How Much Will $1.5 Million Net Me Annually? (2024)

How Much Will $1.5 Million Net Me Annually? (1)

Whether you’re saving to retire, or have just come into a nice windfall, knowing where to put your money to grow it is essential. There are multiple ways money can build interest,but how much interest does $1.5 million earn per year? We break down several ways you can save your $1.5 million, starting with the lowest yield and lowest risk, and moving on to higher yield and higher risk. If you’re wanting to automate the asset allocation of your portfolio, consider working directly with a financial advisor.

How Much Interest $1.5 Million Can Earn Per Year

Earning interest in your investments is how most people are able to grow their wealth and increase their available funds during retirement. The amount that you can earn is going to depend on how much money you have to invest and what types of investments that you choose. Riskier investments have a higher potential to return more interest on your money than safer investments, but the risk might be too much for some.

If you’re looking to invest $1.5 million to maximize the amount of interest you can earn, the answer to how much that will be depends on your investment choice. We’re going to cover some of the most popular choices to invest your money in order to earn interest and talk about how much you could earn from each. Here are five popular asset options to earn interest on $1.5 million.

1. High-Yield Savings Accounts and Money Market Accounts

High-yield savings accounts are savings products offered by some banks with a return up to 1%, unlike regular savings accounts, which only earn around 0.06%. They are incredibly safe, with the FDIC insuring them up to $250,000. While you may not want to put your full $1.5 mill in one of these, if you did, you’d earn $15,000 annually in interest.

Money market accounts are similar to high-yield savings accounts. Unlike a savings account, they come with a debit card and you can write checks. Withdrawals are usually limited to six a month, and you may have to keep an account minimum or pay account fees. Still, some accounts can generate up to 2% yearly with hardly any risk. For $1.5 million, that’s $30,000 a year.

Chances are, you could use a savings account like one of these, but if you really want to grow that money, you’ll need to put at least some of it elsewhere. A balanced investing approach is going to provide you an excellent opportunity to maximize interest without sacrificing the safety of investments like a savings account.

2. Certificates of Deposit (CDs)

The next step up the ladder in terms of risk/reward is a certificate of deposit (CD). With a CD, you deposit your money with a bank or credit union for a set term with the agreement that they will pay out at a specified annual percentage yield(APY) after the term is up.

How much interest does $1.5 million earn per year on a CD? Assuming you deposit for two years at an APY of 3% you’d receive $90,000, or $45,000 per year. That sounds like a great deal, right? Well, that depends on the market. If inflation outpaces your CD, you’re losing purchasing power.

For example, the rate of inflation in 2021 was 7.1%. If your money was tied up in a CD producing 3% APY, your money still had 4.1% less value at the end of the year. While CDs are low risk, in a high-inflation environment there are better places to put your money.

3. Annuities

How Much Will $1.5 Million Net Me Annually? (2)

Annuities are long-term investments that can give you a slightly higher return on your money. They’re typically used in retirement planning. They allow you to save tax-free and only pay taxes when you withdraw. Annuities are financial contracts you sign with an insurance company, usually with the agreement that they’ll pay you out on a recurring basis.

Not all annuities are the same. Some defer payment for a long time, while others pay out almost immediately. There are a few different types of annuities, each with its own level of risk and return. Let’s break down how much interest you could earn with $1.5 million per year with each kind of annuity.

Fixed Annuities

A fixed annuity is the most basic version of an annuity. Annuity rates change on a daily basis. For the sake of simplicity, let’s talk about an immediate fixed annuity. At the time of this article, for an annuity that pays out over five years, you can get a rate of around 4%.

How much interest does $1.5 million make per year with a fixed annuity? At 4% over five years, around $30,909 in interest per year, or $154,584.11 total. That gives you a monthly withdrawal of $27,576.40. While it’s better than a savings account, you could still be treading water – or sinking – if inflation outpaces it.

Indexed Annuities

An indexed annuity is a next notch up in terms of risk and returns of annuities. An indexed annuity is tied to the performance of a specific stock market index, like the S&P 500. This means the value of the annuity can go up if the market performs well.

There’s more risk involved, but many guarantee a minimum percentage of the principal, plus a small amount of interest. The upside is that, if the market performs well, you could see more returns. Beware though, indexed annuities come with caps that will limit your return. Each annuity has different terms. Even if the index performs at 12%, you won’t receive that rate of return.

Variable Annuities

Variable annuities are annuity contracts that offer the highest potential for return. However, unlike a fixed annuity, their return is not guaranteed. With a variable annuity, you will choose where the money gets invested. Depending on your choice you could see a large return, or you could lose money.

