How Much Interest Can You Earn on $1 Million?
Can you live off the interest from $1,000,000?
It depends on:
- How much you spend
- Where you invest the money
For instance, you could open a high-yield savings account on Public and earn 3.3% interest. If you put $1,000,000 into the account, it would generate $33,000 in interest per year, or $2,750 per month. Could you live on that?
If not, you would need to invest in assets that generate higher income, like Treasury bills, corporate bonds, and private credit.
However, while these investments offer the potential for higher returns, they also come with more risk, volatility, and uncertainty.
Interest-bearing vs return-generating
Let's quickly cover the difference between interest-bearing and return-generating assets.
An interest-bearing asset is an investment that generates regular income, known as interest, on a set schedule.
They are conservative, income-producing investments. Common examples include savings accounts and other bank products (CDs and MMFs), Treasury Bills, and corporate bonds.
With these assets, your principal (your initial investment) is rarely at risk. Plus, you usually know what rate of return you will earn before you invest. For example, a bank might offer you 2% interest per year for keeping your cash there.
A return-generating asset is an investment that grows your wealth over time primarily through price appreciation, and, in some cases, reinvested cash flows like dividends or rental income.
These assets are typically more volatile and carry higher risk than interest-bearing assets. Common examples include stocks, real estate, and many alternative investments.
With return-generating assets, your principal can fluctuate significantly, sometimes for long stretches. While we know their long-term average performance historically, there's no way to know how they'll perform over the next 1, 3, 5, or 10 years.
For example, the S&P 500 has averaged roughly 10% per year since 1950, but it has also experienced multiple years with losses of 30% or more during that same period.
For these reasons, retirees and other people who want to live off of their portfolios focus the bulk of their investments on stable, interest-bearing investments.
More on return-generating investments
I focus on interest-bearing investments in this article. For more information on return-generating investments, see our article on how to invest $1 million.
With that groundwork laid, here's a closer look at the most common interest-bearing assets people invest in and how much interest you can expect to earn from each.
How much interest can you earn on $1 million?
How much interest you earn on your $1 million portfolio depends on which assets you invest in.
Below, I've outlined the most popular interest-generating investments. While these investments are all quite stable and reliable, some do have more risk than others.
For example, a corporate bond is riskier than a Treasury bond because a company is more likely to default than the U.S. government.
Generally speaking, the higher the interest rate, the higher the risk.
Note: The interest rates listed below are specific to the examples given. The annual and monthly interest figures are as if you invested the full $1 million into each asset, and do not account for taxes.
1. High-yield savings account (HYSA)
- Interest rate: 3.3% (on Public)
- Annual interest: $33,000
- Monthly interest: $2,750
High-yield savings accounts offer great liquidity — you can access your cash right away without needing to sell an investment — and pay interest rates many times higher than traditional bank accounts.
Additionally, like normal bank accounts, most HYSAs are FDIC-insured, which means the U.S. government is insuring the institution and there's no risk of losing your money (up to $250,000 per account).
There are many institutions that offer HYSAs, but I like Public.
Public is a brokerage for investing in stocks, bonds, and ETFs, and each of its brokerage accounts comes with a HYSA. Public is currently paying 3.3% interest on HYSA balances.
2. Treasury bills
- Interest rate: 3.5–4.8%
- Annual interest: $48,000
- Monthly interest: $4,000
Treasury bills are short-term debt securities issued by the U.S. government.
U.S. government debt is considered the safest investment in the world. That's because if the government ever runs out of money, it can simply print more — so there's no default risk.
Here's a look at the rates it's paying on different maturities:
- 1-month: 3.68%
- 3-month: 3.67%
- 1-year: 3.53%
- 2-year: 3.61%
- 10-year: 4.25%
- 20-year: 4.81%
You may be wondering why someone would choose the 1-year bond over the 1-month bond. If you expect interest rates to be lower in the future, you may want to “lock in” the 3.53% interest rate for 1 year.
