For all those who wondered exactly how much interest you could earn on a cool two million dollars, wonder no more! We did the math, and depending on the interest rate, you could earn anywhere from $833 to $16,667 per month.
So, whether you’re looking to sock away some cash for a rainy day or invest in something bigger, here’s what you need to know.
What Is Your Monthly Interest on 2 Million Dollars
Your monthly interest will depend on your savings plan. For instance, the monthly interest on a 0.5% savings account will amount to about $833 per month. Similarly, it could rise to:
- $1,667 a month (for a 1% government bond),
- $5,000 a month (for 3% annuity),
- $11,667 a month (for 7% real estate), and
- $16,667 per month (for 10% in S&P 500).
What’s more, your annual interest on $2 million would be $10,000 a year (with a 0.5% savings account), or:
- $20,000 a year (1% government bond),
- $60,000 a year (3% annuity),
- $140,000 a year (7% real estate), and
- $200,000 per year (10% in S&P 500).
Must-Know About Savings Interest Rates
Is $2 million enough to retire? It just might be. Namely, when you’re saving for retirement, it’s important to understand just how much interest you can earn on your investments. After all, the more money you can earn in interest, the quicker your nest egg will grow.
But how much is enough? Let’s find out!
1. If you invest $1 million through US Treasury bonds, you can make about $30,800 every year.
(Engineer Your Finances)
If you invested one million dollars in a 30-year Treasury bond, you would earn about $30,800 per year (the rate is 3.08%). You could earn even more if you live in a state that has a higher rate. How much interest does $1 million dollars earn per month? That would be around $2,566.
2. If you deposit $1 million through municipal bonds, you will earn $50,000 per year.
(Engineer Your Finances)
Municipal bonds are a way for people to give money to the government so they can finance government projects. The people who give the money can earn some money back, and it’s all guaranteed by the government.
The rates for municipal bonds vary, but usually, you can get around a 5% return on your investment in a year. That means you would make $50,000 in one year without having to pay any taxes on it.
Can I live off the interest on a million dollars? In this case, yes, you can.
3. If you invest $2 million on annuities, the stock market, and real estate, you can earn a minimum of 6% on your investments every year.
(Life and my Finances)
How much interest will $2 million dollars earn in a year? If you reach the mentioned 6% on your investments, 2 million dollars will generate $120,000 per year or $10,000 per month.
4. With a 3% annuity, your interest on $3 million will amount to $90,000 per year.
(Life and my Finances)
An annuity is a long-term investment that helps protect you from outliving your income. You make payments to the insurance company, and they will give you periodic payments that will last for the rest of your life.
What will your monthly interest on 3 million dollars be with annuities? About $7,500 a month.
5. With a 1% government bond, an annual interest of $5 million will amount to $50,000 per year.
(Life and my Finances)
A government bond is a type of security that the government sells to raise money. People who buy bonds are lending money to the government. In exchange for lending money, these people receive a fixed amount of interest every year for the duration of the bond.
Government bonds are considered to be one of the safest investments as it’s highly unlikely that the government will default on its debt. That said, the interest rate is smaller than (say) what you’d potentially get from stocks.
In addition to that, bonds have different maturity dates, ranging from one month to 30 years.
Overall, with government bonds, your monthly interest on $5 million dollars will amount to $4,167, for instance.
Conclusion
To sum up, if you had two million dollars to invest, you could potentially earn anywhere from $833 to $16,667 per month in interest. Obviously, these numbers vary depending on the terms of your loan and other factors, but this will give you a good idea of all the possibilities and limits.
By understanding the basics of interest, you can make more informed decisions about your finances and hopefully save yourself some money in the long run.
FAQs
Is $2 million enough to retire at 40?
Yes, it’s possible to retire at 40 with $2 million under your belt.
For example, if you have an immediate annuity, you will get a guaranteed income of $68,415.36 each year for the rest of your life. Or, if you choose a payout that lasts 10 years or 20 years, you will get an annual income of $68,303.28 or $67,871.40, respectively.
Keep in mind that these payouts may change frequently and vary depending on your state.
How much income can $2 million generate?
Depending on the withdrawal rates, $2 million can generate:
- $40,000 per year (at a 2% withdrawal rate)
- $60,000 per year (at a 3% withdrawal rate)
- $80,000 per year (at a 4% withdrawal rate)
What is the monthly interest on 1 million dollars?
If you have a million bucks on your account, you can get:
- $417 per month on a 0.5% savings account
- $833 per month on a 1% government bond
- $2,500 per month on a 3% annuity
- $5,833 per month on a 7% real estate
- $8,333 per month on a 10% in S&P 500
Can a couple retire on 2 million dollars?
It depends. When it comes to retirement, everyone has different needs. For some people, $2 million might be enough to retire comfortably. Yet for others, that’s not even close to enough.
That’s why it’s so important to create a personal retirement income plan and not rely on generalizations.
There are so many things that can change the results of your retirement plan — like tax rates, social security timing, Roth conversions, and income needs.
So, when it comes to planning for your golden years, create a plan that will work best for you. Don’t rely on hearsay or your monthly interest on 2 million dollars alone.
