How Much Interest On One Million Pounds Can You Make?

Im sure you have already thought about this question multiple times in your lifetime. How much interest on one million pounds can you make?

In fact it is probably the second most pondered question people ask themselves after “How can I make a million pounds“.

Usually, these questions are surmised on a Sunday evening or a Monday morning at your dreaded 9-5 job.

Most times to gain a million pounds you would have to have inherited the money or had a very well-paying job or some very successful side hustles.

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If you are looking for a quick answer to how much interest can you make on a million pounds then we can go with the 4% rule.

The 4% rule is an investment guideline for how much you can withdraw from your investments per year after retiring and then every year thereafter adjusted for inflation.

Sticking to 4% generally will allow you to not lose any of the capital you have built up.

This means that on one million pounds you could safely withdraw after retirement £40,000 per year without affecting the balance.

It is more than likely that the balance will increase by 4% or more due to either interest applied or inflation of the assets you have invested in.

How Much Interest On One Million Pounds?

Firstly to make it easier to visualize let’s include a graphic down below of the different interest rates applied to One Million pounds. We can then see how much you would stand to gain from each percentage point.

Interest Rate	Monthly Return	Yearly Return
1%	£833	£10,000
2%	£1666	£20,000
3%	£2500	£30,000
4%	£3333	£40,000
5%	£4166	£50,000
6%	£5000	£60,000
7%	£5833	£70,000

As you can see from the table above if you took the 4% rule into account you would be receiving roughly £40,000 minus taxes each year.

This is slightly more than the current UK average wage and certainly would be enough to live on currently depending on where you are in the country.

High-Risk Investments

How much interest on a million pounds do I earn if I place into high-risk investments? Well, lots of potential but the high risk means there is the potential to lose.

On the flip side, you could of course lose it all very quickly. High-risk investments are unwise unless you are young and have time on your side to gain it all back.

If you had purchased one million pounds worth of the crypto Bitcoin back at the beginning of 2017 then you would have 1000 bitcoin.

If you sold today, that 1000 bitcoin would get you roughly £54,100,000. That is quite a large amount of interest on the original amount.

Other high-risk investment strategies include.

• Penny Stocks
• Reits
• Foreign Currency Trading
• IPO’s
• Options

High risk could also involve you simply leaving your One Million pounds in the bank. Most high street bank standard ISA accounts do not offer much over 2%.

Factor in a current inflation rate of around 4% means you are losing 2% of your money to inflation for each year you leave it in the bank.

This is high risk for me as there are not any upsides to most standard bank accounts currently.

Low-Risk Investments

This is more suited to older people like myself for example. As you get older you cannot afford to take any great losses as you dont have the time to recoup them.

When you are older you are looking for low-risk investments to achieve the greatest interest without the risk of losing money.

Investing in ETFs, Pensions and Properties is probably the safest way of growing your money in a low-risk environment.

An index fund such as the S&P500 has over the last 30 years given an average return of 10.22%.

This far outweighs whatever your local bank would give you and currently more than doubles the current inflation rate.

It is a safe option with a relatively good return rate.

Your One Million Pounds could return you around £100,000 over the course of a year.

Factor in taxes for your country and you are still making a very good income from your One Million Pounds.

Investing In Property

This is a good way of utilizing your One Million Pounds.

Property always rises. Sure there can be huge downfalls in the property market but if you ride these out property always prospers.

There are various ways to invest in property, One of the most common is a buy-to-let property.

There are more rules to abide by when doing BTL property such as the the mortgage application and the minimum you must be earning outside of the BTL property to be able to gain a BTL mortgage.

You also need to have an emergency fund to cover repairs and when the property may be vacant for months on end.

A safer way of getting into the Property investment market may be to invest in REITS. Retail Estate Investment Trusts to give their full name is a company that owns or operates income-producing properties.

If you have ever shopped in a supermarket such as Morrisons or gone into a Seven-Eleven, chances are they are owned by one of these companies.

