How Much Interest Does One Million Dollars Earn Per Year?

Article Summary:

It’s impossible to put an exact number on how much interest one million dollars earn per year. It depends largely on how you choose to save or invest the money and the type of returns you can reasonably expect to receive. This is all based, of course, on the different interest rates you can get. But, if you live frugally and invest wisely, you could conceivably have enough money to live on for the rest of your life.

As a kid, we all thought a million dollars was an unbelievably large sum of money that would be all we could ever possibly need. Even with the inflation rate climbing, one million dollars is not a small amount of money. Invested wisely, you can grow that million dollars into significantly more.

For the sake of argument, let’s assume you’ve inherited, won, or otherwise acquired exactly one million dollars after taxes. Now let’s see what we can turn that million into, depending on where you put it.

Before you invest your million dollars

Aside from interest rates, you will need to decide how to invest your money based on your age, when you plan to retire, your ultimate financial goals, and your tolerance for risk. Plus, if you essentially want to live off the interest of a million dollars, you need to assess what other investments, social security payments, or cash you may have to supplement your interest income.

To get a better idea of your investment options, speak with an investment advisor. In addition to stock market investments, investment advisors oversee your retirement and bank accounts as well.

Determine your financial goals and risk tolerance

When it comes to investing in the stock market, investors have thousands of choices. Before you invest in any stocks, bonds, mutual funds, or ETFs, you must decide whether the investment strategy and risks are a good fit for you.

You should also consider more generally whether the unique type of security is a good fit for you. The first step to successful investing is to figure out your current financial goals and risk tolerance — either on your own or with the help of an investment professional.

All investments carry some level of risk. An investor can lose some or all of the money they invest — the principal — because securities fluctuate in value constantly. Dividend payments may also go up or down as market conditions change. Stocks, mutual funds, ETFs, and other investments have different risks and rewards. Generally, the higher the potential return, the higher the risk of loss.

How much interest can you earn in a year from $1 million?

As mentioned previously, there are many ways to earn interest on your money, and a million dollars isn’t a bad place to start. There’s the stock market, money market accounts or high-interest savings accounts, mutual funds, bonds, and rental income from real estate, to name a few.

Each option comes with its own average annual return. Your comfort level plus the amount of time you have to invest will play a role in where you choose to put your money. If you’re nearing retirement age and looking for a stable retirement income, you’ll want to be more conservative. On the other hand, if you’re not looking to retire anytime soon, you might consider investing more aggressively.

To give you a better idea of the money you could earn through interest, see the various interest rates and returns below.

APYOne-year returnAPYOne-year return

High-interest savings accounts

Aside from keeping your cash under the mattress, you can’t get much more conservative than putting your money into a high-yield savings account. The table below and this list of the best savings accounts are good places to start if you want to see some of the highest rates available. Though these accounts usually have higher balance requirements than other savings accounts, they also have better interest rates.

Money market accounts differ from regular savings accounts in that they can also act as a kind of a checking account, complete with a debit card. You can probably also get a better deal with online banks rather than what brick-and-mortar banks pay in interest.

The minimum balance requirements would not be a problem for you because you have a million dollars to deposit. Lucky you! Still, even at the higher end, you would only make about $10,000 a year in interest earnings, which is not enough to live on. However, it is a risk-free way to store your money because you can’t lose money in a high-yield savings account.

Pro Tip

It should be noted that, while you can’t live off the money generated from a high-interest savings account, it’s still a good idea to have one. It’s smart to keep some ready cash on hand for an emergency fund or any upcoming expenses.

Plus, if you have other retirement income, an extra $10,000 in interest earned per year could be your vacation fund, while you hold on to that principal for other ventures.

Real estate investing in the stock market

Putting your money in real estate is typically considered a solid investment option. One of the easiest ways to invest in real estate is through a real estate investment trust (REIT). A REIT is a company that owns — and typically operates — income-producing real estate or real estate-related assets.

This could mean physical properties (actual real estate) or mortgages (real-estate-related assets). By investing in REITs you are essentially lending money through the marketplace in exchange for income derived from the properties owned by the REIT.

Most REITs specialize in a single type of real estate — residential, retail, office, industrial, etc. — although some are hybrids of physical real estate and real estate-related assets. Additionally, many REITs are publicly traded on an exchange, just like stocks. This means they are extremely liquid and eliminate the need to maintain the physical property yourself.

Real estate investing vs. the S&P 500

When you compare potential real estate returns with those of the S&P 500 index, you might be surprised. The S&P 500 has averaged about 10% in average annual returns over the last 20 years and the same is essentially true of the real estate sector, which often outperforms the overall market.

