How much interest can you earn on $1 million in Australia?

$1 million is often seen as a ‘magic number’ to reach before you can retire and potentially live off interest or other earnings. So how much interest could you actually earn on $1 million in Australia?

The answer to this will depend on how you choose to save or invest that money, and for how long. In this article, we’ve taken a look at how much interest you could earn on $1 million invested in a term deposit.

Term deposits can be a low-risk way to invest your money (compared to something like shares) and they allow you to earn a fixed rate of interest. Often, the longer you invest your money, the higher the interest rate you will receive.

You may be able to choose when you receive interest, such as monthly or at maturity. Generally, the more frequently you want interest to be paid, the lower the interest rate you will be offered.

How much interest would $1 million earn in a year?

This will depend on the interest rate and when interest is paid. As a hypothetical example, we’ve considered $1 million deposited in a one-year term deposit with interest paid at maturity.

At the time of writing, term deposit interest rates are reaching 5%pa (per year) in some cases. With a deposit of $1 million, you could earn about $50,000 in interest paid at maturity (calculated via Canstar’s Term Deposit Calculator). A lower rate, such as 4.5%, would earn $45,000, $5,000 less.

As you can see, there is a big difference in potential interest earnings depending on the term deposit you choose.

How much interest would $1 million earn in five years?

Generally, the longer you invest your money, the higher the interest rate you will be offered. With that in mind, we’ve also looked at $1 million deposited in a five-year term deposit, with interest paid at maturity. Again, we considered a 5%pa interest rate.

If you deposited $1 million, you could earn about $250,000 in interest paid at maturity (after five years).

Remember that these are just hypothetical examples. How much interest you can actually earn on $1 million will depend on the specific term deposit you choose. The calculations also rely on assumptions, including assuming that all months are of equal length. For investments amounts over $1 million, you may need to contact the term deposit provider to find out the rates on offer.

Does the government guarantee cover my term deposit?

The Financial Claims Scheme (FCS) provides protection to deposits up to $250,000 per account-holder, per authorised deposit-taking institution (ADI). So for a $1 million deposit, only $250,000 would be protected by the scheme.

As an alternative, you could consider splitting up the $1 million into separate term deposits with different institutions, to help ensure your money is protected in the event that the bank, building society or credit union where you have your term deposit fails. But make sure you check whether any set-up or other fees apply.

If you are planning for retirement, it can also be a good idea to seek personal advice from a qualified financial adviser.

The rates mentioned in this article are correct at the time of writing. Canstar’s database is updated daily, so the rates may be different to those mentioned above. You can use Canstar’s comparison tool to see today’s rates for term deposits. You may also be interested in seeing the highest term deposit rates currently on our database.