So, how much interest does $1.5 million earn per year in a variable annuity? For example, let’s say you put your $1.5 million into a variable annuity that earned 10% annually and paid out over 10 years. You’d earn $835,958.34 in interest, with a monthly payout of $19,466.32. That’s a good return and means you picked a solid investment. However, just because you could get a 10% return, doesn’t mean you will. The market can be unpredictable.

4. Funds and Stocks

Of course, you could invest your $1.5 million in the stock market. The aforementioned S&P 500 is a leading index that has shown an average rate of return of around 8% to 12% over the years. You can’t directly invest in the index, but an easy way to get in on the action is to invest your money in an index fund or exchange-traded fund (ETF) that follows the S&P 500 performance.

It should go without saying that nothing is guaranteed in the stock market. A boon year with a 15% return could earn you $225,000 in interest off of $1.5 million. On the other hand, a recession could hit and the market could swing the other way, turning your $1.5 million into $1.25 million, or worse.

However, given the rule of thumb that the stock market grows around 10% on average yearly, if you invest and hold, you could make out over time well despite dips along the way. Let’s say you put your $1.5 million into various funds and keep them there for 20 years. With an average annual return of 10% compounding over those 20 years, your $1.5 million will turn into over $10 million.

5. Real Estate

Real estate is another place you could put your $1.5 million. But don’t take that to mean the housing market. Specifically, an investment where you could see a decent return is what’s called a real estate investment trust (REIT). While real estate can be volatile, some REIT markets have outpaced the S&P 500.

On top of that, REITs are known for their dividend payouts, often more than double that of the S&P 500. That means that, on top of your interest return, you can get an extra annual payout of 2% to 4% on average.

So, say your REIT grows by 13% in a year, with a 3% dividend on top. That’s growing your $1.5 million by 16%, or an extra $240,000, in one year. Of course, if the real estate market falters, or if the REIT you invest in is mismanaged and goes belly-up, you could lose it all.

The Bottom Line

How Much Will $1.5 Million Net Me Annually? (3)

How much interest does $1.5 million earn per year? It really depends on where you put it. If you stash it in a low-risk account, your return isn’t going to be high. However, if you invest it in assets, your return isn’t guaranteed. This underpins why it’s important to allocate assets based on your needs. The younger you are, the more risk you may be willing to take. However, if you’re already retired or nearing retirement, you want to keep that nest egg safe.

Tips for Investing

  • If you’re looking to maximize the interest or income that your investments are earning in retirement, you may want to consider working with a financial advisor. Your advisor can help you create the right asset allocation mix to meet your financial goals. Finding a qualified financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.

  • It’s important to diversify your portfolio and know what your risks are. Use our asset allocation calculator to start building the right portfolio to meet your needs.

©iStock.com/PeopleImages, ©iStock.com/tumsasedgars, ©iStock.com/Andril Yalanskyi

The post How Much Interest Can $1.5 Million Earn Per Year? appeared first on SmartAsset Blog.

How Much Will $1.5 Million Net Me Annually? (2024)

FAQs

How Much Will $1.5 Million Net Me Annually? ›

The 4% rule suggests that a $1.5 million portfolio will provide for at least 30 years approximately $60,000 a year before taxes for you to live on in retirement. If you take more than this from your nest egg, it may run short; if you take less or your investments earn more, it may provide somewhat more income.

How much income can 1.5 million generate? ›

A couple with $1.5 million in retirement savings can withdraw $60,000 each year. When this sum is combined with their other income sources, it can indeed ensure comfortable post-work years. For example, Social Security benefits can significantly impact joint retirement planning.

How much interest does 1.5 million dollars earn per year? ›

How much interest does $1.5 million make per year with a fixed annuity? At 4% over five years, around $30,909 in interest per year, or $154,584.11 total.

Is 1.5 million net worth enough to retire? ›

The amount of money needed to retire varies depending on individual factors such as lifestyle, expenses, and investment returns. However, experts typically recommend saving enough to replace 70-90% of pre-retirement income. This equates to around $1 million to $1.5 million for an average retirement.

What percent of Americans have 1.5 million dollars? ›

Answer. Final answer: The percentage of the US population with a net worth of 1.5 million dollars or more varies but is estimated to be around 5% to 7%.

Is a net worth of 1.5 million good? ›

A high-net-worth individual (HNWI) is someone with liquid assets of at least $1 million. These individuals often seek the assistance of financial professionals to manage their money, and their high net worth qualifies them for additional benefits and investing opportunities that are closed to most.