So if, for example, you were receiving an interest rate of 7%, that means your million dollars earns you $70,000 a year in income. Many people can live on $70,000 a year. REITs are not without their risks, of course, so it’s best to do your research and seek advice from a real estate investment expert about the best REITs to invest in.

Physical real estate investing

You could also use that million dollars to buy several rental properties of your own and pretty easily live off the income that you receive in rent.

There is obviously more time and effort required when investing in rental properties (upkeep, maintenance, and repairs, to name a few). Plus, the liquidity isn’t there as with REITs, but the potential for higher earnings is strong. Whether you decide to seek out long-term renters or shorter-term clients (such as with Airbnb investment properties) will also be a big factor in how much you can make to live on.


Let’s say you buy a three-bedroom house for $250,000. You could probably rent that out for, say, $2,000 a month after expenses. Multiply that by 12 months and you get $24,000 a year.

If you have four similar rental properties, you could be taking in $96,000 a year. That’s a respectable income and means your investment of one million dollars earns you more than 9% a year.

You could probably double that money if you chose to use the properties for Airbnb-style rental units, but you would be opening yourself to a lot more work in addition to the extra cash. Using just one of the houses for short-term renting might be a good compromise and a nice boost to your cash flow.

Individual stocks

Investing in individual stocks has the potential for very high earnings, but there are also risks to consider. There is a real possibility of losing money if you decide to play that game. However, if that 10% average annual return holds true, your one million dollars could bring in $100,000 in a year — a very comfortable income.

To learn more about your potential options, reach out to a brokerage that focuses on trading stocks.

Pro Tip

Keep in mind that trading stocks (which can be highly volatile) is an investment that might be considered more appropriate for investors who can afford to hold onto the securities longer and weather the ups and downs.

If you are closer to retirement age, you might want to think about putting that million bucks into multiple investments that are part of a well-balanced portfolio. You will get lower returns, but your money will be better protected.

Mutual funds and ETFs

One way to create a balanced portfolio of stocks is to invest in mutual funds or exchange-traded funds (ETFs). Both financial products make it easy to build a diversified portfolio of assets that give you exposure to a variety of securities in one “basket.” There are thousands to choose from and the only real difference is that ETFs are traded daily on the stock market, whereas mutual funds are only traded once a day at the close of business.

To find the right index fund for your cash, take a look at the below brokerages that specialize in mutual fund and ETF investing.

Other investment opportunities

There are many, many other possibilities to invest your million dollars. There are treasury bonds, savings bonds, and certificates of deposit (CDs), to name a few. Unfortunately, these accounts don’t generally come with the higher interest rates you might be seeking.

In any case, a financial advisor will tell you that a diversified portfolio is an ideal way to invest your money. With some of your money in safer investments and another portion in riskier ventures, you have a more balanced mix of assets that hopefully can offset one another.

So, can you live off one million dollars?

The short answer is yes, you probably can live off a million dollars. But, how luxuriously you live on that money depends on multiple factors. The two most important factors are the return you can generate on your investment and your living expenses.

The historical S&P average annualized returns have been around 10%. So investing $1,000,000 in the stock market will get you around $100,000 in interest in a year. This is enough to live on for many people. However, these returns can get eroded by inflation, lower-than-expected returns, and years where you have to spend more than your principal generates.

Key Takeaways

  • How much interest a million dollars can earn in a year varies wildly depending on how you choose to invest your money and the interest rates you can expect to get.
  • In a best-case (but also not unrealistic) scenario, you could earn about $100,000 a year in interest from one million dollars.
  • Investing in individual shares of companies could potentially net you the highest profits, but this strategy is also very risky.
  • Putting a million dollars into mutual funds or ETFs is a safer investment strategy because you have exposure to a wider variety of securities. However, these funds have lower interest rates than individual stocks.
  • Real estate investing could be considered one of the more stable investments for your one million dollars and there are a variety of ways to go about doing it.
  • If you live somewhat frugally and invest wisely, you could potentially live off one million dollars for the rest of your life.
View Article Sources
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  2. Investor Bulletin: Publicly Traded REITs — U.S. Securities and Exchange Commission
  3. How is Credit Card Interest Calculated — SuperMoney
  4. Savings vs. Money Market? Which Account Fits You Best? — SuperMoney
  5. How To Become A Millionaire? 10 Powerful Tips From Those Who Made It — SuperMoney
  6. Best CD Accounts | June 2022 — SuperMoney
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  8. Best Savings Accounts for Kids | June 2022 — SuperMoney
  9. Porte Savings Account — SuperMoney
  10. Axos High Yield Savings Account — SuperMoney