How Much Interest Does $3 Million Earn Per Year?

Wondering how much interest 3 million dollars could earn per year? The answer isn’t straightforward, as annual returns depend on several critical factors, including your risk tolerance, investment choices, prevailing economic conditions, and current interest rates. Conservative options like high-yield savings accounts or certificates of deposit might offer safety but lower returns. Meanwhile, more aggressive investments such as stocks, real estate or business ventures could potentially yield higher returns. There is no one-size-fits-all answer to this question as one person will have individual needs that change the answer from another.

You can find a financial advisor to help you manage risk and help you get the most interest income from your $3 million.

How Much Interest $3 million Earns on Different Investments

SmartAsset: How Much Interest Does $3 Million Earn Per Year?

The amount you can make on interest for $3 million will greatly depend on where your money is invested. Generally speaking, the higher the return an investment offers, the greater the risk. Investments also differ in terms of liquidity, or how easily and quickly an investor can turn the investment into cash. Here are eight common choices:

1. Savings Accounts

A savings account at a bank or credit union pays from 0.01% to 1% per year. At those rates, $3 million would earn from $3,000 to $30,000 in interest per year. Bank deposits are highly liquid and insured against loss by the Federal Deposit Insurance Corporation (FDIC), while the National Credit Union Administration (NCUA) insures credit union deposits.

However, each account is only insured up to $250,000. So, to invest the entire $3 million, you would have to use several different financial institutions. You can identify top-earning savings accounts using SmartAsset’s online savings account comparison tool.

2. Money Market Account

A money market account can generate a meaningful amount of interest on $3 million while still offering a high level of liquidity and relatively low risk. These accounts are offered by banks and credit unions and typically pay higher interest rates than traditional savings accounts, especially in higher-rate environments. The exact return depends on the annual percentage yield, or APY, which can fluctuate with broader interest rate changes.

For example, if a money market account offers a 4% APY, $3 million could earn about $120,000 in interest over one year. At a lower 3% APY, the same balance would generate roughly $90,000 annually. While these returns may not keep pace with long-term inflation the way riskier investments can, they can provide steady income and capital preservation.

Money market accounts are often used by retirees or high-net-worth individuals who want easy access to cash without taking on market volatility. Most accounts are federally insured up to applicable limits, though large balances may require spreading funds across institutions for full coverage. As part of a broader strategy, a money market account can be a useful place to hold cash while earning competitive short-term interest.

3. Money Market Funds

Money market funds are investment vehicles that pool money to invest in short-term, high-quality debt securities such as Treasury bills, government agency debt and corporate commercial paper. They’re designed to preserve principal while providing modest income, and they often offer yields that closely track short-term interest rates. Unlike money market accounts, these funds are typically offered through brokerage firms rather than banks.

If a money market fund yields around 4%, a $3 million investment could generate roughly $120,000 in annual income, though returns can vary over time. Yields may be slightly higher than bank money market accounts, but they are not federally insured. While losses are rare, they are possible, particularly in periods of market stress.

Money market funds can be a practical option for investors who want liquidity and competitive short-term yields without locking up funds. They’re commonly used as a cash management tool or a temporary holding place between investments. For large balances, understanding the fund’s underlying holdings and risk profile is key to using this option effectively.

4. Certificates of Deposits (CDs)

Certificates of deposit, or CDs, offer a fixed interest rate in exchange for locking up your money for a set period of time. Terms can range from a few months to several years, with longer terms typically paying higher rates. For investors with $3 million, CDs can provide predictable income and protection from market volatility.

At a 4.5% annual rate, $3 million invested in CDs could earn about $135,000 per year, though the exact return depends on the term and whether interest is compounded. Because CDs have fixed rates, they can be appealing when interest rates are high and expected to fall. However, accessing funds early usually triggers penalties, which reduces flexibility.

CDs are federally insured up to applicable limits, making them a low-risk option for preserving capital. Large balances may need to be spread across multiple institutions to maintain full insurance coverage. As part of a diversified income strategy, CDs can provide stability while generating steady interest.

5. Treasury Securities

Treasury securities are debt instruments issued by the U.S. government and are considered among the safest investments available. They include Treasury bills, notes and bonds, which vary by maturity length and interest rate. Because they’re backed by the federal government, they carry minimal credit risk and are often used to preserve capital while earning predictable income.

