When I was younger, my goal was to bank a million dollars and live off the interest. As I got older, reality began to set in a bit. Things got more expensive and breadth of my needs and wants got bigger. Suddenly, living off a million dollars just wouldn't work. It wasn't enough to sustain me for the rest of my life!
Now I wonder, can I live off 10 million dollars? Is that too much? Too little? What is the interest on 10 million dollars?
Then, let's say I actually save up $10 million dollars. What do you do with it? How do you invest it? Is $10 million dollars rich?
Have you had these same questions? Yeah...me too. Let's find the answers together.
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How Much Interest on 10 Million Dollars Would I Earn?
The money you can expect to make from a $10 million portfolio can dramatically vary based on your investment portfolio and money management strategy. High-risk investments can give you more returns when compared to stable, low-risk investments. However, this would also mean you’re more vulnerable to investment failures.
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Based on research, here’s what you can expect to make as yearly interest on 10 million dollars:
1. Investing in savings accounts
With savings accounts, most banks will pay out around0.13%–1% on your 10 million dollars. Note that according to the FDIC, the national average interest rate on savings accounts stands at 0.13% APY. However, you can earn up to 17 times more if you invest in a high-yielding savings account.
Let’s assume you make 0.5% interest rate. That will give you earnings of approximately $50,000 a year.
2. Investing in dividend stocks
According to Nasdaq Data, dividend stock investors potentially earn between 2% to 5% in dividends on a yearly basis. This means that with a $10 million portfolio, you would earn between$200,000 to $500,000 per year.
Dividend stocks can offer you a consistent income stream. In addition to the regular income, investors can also benefit from the increase in the underlying value of the stock. r.
3. Certificate of Deposit (CD)
A Certificate of Deposit (CD) offers good interest rates. However, you can’t access the funds whenever you like. Instead, you’ll have to wait until the end of your CD term to tap into the money.
Your CD term can range from 30 days to several years. And the interest rates range from 0.26% to as high as 4.60%. With a $10 million portfolio, you’d receive an annual income of anywhere from$2,600 to $460,000.
3. Short term government bonds
Short term government bonds are generally a safe investment choice. Investors usually earn around1% interest per year. So, on a $10 million investment, bond investors can expect to earn$100,000 per year.
4. Short term corporate bonds
You can usually earn around 2%–3% interest on short term corporate bonds per year. So, on a $10 million investment, bond investors can expect to earn$200,000 to $300,000 per year.
Short term corporate bonds usually pay more interest than government bonds. This is also a safe investment choice as long as investors are working with a reputable issuer.
5. Investing in annuities
An annuity usually pays around 3% yearly interest. So, on a $10 million dollar portfolio, you’d earn $300,000 a year.
An annuity is a contract between an insurance company and you. This contract requires the insurer to pay you, either immediately or in the future. You buy an annuity by making either a single payment or a series of payments.
6. Investing in real estate
Investing in real estate can be highly profitable, with returns ranging from 3%–10%. In fact, over a 15-year period, according to Cohen & Steers, actively managed REIT investors realized an annualized 10.6% return. On a $10 million investment, you can earn anywhere from$300,000 to $1,000,000.
7. Money market mutual funds
Money market funds usually give you returns between1% and 3%a year. This means that with a $10 million portfolio, you would earn between$100,000 to $300,000 per year.
Investors usually use them to protect their retirement savings while still earning some interest.
How Much Do Banks Pay in Interest on 10 Million Dollars?
What kind of money will the bank pay out on a huge chunk of cash? Another way of asking this question might be, "How much will I earn on 10 million dollars in savings?". To cut to the chase, banks will likely pay out 0.5%-1.0% on your 10 million bucks. This will produce between $50,000-$100,000 a year. Not terrible, but certainly not enough given that large sum of money. Just over a year ago, you could have found savings rates of 1.5%-2.0%, but since Covid hit, money has gotten cheaper, which means savings rates have dropped as well. Maybe they'll come back in a couple years, but for now, 1% is the top of the ladder for bank savings rates, even with a massive amount like $10 million.
What is the Yearly Interest on 10 Million Dollars?
