How much interest would $10 million earn you?

When building a nest egg, you need to understand how much income you can expect it to generate. We explore how much interest $10 million could earn. The answer will vary depending on where you put your savings and what you actively invest in, but we’ll give you some examples of popular investments. If you need help developing a financial plan for your personal retirement needs, consider speaking with a financial advisor.

How much interest would $10 million earn?

The amount of income you can expect to receive from a $10 million portfolio varies greatly depending on where you store your money and what you invest in. With a higher risk investment, for example, you can potentially earn higher returns. But this risk could mean that you earn less if the investment fails or falls on hard times.

Here’s a closer look at the income you can expect, at the time of writing, to receive from several popular investment options if you have $10 million.

1. Savings accounts. A savings account is easily the most accessible place to store money. With the help of FDIC insurance, the risks of losing money in a reputable savings account are non-existent. With a traditional savings account, you might find an interest rate close to the national average of 0.06%. But with a high-yield savings account, that interest rate could be around 0.80%. On a portfolio of 10 million dollars, you will receive an annual income of 6,000 to 80,000 dollars per year.

2. Certificate of Deposit: A CD offers slightly better interest rates. But you won’t have access to the funds whenever you want. Instead, you’ll have to wait for a CD term to end to tap into the funds. CD durations range from 30 days to several years. You can find interest rates near the national average of 0.26% or rates as high as 2.25%. With a portfolio of $10 million, you will receive an annual income of $2,600 to $225,000. If you’re concerned about regular access, consider building a CD ladder.

3. Annuities. An annuity is an insurance product that you buy in exchange for an agreed payment on a regular basis at some point in the future. The amount you have to pay into an annuity isn’t the only factor when it comes to returns. Annuity providers also consider your age, condition and gender. For example, a 59-year-old male from Florida would receive a monthly income of approximately $50,000 per month for an annuity of $10,000,000. But the details will change depending on your situation.

The story continues

4. Bonds. Bonds are generally considered a relatively safe investment if you work with a reputable issuer. But there are risks if you don’t work with a respected organization. Bond investors can earn around 2-5% per year. So how much interest would $10 million earn? Bond investors can expect to earn between $200,000 and $500,000.

5. Dividend shares: Dividend stocks provide investors with a stream of income. In addition to income, the value of the underlying stock may also increase. On average, dividend stock investors earn between 2% and 5% in dividends each year. So, with a portfolio of $10 million, you would earn between $200,000 and $500,000 per year.

6. Real Estate: Real estate is a very popular investment. Although returns can vary widely for those buying individual properties, we will look at real estate investment trusts (REITs) for the purposes of this discussion. On average, REITs offer returns of 3% to 10% per year. So how much interest would $10 million earn in a REIT? Around $300,000 to $1,000,000

Other types of accounts you can store your money in include money market accounts, money market funds, and high yield savings accounts.

Factors that affect retirement income

The amount of money you need to invest is just one factor that affects your retirement income. The amount you will have to pay in fees to invest could be another major factor that negatively impacts your final dollar amount. Here are some other important variables to keep in mind:

• Taxes: You can’t completely avoid taxes in retirement. But working with a qualified financial advisor can help you avoid paying more than necessary.

• Diversification: While we’ve discussed how much interest $10 million would earn for several asset classes, you’re unlikely to put all your eggs in one basket. Consider creating a diversified portfolio to ensure different streams of income come in.

• Inflation: The funds that your investments will earn in the future may be worth less. Use our inflation calculator to see how this economic factor could weigh on your returns.

Each of these factors can have a significant impact on how much interest $10 million would earn. When making a plan, remember to think about these variables, especially ones you can control, such as diversification. You can choose how you invest your funds to ensure that your financial future is well balanced and protected.

Sustainable withdrawal rate

A sustainable withdrawal rate is the percentage of your savings that you can withdraw each year for living expenses without ever depleting the funds from your investments. This is probably the answer many people are looking for when considering retiring with $10 million. A general rule is to have a withdrawal rate of 4% or 5% each year, but of course this will depend on your situation and also inflation.

For example, let’s say that of your $10 million, we believe in a sustainable withdrawal rate of 5%. This means that each year you will withdraw $500,000 to live comfortably enough, which gives you $41,666.67 per month. If you have invested your money in bonds and are earning 5% interest, your money will last for 40 years without you depleting or changing the amount you receive each month.

Depending on how you choose to invest your funds, you can then determine what your sustainable withdrawal rate will be. It also depends on how long you plan to be in retirement, because the last thing you want is to adjust your monthly lifestyle or run out of money.

Conclusion

It’s entirely possible to live off the interest generated by a $10 million portfolio, depending on how much you need and your investment choices. You’ll want to make sure your lifestyle goals match the income generated if you want to get through retirement without running out of funds. Developing a financial plan with an advisor can ensure that this important nest egg will help you enjoy the retirement of your dreams.

Retirement Planning Tips

• Probably the best way to figure out how much you can earn in retirement is to talk to an expert who can help you manage your personal financial situation. Finding a qualified financial advisor doesn’t have to be difficult. SmartAsset’s free tool connects you with up to three financial advisors who serve your area, and you can interview your advisors at no cost to decide which one is best for you. If you’re ready to find an advisor who can help you reach your financial goalsstart now.

• It is important to assess your risk tolerance because not all investments are created with equal risk. Assess your risk tolerance with SmartAsset’s free asset allocation calculator.

• It is important to project the growth of your savings because the money you save will earn interest. When compounded over time, these interest savings can add up quickly. See how much your savings will grow with SmartAsset’s free savings calculator.

Don’t miss news that could impact your finances. Get news and tips for making smarter financial decisions with SmartAsset’s bi-weekly email. It’s 100% free and you can unsubscribe at any time. Register today.

Photo credit: ©iStock.com/vorDa, ©iStock.com/Geber86, ©iStock.com/Astarot

The post How Much Interest Would $10 Million Earn? appeared first on SmartAsset Blog.