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Interest on $1 million by rate
| Rate (APY) | Per year | Per month | Per day |
|---|---|---|---|
| 1% | $10,000 | $833 | $27 |
| 2% | $20,000 | $1,667 | $55 |
| 3% | $30,000 | $2,500 | $82 |
| 4% | $40,000 | $3,333 | $110 |
| 4.5% | $45,000 | $3,750 | $123 |
| 5% | $50,000 | $4,167 | $137 |
| 6% | $60,000 | $5,000 | $164 |
If you leave the interest in
Reinvested interest compounds. At 4% compounded monthly, $1 million grows to about $1,490,833 in 10 years and $2,222,582 in 20. If you spend the interest each year instead, you keep the $1 million but its buying power shrinks with inflation.
Taxes reduce the income
Interest from savings accounts, CDs and Treasury bills is taxed as ordinary income at the federal level (Treasury interest is exempt from state and local income tax). In the 24% federal bracket, $40,000 of interest leaves about $30,400 after federal tax, before any state tax.
Keep $1 million insured
FDIC insurance covers $250,000 per depositor, per insured bank, for each account ownership category. Holding $1 million in cash safely usually means spreading it across banks or ownership categories, using a bank network that places deposits with multiple banks, or holding Treasury bills, which are backed by the US government.
Interest vs the 4% rule
The “4% rule” from retirement research is different: it suggests withdrawing 4% of a diversified stock-and-bond portfolio in the first year of retirement and adjusting that amount for inflation after, aiming to last about 30 years. That is about $40,000 a year from $1 million, but it relies on investment growth and can spend down principal, unlike living off bank interest.
Rates in the tables are a range for comparison, not current market quotes. Payments are principal and interest only unless stated.
Related
Frequently asked questions
How much interest does $1 million make a month?
About $3,333 at 4% APY, $4,167 at 5% and $833 at 1%.
How much interest does $1 million make a year?
$10,000 per 1% of interest: $40,000 at 4%, $50,000 at 5%.
Can you live off the interest of $1 million?
At 4% it is about $40,000 a year before tax, and its buying power falls with inflation unless some interest is reinvested.
Is $1 million in one bank FDIC insured?
Only up to $250,000 per depositor, per bank, per ownership category.