The question of how much 10 million dollars can generate per year is a great one, but it's not the easiest answer to give since there are so many investment possibilities.
Based on my experience, you can expect to get the below rates for the respective investments.
Savings: 0.5%
Certificate of Deposit: 0.65%
Short term government bond: 1%
Short term corporate bond: 2-3%
Annuity: 3%
Real Estate: 7%
S&P 500 Index Fund: 10%
The real estate percentage is my estimate based on the crazy price of homes today (and FYI, rental rates have not kept up with housing prices). And, the S&P 500 is based on the historical average when including dividend reinvestment.
So now to answer the question of "what is the interest on 10 million dollars annually?"
With a 0.5% savings account: $50,000 a year
1% government bond: $10,000 a year
3% annuity: $300,000 a year
7% real estate: $700,000 a year
And, 10% in S&P 500: $1,000,000 per year
Dang, we're getting into some pretty big numbers here! But I guess that's what $10 million can get ya. ;) The savings account certainly seems like much too little given the $10 million investment. Once you get up to 3% with the annuity, we're starting to talk about some real money.
The real estate produces a fantastic yearly amount, and the S&P investment will likely be even better than that (I bet you could figure out how to live on $1,000,000 a year...don't you think?
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What is the Interest on 10 Million Dollars a Month?
If you had that whopping 10 million dollars, what would the interest be on it per month? Using the same investment figures as above, here's how much you'd earn in interest on $10 million a month:
0.5% savings account: $4,167 a month
1% government bond: $8,333 a month
3% annuity: $25,000 a month
7% real estate: $58,333 a month
And, 10% in S&P 500: $83,333 per month
What is the Interest on 10 Million Dollars If You Let It Grow?
Let’s say you decide that $10 million is the amount you can expect to have stashed before you retire. But, for simplicity sake, let's say that you're able to leave your nest egg alone and can just let it grow for a couple more decades.
You know...maybe you can live on some other savings plus your social security or pension payments. So you're able to leave the entire $10 million invested for the long-term.
What would happen? Could it turn into a crazy amount of money for your kids and grandkids?? Would you turn into the next Rockefeller family?
If your money compounds annually, here’s the interest on $10 million (ie. the potential answer to the question, “what is the interest on 10 million dollars”….if it were left alone and reinvested?):
2% interest for 20 years = total after 20 years of $14,913,280
4% interest for 20 years = total after 20 years of $22,225,820
6% interest for 20 years = total after 20 years of $33,102,044
8% interest for 20 years = total after 20 years of $49,268,027
10% interest for 20 years = total after 20 years of $73,280,736
Whoa. These numbers are getting pretty crazy!
If you want to seriously change your family tree, save up 10 million bucks and stash it away! These numbers are simply insane.
Sustainable Withdrawal Rates - Living Off The Interest of 10 Million Dollars
Likely, the example above is unrealistic. In your case, you probably don't want to know just the interest on $10 million. You're likely going to take some of that money out at some point, right? Instead, you'll probably save diligently over many years, reach that $10 million mark, and then potentially retire and start drawing on those funds over (hopefully) a long period of time!
What you want to look for is the sustainable withdrawal rate: the percentage of your savings that you can take out for living expenses each year without ever exhausting your funds. Fidelity gives 4%-5% as a general rule of thumb, but it depends on a few factors.
Your annual spending
Length of your retirement
Inflation rates
Rates of return on your investments
Inflation is out of your control, but the others are somewhat impacted by your choices. What you can control, to a certain degree, is how much you spend each year.
I have been a long-time fan of Mr. Money Mustache. He points out that if you can ratchet down your expenses now, no matter what your age, you’ll reap double the benefits in retirement.
Related: What is the Interest on 3 Million Dollars? (Should This Be Your Goal?)
Here’s what decreasing your spending would do for you:
Leaves you more left over to save and invest over your working career.
And, it means you'll need less money to live on once you’re retired.
You are also largely in charge of the length of your retirement. No, you can’t predict exactly how long you’ll live for...But you can make reasonable assumptions based on your family health history, your lifestyle, etc.
