The Powerball Winner Is Still a Mystery. Here's How The Lucky Winner Can Still Get $330 Million More

It's been little over a week since the numbers for the $1.08 billion Powerball were announced, and the winner has yet to come forward. While this isn't unusual -- it can take weeks or months to properly identify and vet the winner -- it does give us pause to speculate on how the winner will receive their money -- and what they can do to get more.

Powerball winners are given a choice between receiving their money as a lump sum payment or as an annuity with 30 installments over 29 years. Most winners choose the lump sum. It gives them the money all at once and doesn't put them at risk of dying before the 29-year annuity finishes paying out. However, by taking the lump sum, you automatically leave money on the table, sometimes a massive amount.

Lump sums are smaller than the advertised prize

If the winner chooses the lump sum, the lottery agency will automatically subtract a portion from their earnings. The portion that they subtract is calculated by a "discount value," which the agency determines before the Powerball begins. For this lottery, the lump sum would yield roughly $558.1 million after the discount value is applied, according to the lottery site usamega.com, which would be more like $351 million when taxes are taken out.

The annuity option, however, yields the entire advertised prize over 30 installments. This time around the winner would be looking at roughly $36 million every year for the next 29 years (plus this year) for a grand total of $1.08 billion. After taxes are taken out, that would end up as about $22.7 million each year, or roughly $681 million total – $330 million more than what the lump sum winner would receive.

Now, typically, most winners have taken the lump sum. In fact, no winner has chosen the annuity since 2014, when a Californian nail technician, Vinh Nguyen, won $228.4 million and elected to receive it as an annuity at roughly $7.6 million per year. But those that choose the annuity will almost double their winnings and perhaps prevent themselves from spending all their earnings at once.

The lump sum may have an edge over the annuity in this one instance…

But don't be mistaken: Lump sum winners who can resist spending all their money on super yachts and private jets can possibly earn even more than the advertised prize itself. How does that work? Simple. By investing.

For example, let's assume the lump sum winner receives $351 million after taxes and decides to stick a modest $51 million in their savings account and invest $300 million in the S&P 500 for the next 29 years. Assuming an annual compound growth rate of 9.7% (which is the S&P 500's compound annual growth rate over the last 95 years), your $300 million would grow to $4.397 billion in 29 years -- more than four times the jackpot's original value and more than six times what you would have gotten with the annuity.

But now what if you decided to take the annuity and invest $20 million of your $22.7 million monthly payouts? If you invested $20 million each year for the next 29 years (assuming again a 9.7% annual compound growth rate), your final amount would be $3.109 billion -- a full billion and some change less than the invested lump sum.

Of course, that assumes the winner doesn't pull their money out (which could more than halve their earnings if they miss the market's best days) and keeps their personal finances stable over the next 29 years. But if the winner is savvy enough to make their money work harder for them, they could take the lump sum and be a billionaire in 29 years, with $51 million to live off between now and then.

What are the odds that the winner will invest in the S&P 500? Who knows. But if they, like Einstein, believe compound interest is the eighth wonder of the world, they could grow that money to a sum no lottery has ever reached.