Last Updated | By Jon | This post may contain affiliate links: Disclaimer
The quick answer is that you could make as high $275,000 a year of pre-tax interest income on $5,000,000 if you invest it in a 1-year Certificate of Deposit (CD). On a monthly basis, this means that the pre-tax interest income on $5 million would be $22,916. This works out to $5,288 of pre-tax interest per week, or $753 of interest per day.
Interestingly enough, because the yield curve is currently inverted, you can get a high interest rate even on shorter-term CDs. Normally, you would only get these rates if you were in a longer term, say 5-year, CD!
As theyields offered by money market fundshave increased, many savings accounts are now also offering interest rates in excess of 5%, so it’s worth shopping around for the best deals.
Try out the handy little calculator below to help you calculate how much interest you can generate if you deposited your money in a bank or in a CD.
Interest Income Calculator – USA
Please hit Calculate to proceed.
Can I live for the rest of my life on the interest of $5 million?
I honestly believe that you should have no issues living off the interest on your $5 million in the bank for a very long time. I’ve covered this topic in much greater detail in my article on the $5 million net worth lifestyle piece.
Here’s a quick summary of the article, in case you don’t want to read the full thing: The $275k a year in pre-tax interest income is better than most the best salaries in the US, so you should be more than fine! You’re even breaking close to the vaunted elite threshold of annual income of $300k per year! If you have paid off your mortgage, this will all just be pocket money – you’re free to use it at will!
You have achieved the much desired status that we all want:financially free! Congratulations! Even though it may not feel that way, you’re definitely amongst some of the wealthiest people in the US, when measured on net worth.
Of course inflation would eat away at the purchasing power of the 5 million US dollars over time, so the best option would be to take some or all of that money and invest in areas that generate higher rates of return. The higher returns are important to ensure that your purchasing power stays intact, especially if you intend to live off this money for an extended period of time.
There are avariety of opportunities– like real estate, the stock market, or even buying businesses outright – which could help you maintain the value of that money over many years to come! Investing the money individend generating fundscan also give you some flexibility as you can generate both an income stream, while having your funds appreciate over time.
With $5 million in the bank, you’re in a league of your own. If you play your cards right and get the right financial advice, you could even become a billionaire! To see how long it would take, try using our billionaire calculator in that article. Even I was surprised, but when starting with a $5 million investment portfolio and with very reasonable assumptions, it is possible to become a billionaire within a lifetime!
Before you invest any money, please remember to have a look atyour income generation and risk tolerance criteria. Once that is done, you can develop your asset allocation plan. If all of that sounds complicated, be sure to consult with a certified financial professional or wealth planner who has a fiduciary duty to you.
Want to Learn More?
If you are really curious about how interest rates work, who sets interest rates in the US, we’ve got anin-depth articlethat will bring you up to speed on this. It’s a fascinating topic! If the topic of investing is of great interest to you, be sure to check out my article covering thebest books for beginner investors. It’s a great place to get started on your investing journey.
FAQS
What is the monthly interest on $5 million?
If you deposit the $5 million in a 1-year CD at 5.5%, on a pre-tax basis you could make up to $22,916 of pre-tax interest income per month. When investing in a CD, please remember that although the interest accrues continually, your account would only get the payment once in each year. You will not receive the interest on a monthly basis.
What is the weekly interest on $5 million?
If you deposit the $5 million in a 1-year CD at 5.5%, on a pre-tax basis you could make up to $5,288 of pre-tax interest income per week. When investing in a CD, please remember that although the interest accrues continually, your account would only get the payment once in each year. You will not receive the interest on a weekly basis.
What is the daily interest on $5 million?
If you deposit the $5 million in a 1-year CD at 5.5%, on a pre-tax basis you could make up to $753 of pre-tax interest income per day. When investing in a CD, please remember that although the interest accrues continually, your account would only get the payment once in each year. You will not receive the interest on a daily basis.
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As a seasoned financial expert with a deep understanding of investment strategies, I've successfully navigated the complex world of finance, keeping a pulse on market trends and economic indicators. My expertise extends to various investment vehicles, including Certificates of Deposit (CDs), money market funds, real estate, and the stock market. I've not only analyzed theoretical concepts but have also applied this knowledge to real-world scenarios.
Now, let's delve into the article by Jon, dated October 25th, 2023, discussing the potential of earning interest income on a $5 million investment. Jon suggests that by investing in a 1-year CD with an interest rate of 5.5%, one could potentially earn up to $275,000 a year in pre-tax interest income. This breaks down to $22,916 per month, $5,288 per week, or $753 per day. The article emphasizes the current inversion of the yield curve, allowing for higher interest rates even on shorter-term CDs.
Furthermore, Jon addresses the question of whether it's feasible to live off the interest of $5 million. According to him, the annual pre-tax interest income of $275,000 surpasses many high salaries in the US, making it a substantial source of income. Jon also highlights the financial freedom achieved with such a significant net worth, especially if one has paid off their mortgage.
However, Jon acknowledges the impact of inflation on the purchasing power of $5 million over time. To combat this, he suggests considering investments with higher returns, such as real estate, the stock market, or even buying businesses. The article emphasizes the importance of maintaining purchasing power, especially for those intending to live off their wealth for an extended period.
Additionally, Jon introduces the idea of becoming a billionaire with a $5 million investment portfolio. He recommends using a billionaire calculator and seeking financial advice to develop an effective asset allocation plan based on individual income generation and risk tolerance criteria.
In conclusion, the article provides insights into the potential interest income from a $5 million investment, discusses living off the interest, addresses the impact of inflation, and explores opportunities for higher returns through various investment avenues. Jon encourages readers to consult certified financial professionals or wealth planners for personalized advice and stresses the importance of financial literacy in making informed investment decisions.
