How Much Interest Can You Earn on $1 Million?
Can you live off the interest from $1,000,000?
Well, that depends on two things:
- How much you spend each year
- Where you invest the money
For instance, you could open a high-yield savings account on Public and earn 5.1% interest. If you put $1,000,000 into the account, it would generate $51,000 in interest per year. Can you live on $51,000, or $4,250 per month?
If you need more than $51,000 in annual income, you may need to invest in assets that generate even higher income, like bonds, real estate, 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
Interest-bearing assets — like savings accounts, Treasury bills, bonds, and other bank products — are typically stable investments that pay interest on a set schedule.
With these investments, your principal, or the amount you invest, is rarely at risk. Plus, you will usually know what rate of return you will earn before you invest.
For example, a bank might pay you 2% interest per year for keeping your cash there.
On the other hand, return-generating assets — like stocks, real estate, and many alternative investments — have higher degrees of volatility and risk.
While we know the average performance of these assets historically, we never know for sure how they will perform in the future.
Furthermore, the returns tend to vary from year to year. The S&P 500 has averaged around 10% per year since 1950, but has had multiple years where it's lost 30% or more.
For these reasons, retirees and other people who want to live off of their portfolios often focus the bulk of their investments on interest-bearing investments.
These provide more stability, and the borrower has promised to make you consistent payments on a set schedule. Borrowers can still default on their debt, but otherwise, your future returns are known in advance.
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.
Let's take a closer look at the most common interest-bearing assets people invest in and how much interest you can expect to earn per month and per year 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.
A note on interest rate examples
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: 5.1% (on Public)
- Annual interest: $51,000
- Monthly interest: $4,250
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 5.1% interest on HYSA balances.
2. Treasury bills
- Interest rate: 4.5–5.3%
- Annual interest: $53,000
- Monthly interest: $4,417
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 — there's no default risk.
Right now, because the government has increased interest rates to reduce inflation, its short-term debt has higher interest rates than its longer-term debt.
Here's a look at the rates it's paying on different maturities:
- 1-month: 5.3%
- 3-month: 5.3%
- 1-year: 5.0%
- 2-year: 4.6%
- 10-year: 4.3%
- 30-year: 4.5%
You may be wondering why anyone would choose the 10-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 4.3% interest rate for 10 years.
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 own SGOV, which owns a portfolio of 1–3 month bills.
3. Bonds
- Interest rate: 4.8–5.5%
- Annual interest: $55,000
- Monthly interest: $4,583
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 5% interest for 10 years.
If you bought one, you would receive $50 per year, paid in $25 increments every six months. On the bond's maturity date, you will have your $1,000 returned along with your final $25 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 5.5%.
4. Private credit
- Interest rate: 13.6% (on Percent)
- Annual interest: $182,000
- Monthly interest: $15,167
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 — around 9 months — and pay higher interest rates than corporate debt.
On Percent, the average deal has a maturity date of 9.5 months, an interest rate of 13.58%, and a 1.9% 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 5.3%
- Annual interest: $53,000
- Monthly interest: $4,417
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 5.3%.
6. Money market funds (MMFs)
- Interest rate: Up to 5.2%
- Annual interest: $49,000
- Monthly interest: $4,083
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 4.62%.
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 5–6% interest.
So, if you want to live off the interest from your portfolio, you'll need to spend less than $5,000 per month. And, depending on where you live and after accounting for taxes, this number may be closer to $4,000 per month.
A note on interest rates
It's worth noting that interest rates could possibly go down in the future, affecting these numbers significantly.
If that's not an option, you'll either need to keep saving to build up your nest egg even further or potentially invest some of your portfolio in more volatile assets.
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.
