What's The Interest On 2 Million Dollars? (Yearly and Monthly)

The interest on $2 million, if left to compound at 2%, would be $40,000 a year. However, high-yield savings accounts can have interest rates as low as 0.6%, netting just $12,000 a year in interest on $2 million, if left in the bank.

Let’s say you decide that $2 million is the amount you can expect to have stashed before you retire. Let that money pay the bills for as many retirement years as possible. You’ll need to take into account the interest rate you earn on your investment principal and how often the interest compounds.

For simplicity, let’s say you have additional capital that allows you to pay your bills, and you’re leaving the entire $2 million invested long-term. If your money compounds annually, here’s the interest on $2 million (ie. the potential answer to the question, "what is the interest on 2 million dollars"....if it were left alone and reinvested?):

• 2% interest for 20 years = total after 20 years of $2,971,895

• 4% interest for 20 years = total after 20 years of $4,382,246

• 6% interest for 20 years = total after 20 years of $6,414,271

• 8% interest for 20 years = total after 20 years of $9,321,914

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The yearly interest on $2 million depends on how investments are held. With a 0.5% savings account, the interest on $2 million would be $10,000, but with a 1% Government bond, yearly interest would double to $20,000.

With money in real estate, at 7% interest, $2 million would make $140,000 a year. The question of how much 2 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 options.

Based on my research and 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%

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The real estate percentage is my estimate based on the crazy price of homes today (rental rates have not kept up with housing prices). And, the S&P 500 is based on thehistorical average when including dividend reinvestment.

So now to answer the question of “what is the yearly interest on 2 million dollars?”

• With a 0.5% savings account: $10,000 a year

• 1% government bond: $20,000 a year

• 3% annuity: $60,000 a year

• 7% real estate: $140,000 a year

• And, 10% in S&P 500: $200,000 per year

Whoa! Seems like a no-brainer, right? Put all the money in the stock market, right?? Not so fast. There’s also the factor of risk.

Putting 2 million dollars in the stock market is much more risky than putting it into a savings account. Be sure to take this into account when selecting your retirement investments.

The monthly interest on $2 million ranges from $1,500, if placed in a savings account at the average of 0.9%, to $16,667 a month, if invested in the S&P 500, earning 10%.

Monthly interest on $2 million varies depending on investment type, however typical savings accounts result in the lowest returns. If you had that infamous 2 million dollars, then what would the interest be on it per month?

Using the same investment figures as above, here’s what the monthly interest on $2 million dollars equates to:

• 0.5% savings account: $833 a month

• 1% government bond: $1,667 a month

• 3% annuity: $5,000 a month

• 7% real estate: $11,667 a month

• And, 10% in S&P 500: $16,667 per month

Read more:

• How Long Could You Live Off of a Million Dollars? Is It Enough to Retire On?

But the example above is unrealistic. We don’t really just want to know the interest on $2 million. Most of us won’t sock away $2 million and never take money out, right?

A better option: save diligently over our working career, reach that $2 million benchmark, and then watch it work for us in our retirement years. The interest on $2 million is enough for most Americans to retire comfortably.

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

Check out our monthly budget template for more clarity.

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 per year.

Mr. Money Mustache points out that if you can ratchet down your expenses now, no matter what your age, you’ll reap double the benefits in retirement. Here’s what decreasing your spending does for you:

1. Leaves you more left over to save and invest over your working career.

2. Means you 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. 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 markets, you can choose the types of investments to make, which impacts your overall returns.

After reaching that total, your interest on 2 million dollars can fund however many years you need it to.

Here’s the fun part: if the $100K annual spending example sounded too high, maybe you don’t need $2 million, or the interest on $2 million, to retire comfortably.

Another example is to start with $1 million in retirement savings, withdraw $40K a year to live on, and your balance only decreases slightly over 35 years and longer. A 25-year retirement is also fine—you’d have about $933K remaining by year 25.

Financial gurus will often try to scare you away from retiring by tossing around ridiculous figures that the average working American could never accumulate. The examples above can show you the possibilities when you are mindful about your investments and spending.

Even if you won’t have the interest on 2 million dollars by retirement age, you can see that it’s possible to live on much less—and still never run out of money. You can’t prepare for every possibility in life. But you can build in margins for error in your calculations.

The 4% rule is a guideline—you can adjust that to be confident your finances can handle life’s curveballs.

*Personal Capital Advisors Corporation (“PCAC”) compensates LAM Finances for new leads. LAM Finances is not an investment client of PCAC.