As you work on growing your nest egg, it’s important to understand the income it can generate. For example, how much interest $10 million could potentially earn. The returns will depend on your chosen savings vehicles and investment strategies, but there are several different options that you could explore. If you’re looking for personalized guidance to craft a retirement plan that meets your unique goals, consider consulting with a financial advisor.
How Much Interest Would $10 Million Earn?
The income you can generate from a $10 million portfolio depends significantly on how you allocate your funds and the types of investments you choose. Higher-risk investments may offer the potential for greater returns, but they also carry the possibility of lower earnings if the investment underperforms or experiences a downturn.
Here’s a closer look at the income you can expect 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 cash. 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 near the Dec. 2024 average of 0.07%. But with a high yield savings account, that interest rate might be as high as 0.42%. On a $10 million portfolio, you’d receive an annual income of $7,000 to $42,000 per year.
2. Certificate of Deposit: A CD offers slightly better interest rates. But you won’t have access to the funds whenever you like. Instead, you’ll have to wait until the end of a CD term to tap into the funds. CD terms range from 30 days to several years. You can find interest rates as high as 4.25%. With a $10 million portfolio, this means you could theoretically receive an annual income up to $425,000, if your entire nest egg was held in a CD at that rate, which is often not advisable. If you’re concerned about regular access, you could also consider building a CD ladder.
3. Annuities. An annuity is an insurance product that you buy in exchange for an agreed-upon payment on a regular basis at some point in the future. The amount you have to put into an annuity isn’t the only factor when it comes to returns. Annuity providers also consider your age, state and gender. For example, a 59-year-old male from Florida would receive a monthly income of around $50,000 per month for a $10,000,000 annuity. But the details will change based on your situation.
4. Bonds. Bonds are generally considered a relatively safe investment if you’re working with a reputable issuer. But there are risks if you aren’t working with a well-respected organization. Bond investors can earn around 2% to 5% per year. So, how much interest would $10 million earn? Bond investors can expect to earn between $200,000 to $500,000.
5. Dividend stocks: Dividend stocks offer investors an income stream. In addition to the income, the value of the underlying stock can also grow. On average, dividend stock investors earn between 2% to 5% in dividends each year. So, with a $10 million portfolio, you would earn between $200,000 to $500,000 per year.
6. Real estate: Real estate is a very popular investment. Although the returns can vary widely for those buying individual properties, we’ll look at real estate investment trusts (REITs) for the purposes of this discussion. On average, REITs offer returns of 3% to 10% annually. 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 Impact Retirement Income
The amount of money you have to invest is just one factor that affects your retirement income. How much you’ll have to pay in fees to invest could be another huge factor that negatively impacts your final dollar amount. Here are some other important variables to keep in mind:
- Taxes: You cannot completely avoid taxes in retirement. But working with a qualified financial advisor can help you avoid paying more than you need to.
- Diversification: Although we discussed how much interest would $10 million earn for several asset classes, it’s unlikely that you put all of your eggs in one basket. Consider building a diverse portfolio to ensure different income streams come in.
- Inflation: The funds your investments earn in the future might be less valuable. Use our inflation calculator to see how this economic factor could eat into your returns.
Each of these factors can significantly impact how much interest would $10 million earn. As you build out a plan, don’t forget to think about these variables, especially the ones you can control, such as diversification. You get to choose how you invest your funds, so you can make sure that your financial future is well balanced and protected.
Sustainable Withdrawal Rate
A sustainable withdrawal rate represents the percentage of your savings you can withdraw annually for living expenses without depleting your investment funds. For many people considering retirement with $10 million, this concept offers a critical guideline for financial planning.
Typically, a 4% to 5% annual withdrawal rate is considered a good benchmark, though the right rate will depend on factors like your financial goals, investment strategy and inflation.
For instance, if you adopt a 5% sustainable withdrawal rate on a $10 million portfolio, you could withdraw $500,000 annually to cover your expenses, equating to $41,666.67 per month. Assuming your investments generate a 5% return — such as through bonds — your funds could sustain this withdrawal rate for 40 years without diminishing or altering your monthly income.
Your sustainable withdrawal rate ultimately depends on how your portfolio is structured and your retirement timeline. Careful planning ensures you can maintain your desired lifestyle and avoid outliving your savings.
Bottom Line
It’s entirely possible to live off the interest earned by a $10 million portfolio, depending on how much you need and what your investment choices are. You’ll want to make sure that your lifestyle goals are in line with the income produced if you’re going to make it through retirement without running out of funds. Mapping out a financial plan with an advisor can make sure this sizeable nest egg helps you enjoy the retirement you’ve been dreaming of.
Tips for Retirement Planning
- The best way to determine how much you can earn in retirement is to probably speak to an expert who can help navigate your personal financial situation with you. 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. 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 evaluate your risk tolerance because not all investments are created with equal risk. Weigh out your risk tolerance with SmartAsset’s free asset allocation calculator.
- Projecting your savings growth is important because the money you save will earn interest. When compounded over time, those interest savings can add up quickly. See how far your savings will grow with SmartAsset’s free savings calculator.
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