out professionals you can trust to help you make sense of all your new financial considerations.

I’m a big believer in financial advisors even if you’re not rich, and one of these professionals can help you make a plan for the future of your winnings, as well as work out how much you can comfortably spend now and perhaps on a monthly basis. An accountant can help you work through your tax obligations, and an attorney can handle estate planning. Do not hire a random cousin or neighbor to manage your money (unless they actually are one of these professionals and you trust them).

4. “If I win, my life will be ruined.”

We’ve all heard the stories: Lottery winner broke after a year. Lottery winner murdered. Lottery winner regrets winning. These have all happened, by the way — they’re just not the norm. It stands to reason that stories about miserable lotto winners would be repeated, as everyone loves a cautionary tale. But the data just hasn’t borne out the idea that winning the lottery will ruin your life.

Studies have shown that lotto winners do end up happier, and if you approach any windfall of cash with a level head, a solid plan, and the right people in your corner, you may find that money can indeed buy happiness.

Keep this in mind about the Powerball, and lotteries in general

Everyone loves to dream — and buying a Powerball ticket (or any kind of chance at a big cash prize) gives you that opportunity. Until the winning numbers are announced and you’re not a winner, you can fantasize about what your life would be like if you suddenly became a billion dollars richer.

Here’s the problem with Powerball, though: Your odds of winning are infinitesimal. The current big jackpot? You’ve got a 1 in 292.2 million shot. If you reframe your expectations, you can take comfort in the fact that your odds of winning any Powerball prize are 1 in 24.9, though. I once won a Powerball prize — of $17. I wasn’t a big lotto player then (actually, I only bought the ticket as a novelty, because lotteries had just been legalized in the state I lived in at the time), and I’m not now. It’s been years since I bought a ticket.

I’ve heard it said that “lotteries are a tax on people who are bad at math,” and I buy it. If you’ve got a little money to put to good work for you, don’t buy a lottery ticket with it. Instead, consider investing it — or even opening a high-yield savings account with a good online bank. Right now, a return of 5% on that money could be yours. It’s not as sexy as a Powerball jackpot, but it’s achievable for anyone.

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.

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