You can buy Treasury bills in a regular brokerage account (such as Public or Fidelity) or directly from the government on TreasuryDirect.gov.
You can also buy Treasury bill ETFs, which are easier to manage, pay monthly dividends, and have lower minimum investments. I hold SGOV, which owns a portfolio of 1–3 month bills.
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3. Bonds
- Interest rate: 4.5–5%
- Annual interest: $50,000
- Monthly interest: $4,167
Bonds are debt instruments issued by corporations, municipalities, and other institutions. Like Treasuries, each comes with an interest rate and a maturity date.
For example, Microsoft might issue $1,000 bonds that pay 4.5% interest for 10 years.
If you bought one, you would receive $45 per year, paid in $22.50 increments every six months. On the bond's maturity date, you will have your $1,000 returned along with your final $22.50 interest payment.
Bonds are riskier than Treasury bills because companies (and other institutions) are more likely to default than the U.S. government. If Microsoft goes bankrupt before your bond's maturity date, you may not receive your principal back.
You can buy individual bonds in your brokerage account or buy a bond ETF. MBBB — a medium-term, investment-grade bond fund — is currently paying 4.98%.
4. Private credit
- Interest rate: 14.47% (on Percent)
- Annual interest: $144,700
- Monthly interest: $12,058
Private companies that can't get a loan from a bank or don't have time to wait for one must turn to private markets for financing. This is the private credit market.
Because the capital is harder to come by and often entails greater risk, most private credit deals are shorter term — typically between 10-24 months — and pay higher interest rates than corporate debt.
On Percent, the average deal has a maturity date of 16.6 months, an interest rate of 14.47%, and a 3.00% default rate. You can read more about the platform in our Percent review.
Private credit investing is significantly higher risk than the other investments on this list, and the market is more opaque. If you do decide to invest in private credit, you may want to allocate only a small percentage of your portfolio to it.
5. Certificates of deposit (CDs)
- Interest rate: Up to 4.05%
- Annual interest: $40,500
- Monthly interest: $3,375
Certificates of deposit (CDs) are products offered by banks to their customers.
Instead of putting your money into a regular bank account, which you can withdraw from at any time, you can invest in a CD and agree to “lock up” your money for the term of the CD.
For making this agreement, banks will pay you a higher interest rate than they would on your checking or savings account balance.
You can contact your bank for current CD rates or use Raisin to compare rates from hundreds of banks, the highest of which are currently paying 4.05%.
6. Money market funds (MMFs)
- Interest rate: Up to 4%
- Annual interest: $40,000
- Monthly interest: $3,333
Money market funds (MMFs) are another type of product that is commonly offered by banks and other financial institutions.
Instead of buying individual debt securities yourself, you can invest in an MMF, which is a type of mutual fund that owns a portfolio of short-term, high-quality debt.
MMFs are typically more liquid than the debt instruments they invest in and are easier to manage, though they typically pay slightly lower interest rates.
You can invest in MMFs via your brokerage account or via your bank. You can also compare MMF products on Raisin, where you can find rates as high as 4%.
Is $1 million enough?
As you can see, there are many ways to invest $1 million and earn interest. However, most of these investments are currently paying between 3–5% interest.
So, if you want to live off the interest from your portfolio, you'll probably need to spend less than $4,000 per month. And, depending on where you live and after accounting for taxes, this number may be closer to $3,250 per month.
If that's not an option, you'll either need to keep saving to build up your nest egg even further, find additional sources of income, or invest some of your portfolio in more volatile assets.
Remember, an allocation to private credit, stocks, and/or real estate may increase your annual returns, but will come with additional risk and volatility. Only you can decide if that's an acceptable tradeoff.
It all depends on your goals and lifestyle. If you have a fairly quiet, frugal lifestyle, a $1 million portfolio could generate enough interest to live on.
Compound interest investments
You may also be interested in learning more about compound interest, which you can do in our article on the best compound interest investments.
