How much interest do you earn on one million dollars?
A lot of people end up at my site after searching on the question “How much interest do you earn on one million dollars?”
So, I’ve decided to give them a proper answer: How much interest do you earn on a million dollars? The answer is, of course, it depends.
It depends on several factors including: What is the interest rate? Over what period of time? How often is the interest calculated and paid during the period?
What is the interest rate?
Obviously the higher the interest rate, the better. Even small differences result in large amounts of money over long periods of time. As a practical example, we’ll use a 4% interest rate which is easily available with an Emigrant Direct Savings account.
Over what period of time?
The longer the better. Compound interest works it’s magic best over long periods of time. I’ll give a couple of examples using different periods of time.
How often is the interest calculated and paid?
The more often, the better. Is the money compounded yearly, quarterly, monthly, or daily? For our example we’ll assume the money is compounded monthly.
So, to answer the question, how much interest do you earn on One Million Dollars (assuming a 4% interest rate, compounded monthly)?
One Day - $109.59
One Month - $3,333.33
One Year - $40,741.54
Five Years - $220,996.59
Ten Years - $490,832.68
Twenty Years - $1,222,582.09
So, it doesn’t take long for the money to really add up. And there are a lot of ways to get a higher interest rate than 4%. Use a compound interest calculator to experiment with different interest rates, periods of time, and compounding periods.
That’s at 4%… but people that have $1M+ do not let it sit in Risk Free accounts (yes, I know that you know that) — so, that $1M will likely earn anything but your 4%.
10%? 15%? 20% or more? Maybe so!
- Steven Burda -
e-mail: steven.burda.mba @gmail.com
John Chambers , disabled
If you really want to know how much interest one million can make then stop all the talk and do something. Just send me one million dollars and I will invest it.
if invested in corporate bonds (stellar companies like Levis Strauss, Starbucks borrow money all the time) you’ll get around 9%.
or if you’re like john kerry’s wife, theresa heinz, you put them in TAX-FREE munis!
Most people who ask this question are REALLY asking: “is $1 million ENOUGH?” … for most people the answer is NO.
Here’s why: http://7million7years.com/2008/01/30/its-never-going-to-be-enough/
As others have said, tax is a critical issue here. Not sure about the US, but in the UK savings are taxed at 20% to 40%, once you’re above a small income band. It’s much more efficient to put a million pounds into stocks, where there’s no higher rate tax to pay. As I say, your US readers will need to look into the equivalent tax bands over there.
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