For instance, you could open a high-yield savings account on Public and earn 4.35% interest. If you put $1,000,000 into the account, it would generate $43,500 in interest per year.
However, savings accounts also pay the lowest interest rates of any option, currently an average of 0.2%, enough to earn $100 on a $50,000 deposit in a year. High-yield interest savings accounts pay a bit more. Currently, they could earn up to 5% or more. At that rate, you could earn $2,500 for a year.
However, high-yield savings accounts offer significantly higher rates. For instance, some accounts provide APYs up to 5.50%. With a 5.50% APY, a $10,000 deposit would yield about $550 in interest over one year.
Interest rates have fallen recently, but HYSAs are still offering solid annual percentage yields (APYs) between 4.00% and 5.00%, depending on which bank you choose. This means for every $10,000 you put in, you can earn around $400 per year; so $20,000 will earn you around $800 in 12 months.
While losing your money in a high-yield savings account isn't likely, you'll want to be aware of FDIC limitations and other potential risks we've rounded up to help you maximize the interest you can earn — and avoid hitting limits, triggering fees or missing lower rates that can eat into your savings goals.
High-yield savings accounts may have variable interest rates, which may impact earnings. While they aim to offer higher interest rates than traditional savings accounts, these rates may fluctuate over time due to changes in the financial market or the financial institution's policies.
There are two high-yield checking accounts with interest of at least 7%, though: BCU PowerPlus Checking and Landmark Credit Union Premium Checking Account. Both come with major downsides, though. Are 7% interest savings accounts safe?
Millionaires Like High-Yield Savings, but Not as Much as Other Accounts. Usually offering significantly more interest than a traditional savings account, high-yield savings accounts have blown up in popularity among everyone, including millionaires.
Increase Your Retirement Savings
Although having $100,000 in your retirement savings is nothing to sneeze at, it's also not enough to fund a potentially long lifetime. Once you've saved that much money, you've already proven to yourself that you have the financial discipline to save even more.
Should I put all my money in a high-yield savings account? Most HYSAs limit withdrawals to six per month, which could make it hard to access funds. And while the return is better than a traditional savings account, it won't provide the growth necessary for long-term wealth compared to stocks and bonds.
Key Takeaways
Yes, it's possible to retire on $1 million today. In fact, with careful planning and a solid investment strategy, you could possibly live off the returns from a $1 million nest egg.
“In simple terms,” says Richiest's Ashley, “the money you earn from a high-yield savings account is usually taxed just like your regular income. “This means that the interest you make on these accounts gets taxed by the federal government and, depending on where you live, your state government too.”
The safest place to put $1 million dollars would be in a combination of insured bank accounts and conservative investments, such as bonds and CDs, to ensure a balance of liquidity and stability.
A stocks and shares Isa is likely to be most suitable. That is unless you will turn 55 within 30 years, in which case a pension might be a better tax wrapper for you. If you're unsure about the time horizon, you could invest in both a pension and a stocks and shares Isa.
At a 4.25% annual interest rate, your $100,000 deposit would earn a total of $4,250 in interest over the course of a year if interest compounds annually.
If you deposit $50,000 into a traditional savings account with a 0.46%, you'll earn just $230 in total interest after one year. But if you deposit that amount into a high-yield savings account offering, say, 4.60% APY,* your one-year interest soars to over $2,301.25.
No penalties: You can typically withdraw your money whenever you need it without penalties.
For savings, aim to keep three to six months' worth of expenses in a high-yield savings account, but note that any amount can be beneficial in a financial emergency. For checking, an ideal amount is generally one to two months' worth of living expenses plus a 30% buffer.
How much is too much? The general rule is to have three to six months' worth of living expenses (rent, utilities, food, car payments, etc.)
Not the best choice for long-term savings – High-yield savings accounts offer much better interest rates than traditional savings accounts, but often, you won't earn enough over the long-term to account for inflation. Investments may be a better option for a longer-term, greater yield.