I am looking for a little fact check on this article http://www.straightdope.com/columns/read/2149/if-i-win-the-lottery-should-i-ask-for-a-lump-sum-or-an-annuity prior to making any financial decisions about the powerball jackpot I plan on winning this evening. According to the article,
“… if we start with a cash value of $500,000 and expect to wind up with $1,000,000 after 20 years (in other words, the equivalent of a $50,000 annuity), the underlying annual interest rate has to be 8.92%.”
Now, I did a little playing around in Excel and cannot, for the life of me, duplicate these results. The maximum amount of time, at that percentage rate, it takes me to double my money is 11 years, not twenty, and that’s with NO compounding.
Am I misunderstanding something fundamental about how interest works? Or was the original item in error? Any input would be appreciated, as I will be winning the jackpot in 6 hours and 41 minutes. 
I duplicated that rate in Excel with this basic technique:
Have a cell for the rate. Set up a series of cells where the first year you subtract the $50K. Each subsequent year, add the rate times the previous year balance and subtract the $50k. Use the excel goal seek to set the final year to zero (after adding the final interest and subtracting $50k) by varying the rate. I actually got .089196 which rounds to the rate given.
There are probably more direct ways to do this but this method clearly lays out what is happening.
Took me a while to get your results, because I realize we were doing two different operations. The original article considered two possibilities for payment of jackpot:
$50,000 annuity x 20 years = $1,000,000
or
$500,000 current cash value, which, at a determinable interest rate, will be worth $1,000,000 after 20 years.
I oversimplified, not considering the annual payout of $50,000 dollars from the principal in scenario 2.
Thank you for clarifying the original poster’s intent 
I can’t verify this right now (The Powerball site is blocked at work) but IIRC another factor is that the Powerball annuity option payments are not flat, They start out at some lesser amount and increase by 4% a year for the period. This (they claim) is so your purchasing power remains approximately the same over the life of the annuity.
Does anybody know whether lottery annuity payments – Powerball or anyone else’s – go to your estate if you kick it before the time is up?
According to the article linked in the OP*, California continues payments to your estate if you die while receiving the annuity. The article was written in 2004, though, which is the same year the California joined the Mega Millioins lottery, a multi-state lottery.
The California-exclusive Super Lotto is still being played, and one presumes that the continuity of the annuity is retained with the game. It may not be the case with the mega Millions game. I don’t know, and the article doesn’t address it.
*OP: your link doesn’t work as posted. I noticed an extra [http//] character string and notified a mod to request a fix.
When I wrote that Staff Report, the rules were very different from state to state, and I thought I stressed that. Once you know the rules, it’s usually fairly straightforward financial math to figure out the underlying interest rate, and decide whether you think you can do better. I actually didn’t use Excel, I used my 30-year-old HP-Financial calculator, but Excel does it just fine.
Of course, any such calculation is really based on expectation of future rates of return. A lottery winner who took the lump sum in 2007 and found they’d lost 40% of the value over the last eight months, for instance, would be pretty pissed not to have taken the annuity. Who knew?