Decide when to retire based on when you think you’ll reach your optimum total retirement funds. As far as rate of return, you get to decide how you’ll invest your money.
If you have a basic 401(k), you usually have options of types of funds based on your risk tolerance. While you can’t control the various markets, you can choose the types of investments to make, which impacts your overall returns.
After reaching that total, living off the interest of 10 million dollars can fund however many years you need it to.
Interest on 10 Million Dollars for a Sustainable Retirement
If you're retiring soon, $10 million is a pretty hefty amount of money! It should honestly be pretty easy to live on 10 million dollars. But, let's check all the numbers just to be sure that it's the right number for you! How much should your withdrawal rate be on 10 million dollars? See below for a few different options.
Generous Retirement Example
$10 million starting balance at 4% rate of return
30-year retirement (a pretty lengthy retirement)
$500K withdrawal per year
Using Bankrate’s calculator, with the example above, you’d still have $1.5M left in your accounts by year 30. You can live lavishly on $500k a month, AND you can leave a pretty solid inheritance to your kids!
More Frugal Retirement Example
$10 million starting balance at 4% rate of return
30-year retirement
$400,000 withdrawal per year
You’ve cut your spending by $100k a year and kept the rest the same, which leaves you with over $9 million after 30 years! This would enable you to live a decent lifestyle in retirement, and you can even leave a robust inheritance behind.
Super-Early Retirement Example
$10 million starting balance at 4% rate of return
50-year retirement (retire at 40 and live to be 90!)
$400K annual withdrawals
If you retire super early and withdraw $400k a year, you could still pass on $8.6M to your kids when you die!
If you play with the numbers, looking at the interest on $10 million, $5 million, or $3 million, you can check out different scenarios.
Maybe you plan on working until age 70 and you anticipate living to be 90. You’d only need to finance 20 years of retirement in that case. Or if $400K annual spending sounds too low for you, maybe you can ratchet it up to $450k and see if the numbers still land where you want them to. Withdrawing $450,000 a year for 50 years after retiring early would still net you $500k at the end of your life.
Interest on 10 Million Dollars - Is It Complete Overkill?
$1 million isn't as much as it used to be. But what about $10 million? Is 10 million dollars the right number for retirement these days?
Based on the examples we outlined above, if you retire at 65 and live for 30 years, you can withdraw $500,000 pretty comfortably. Now, that might seem like a lot today, but remember that costs double every 20 years.
So, if you're used to living on $250,000 today, then in 20 years, you'll have to spend $500,000 just to maintain the lifestyle that you're used to today.
In another 20 years, you'll need to spend $1,000,000 to maintain that $250k lifestyle that you have today.
Suddenly, $500,000 a year doesn't sound like such a swanky number does it? In reality though, this is still living quite well. Sure, you might live in California, but you can still have quite a nice life with a $500k a year income!
If you're near retirement and you have 10 million dollars, I'd say you're totally fine to retire. Do it now. (ie. Yes, $10 million probably was overkill!) But, if you're 30 years old and you're thinking about retiring and living large for the next 50-60 years, then you either really have to watch your spending, or you should just stay working. (Yes, it IS possible to blow through $10 million in your lifetime if you're not careful!).
For 99% of us though, 10 million dollars in retirement should be plenty. If you spend $400,000 a year and ramp that up slightly with inflation, you'll likely have more money when you die than when you first retired!
Have 10 Million Dollars in Your Retirement? You're Probably Good...
If you're not a diva and you have 510million dollars in your retirement, I'd say you could retire comfortably. Stop overthinking every situation and every doomsday scenario. Chances are, they aren't ALL going to happen. Settle yourself down and enjoy life already.
Do something you love to do, whether it earns you money or not (heck, it can even COST you money at this point!):
volunteer for a local non-profit
start your own business
invent something
travel around the world
impact someone else's life!
For us, we're targeting roughly $3 million for our retirement. This will enable us to continue the lifestyle we enjoy today without thinking too hard about the "what-ifs" of our future life.
Sure, 10 million dollars would be great, but it's not necessary, and probably not worth the extra 15-20 years I'd need to slave away in order to get there.
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