Can I retire at 62 with $1.5 million? ›

Monthly Income From $1.5 Million Retirement Fund

If you retire at 62 with $1.5 million saved, applying the 4% rule suggests an annual withdrawal of $60,000 or about $5,000 per month. This rule assumes an annual withdrawal rate of 4%, adjusted for inflation, to sustain your savings for 30 years or more.

Can you live off interest of 1.5 million? ›

The 4% rule suggests that a $1.5 million portfolio will provide for at least 30 years approximately $60,000 a year before taxes for you to live on in retirement. If you take more than this from your nest egg, it may run short; if you take less or your investments earn more, it may provide somewhat more income.

Can you live off interest of $1 million dollars? ›

Historically, the stock market has an average annual rate of return between 10–12%. So if your $1 million is invested in good growth stock mutual funds, that means you could potentially live off of $100,000 to $120,000 each year without ever touching your one-million-dollar goose. But let's be even more conservative.

At what age can you retire with $1 million dollars? ›

Retiring at 65 with $1 million is entirely possible. Suppose you need your retirement savings to last for 15 years. Using this figure, your $1 million would provide you with just over $66,000 annually. Should you need it to last a bit longer, say 25 years, you will have $40,000 a year to play with.

What percentage of retirees have 1.5 million dollars? ›

According to EBRI estimates based on the latest Federal Reserve Survey of Consumer Finances, 3.2% of retirees have over $1 million in their retirement accounts, while just 0.1% have $5 million or more.

How long can you live off 1.5 million? ›

It's all about managing your financial resources

To put it another way, $1.5 million could end up lasting for 30 years in retirement, or it could end up lasting for 10 years -- or even less time. It really boils down to how you choose to live and spend your money.

At what age can you retire with $1.5 million dollars? ›

You can certainly retire comfortably at age 65 on a $1.5 million, but your ability to do so relies on how you want to live in retirement, how much you plan to spend, when you plan to claim Social Security and how your portfolio is structured.

What net worth is considered rich? ›

According to Schwab's 2023 Modern Wealth Survey, Americans perceive an average net worth of $2.2 million as wealthy​​​​. Knight Frank's research indicates that a net worth of $4.4 million is required to be in the top 1% in America, a figure much higher than in countries like Japan, the U.K. and Australia​​.

What is considered wealthy in retirement? ›

$1 million, $5 million, $10 million

However, if you have $1m, are retired and are living an expensive lifestyle, you might go from wealthy to poor in a relatively short period of time. The Schwab survey found that overall, Americans say they need: $1.9 million to be wealthy in 2021 (down from $2.6 million in 2020)

What is the net worth of the top 5%? ›

Top 2% wealth: The top 2% of Americans have a net worth of about $2.472 million, aligning closely with the surveyed perception of wealth. Top 5% wealth: The next tier, the top 5%, has a net worth of around $1.03 million. Top 10% wealth: The top 10% of the population has a net worth of approximately $854,900.

How much does a $1.5 million dollar annuity pay? ›

Immediate retirement: At age 60, an immediate annuity with a $1.5 million investment could provide a guaranteed annual income of $91,500, or about $7,625 per month, for the rest of the insured's lifetime​​.

How much income will $1 million generate? ›

One rule of thumb suggests $1 million would generate around $40,000 each year, adjusted upward for inflation. Instead of picking a figure, work out what income you might need in your old age and work backward from there.

How much income can you generate from 2 million dollars? ›

Generally, a diversified investment portfolio that includes a mix of stocks, bonds, and other income-generating assets can yield an average annual return of around 4% to 6%. Based on this, a 2 million dollar investment portfolio could potentially generate an annual income of $80,000 to $120,000.

Top Articles
Latest Posts
Article information

Author: Edwin Metz

Last Updated:

Views: 6291

Rating: 4.8 / 5 (78 voted)

Reviews: 85% of readers found this page helpful

Author information

Name: Edwin Metz

Birthday: 1997-04-16

Address: 51593 Leanne Light, Kuphalmouth, DE 50012-5183

Phone: +639107620957

Job: Corporate Banking Technician

Hobby: Reading, scrapbook, role-playing games, Fishing, Fishing, Scuba diving, Beekeeping

Introduction: My name is Edwin Metz, I am a fair, energetic, helpful, brave, outstanding, nice, helpful person who loves writing and wants to share my knowledge and understanding with you.