Who wants to be a millionaire…? Plenty of people, is likely to be the answer! $5 million in your pocket definitely qualifies you as a millionaire! So, what is the yearly interest on $5 million dollars if you put that money in the bank?
The quick answer is that you could make as high $250,000 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 $20,833. This works out to $4,807 of interest per week, or $685of 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!
If you wanted to access that money on an on-demand basis, your best bet would be to be deposit it in a savings account which lets you have access to that money any at very short notice. The obvious downside to such accounts is that the interest rate on offer is lower – in the 4% range. That’s not bad, but still much lower than what you would get in a CD.
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
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 $250k 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 a variety 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 in dividend generating funds can 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 at your 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 an in-depth article that 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 the best 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 4.65%, on a pre-tax basis you could make up to $19,375 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 4.65%, on a pre-tax basis you could make up to $4,471 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 4.65%, on a pre-tax basis you could make up to $637 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.