These companies take the rent and then by law they have to pay a minimum of 90% of taxable income in the form of shareholder dividends each year.

This means you will receive dividends for investing in a REIT.

The amount you get depends on what REIT you invest in. I personally invest in Realty Income (O).

They currently have a dividend yield of 5.4%.

There are other REITS available so do your own research before investing.

Can You Retire On One Million Pounds?

This is a question that is difficult to answer as it will be significantly different for every person.

It will depend on your current income, The lifestyle you would like to lead, Not to mention your current age and the expected age of retirement.

According to the Pensions and Lifetime Savings Association (PLSA), a comfortable retirement which would be a 3-week European holiday each year and being frivolous with your money from time to time requires an annual disposable income in today’s money of £37,300 per single person and £54,500 per couple.

If you retire at 66 and then live for another 30 years and you intend to live off the cash alone then that One Million Pounds probably won’t cover that I’m afraid. Using the interest from that cash if it was at 5% would possibly cover the amount you need.

You could always factor in the fact you may have a government pension with full contributions to add which will add about another £7,000 a year each on top.

Then if you have any work pensions etc.

However, as you can see One Million Pounds if you are living for another 30 years after retirement is not a lot of money.

Its a difficult question to answer fully so the best case is to speak to a financial advisor to find out what works best for you in your situation.

How To Make A Million In The First Place

Of course, most of this is hypothetical. No point in asking how much interest on One million Pounds if you don’t have the million in the first place. Im sure you have dreams of having a million invested or in the bank, but most of us do not.

So how can you get closer to achieving that in real life?

Well procuring a job that pays enough for you to save that much is unlikely. The best way is still to invest heavily and early to be able to build your way to that wealth.

Starting your own business is one way of getting to a million. However, for most people, this is quite hard with full-time jobs and families with bills to pay.

I would say the best way is to change your mindset and work towards three main objectives.

Make More Money

Seems really obvious doesn’t it but making more money is key. The more you make the better off you will be.

You can do this by combining promotions at work, Creating well-paying side hustles and learning new skills with which to leverage in order to help make more money in either of those areas.

Save More Money

Saving money is something you can do without learning new skills it just takes a little getting used to.

Firstly you need to write out a budget and stick to it.

You need to calculate where every penny goes and make some sacrifices. Stop unnecessary subscriptions, memberships and frivolous spending. Tighten those belts right up.

Invest Every Spare Penny

Every Penny you choose to invest will lead to a more prosperous lifestyle further down the line.

Buy Assets, not liabilities.

Think of the amount of times you may have wasted money. A £20 bet on the football. A £100 evening out with the girls. £1000 on a new television when your old one was still working.

Now imagine spending that money on income-producing assets such as what you would get with a stocks and shares ISA.

Investing in solid companies or funds which provide a dividend payout that has increased year on year means you are setting your future self up for success.

Taxes

We cannot talk about making interest or gains on a large lump sum such as a Million Pounds without talking about dreaded taxes.

It goes without saying to make sure you always check what you need to pay and use a financial advisor to do so.

Not paying taxes or misleading HMRC could lead to criminal charges and no one wants that.

Simply placing your Million Pounds into your bank account will not only lead to very little in the way of interest, it will also lead to you being taxed on any interest you do make.

You could choose to place the funds into an ISA which will give you more interest but this still only allows £20,000 per year to be non-taxable. so that will not do either.

Investing your money into businesses, stocks, bonds or property will be the only way to avoid paying large amounts of tax on any profits made.

Having your money work for you can limit the amount of tax owed.

I am not a tax advisor though so obviously speak to your financial advisor should you have One Million Pounds to play with.

Conclusion: How Much Interest On One Million Pounds

When asking how much interest on One Million Pounds you can see it is not straightforward to answer.

I hope I have given a little insight into the amounts you could make as well as various pitfalls to watch out for.

I have also tried to give you some help when it comes to making that sort of money as it is possible with some effort and dedication.