What $500,000 earns
Per year, per month and per day, with the interest taken out so the balance stays at $500,000.
| APY (example) | Per year | Per month | Per day |
|---|---|---|---|
| 3% | $15,000.00 | $1,233.13 | $40.49 |
| 4% | $20,000.00 | $1,636.87 | $53.73 |
| 4.5% | $22,500.00 | $1,837.40 | $60.30 |
| 5% | $25,000.00 | $2,037.06 | $66.84 |
Worked example: 500k at 4% interest
- Yearly interest = $500,000 × 0.04 = $20,000.00.
- Monthly rate equivalent to a 4% APY = (1.04)1/12 − 1 = 0.3274%.
- Monthly interest = $500,000 × 0.3274% = $1,636.87. This is a little less than one twelfth ($1,666.67) of the yearly figure, because monthly payouts could themselves be reinvested.
- If you leave everything in for 5 years: $500,000 × 1.045 = $608,326.45, which is $108,326.45 of interest in total.
What $500,000 grows to with compound interest
If you leave the interest in, it compounds. Balances below assume no new deposits and are before tax and inflation. The 7% and 10% rows are long-run growth illustrations, not bank rates, and are not guaranteed.
| APY (example) | 10 years | 20 years | 30 years |
|---|---|---|---|
| 3% | $671,958.19 | $903,055.62 | $1,213,631.24 |
| 4% | $740,122.14 | $1,095,561.57 | $1,621,698.76 |
| 5% | $814,447.31 | $1,326,648.85 | $2,160,971.19 |
| 7% | $983,575.68 | $1,934,842.23 | $3,806,127.52 |
| 10% | $1,296,871.23 | $3,363,749.97 | $8,724,701.13 |
How long to turn $500,000 into $1 million
With no new deposits, $500,000 doubles in about 17.7 years at 4%, 10.2 years at 7% and 7.3 years at 10%. A quick check is the rule of 72: divide 72 by the rate to estimate the years it takes to double.
Can you live off the interest on $500,000?
Possibly as a supplement, but rarely on its own. At 4–5% yields, $500,000 pays roughly $20,000.00–$25,000.00 a year, or $1,636.87–$2,037.06 a month, before tax.
For comparison, the 4% rule of thumb says a retiree might withdraw about 4% of a portfolio in the first year and adjust that amount for inflation. For $500,000 that is $20,000.00. It is a rough guide, not a guarantee or advice.
Three things change the picture:
- Taxes. Interest is generally taxed as ordinary income, so spendable income is lower than the figures above.
- Inflation. If you spend all the interest and leave the balance alone, the buying power of $500,000 shrinks over time.
- Rate changes. Savings and money market yields can fall. Only a CD or Treasury bill locks in a rate, and only until it matures.
To see what a planned withdrawal does to the balance, use the compound interest calculator with withdrawals.
FDIC limit: keeping $500,000 insured
The standard deposit insurance amount is $250,000 per depositor, per insured bank, for each account ownership category, according to the FDIC's deposit insurance page. So $500,000 in one bank under one ownership category is not fully insured. Accrued interest counts toward the limit too.
Common ways to stay within the limit:
- Spread the money across more than one FDIC-insured bank.
- Use different ownership categories at the same bank, such as a single account and a joint account. Joint accounts are insured per co-owner.
- Keep a cushion below $250,000 per bank so growing interest does not push you over.
The FDIC's EDIE estimator calculates your coverage for your exact accounts. Credit unions are covered in a similar way by the NCUA, so check the details if you bank with one.
Savings account, CD or Treasury bills for $500,000
A high-yield savings account keeps your money available, but the rate can change at any time. A CD fixes the rate for a set term and usually charges a penalty for early withdrawal. Treasury bills are backed by the US government, are bought through TreasuryDirect or a broker, and their interest is exempt from state and local income tax. Which is best depends on how soon you need the money, your tax situation and the rates on offer today. Compare them in the high-yield savings and CD calculators.
Related amounts and tools
For other balances see interest on 100,000 dollars, interest on 1 million dollars and interest on 2 million dollars. For compounding by period use the monthly and daily compound interest calculators.