Powerball is at $1 billion! But if you win it, higher interest rates will cost you millions

DETROIT — Inflation, which is at a 40-year-high, has increased the price eggs, electricity and rent. Well, there’s now another way it’ll cost you: losing some of the big lottery payout.

The Powerball jackpot is up to $1 billion for Monday’s drawing, the largest this year and the fifth-second ever. And the jackpot lump-sum payout option, which lottery officials say is what most people select, is now $497 million. But, less than two months ago, the payout would have been tens of millions of dollars higher.

Keep in mind the odds of winning are 1 in 292 million.

The change, Michigan lottery officials said Tuesday, is mostly a result of rising interest rates, which the Fed is using to try to lower inflation.

The $1 billion payout is based on the winner taking annual payouts from safe investments essentially made for the winner that increase each year for 30 years. If the winner wants all the money at once, there’s another payout formula based on a variety of factors, some of which are affected by interest rates.

“The cash option amount has always fluctuated,” Jake Harris, the lottery’s player relations manager, said. “But what you are seeing now is kind of a product of the overall climate, where interest rates have gone up a bit more recently than in the past few years and that’s, perhaps, why it is more noticeable now.”

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But if you are feeling lucky, know that as the interest rates go up, the lump-sum payout amounts go down. They fell, for instance, from about 59% of the jackpot on Aug. 3, the last time there was a winner, to about 48% of the most recent jackpot.