If $3 million is invested in Treasury securities yielding around 4%, it could generate roughly $120,000 per year in interest. Actual returns depend on the mix of maturities and prevailing interest rates at the time of purchase. Interest from Treasuries is taxable at the federal level but generally exempt from state and local income taxes, which can improve after-tax returns.

Treasury securities can be held individually or through funds and can be laddered to balance income and liquidity needs. They’re often appealing to retirees and conservative investors seeking steady income without market volatility. As part of a broader portfolio, Treasuries can provide both income and diversification benefits.

6. Series I Savings Bonds

Series I savings bonds are government-issued bonds designed to protect investors from inflation while preserving principal. Their interest rate is made up of a fixed component and an inflation-adjusted component that resets every six months based on changes in consumer prices. This structure can make I bonds appealing during periods of elevated inflation, when other low-risk investments may lose purchasing power.

There are limits on how much you can invest in Series I bonds each year, which makes them less suitable for deploying a full $3 million at once. Still, they can play a role in a broader strategy by providing inflation-linked returns on a portion of your cash. Interest accrues tax-deferred until redemption, and federal taxes can sometimes be avoided if the funds are used for qualified education expenses.

Series I bonds must be held for at least one year, and redeeming them before five years results in an interest penalty. While they’re not a primary income vehicle for large balances, they can add diversification and inflation protection. Used thoughtfully, I bonds can complement other interest-earning investments in a conservative portfolio.

7. Corporate Bonds

While less safe than Treasury securities, debt obligations from major corporations also tend to pay higher interest. Corporate bond interest rates vary widely depending on the stability of the issuer. Price for corporate bonds fluctuate, so total return, including interest and value of the bond, is a key factor.

Corporate bond funds offer diversified baskets of bonds from many different issuers that can help manage risk and improve returns. However, as of the time of writing, the Bloomberg Global Aggregate Corporate Total Return Index has posted a one-year return of negative 1.33%.

8. Municipal Bonds

Municipal bonds are debt securities issued by states, cities and other local governments to fund public projects. They typically pay lower interest rates than taxable bonds, but the income is often exempt from federal income taxes and, in some cases, state and local taxes as well. For investors in higher tax brackets, that tax advantage can make municipal bonds especially attractive on an after-tax basis.

If $3 million is invested in municipal bonds yielding around 3%, the annual interest would be roughly $90,000, though the effective return could be higher after accounting for tax savings. Yields vary based on the bond’s maturity, credit quality and whether it’s backed by a specific revenue source or general taxing authority. While municipal bonds are generally considered low risk, they are not risk-free and can be affected by changes in interest rates or the issuer’s financial health.

Municipal bonds can be purchased individually or through mutual funds and ETFs, offering flexibility in diversification and management. They’re often used by retirees or high-income investors seeking steady, tax-efficient income. As part of a broader strategy, municipal bonds can help balance income needs with tax considerations.

Strategies to Maximize Earned Interest in Your Investment Portfolio

Interest-earning investments form the foundation of many income-focused portfolios. These investments typically include bonds, certificates of deposit, money market accounts and high-yield savings accounts. Each offers different risk levels and potential returns, creating opportunities to balance stability with growth potential in your financial strategy.

Spreading your investments across various interest-generating vehicles helps optimize your returns while managing risk. Consider allocating portions of your portfolio to government bonds for safety, corporate bonds for higher yields, and CDs for guaranteed returns. This balanced approach can help maintain a steady income regardless of market fluctuations.

The length of time until a bond matures significantly impacts its sensitivity to interest rate changes. Shorter-duration bonds typically offer lower yields but less price volatility when rates change. Longer-duration bonds generally provide higher yields but come with greater price fluctuations. Balancing these factors based on your risk tolerance and interest rate outlook can enhance your portfolio’s performance.

Market conditions and interest rates constantly evolve, requiring periodic portfolio adjustments. Set a schedule to review your interest-generating investments quarterly or semi-annually. This discipline helps ensure your allocation remains aligned with your goals and takes advantage of changing interest rate environments.

Bottom Line

How much interest $3 million earns in a year depends largely on where it’s invested and how much risk you’re willing to take. Conservative options like money market accounts, CDs and Treasury securities can generate six figures in annual income while prioritizing capital preservation, while municipal bonds and I bonds can improve after-tax or inflation-adjusted returns. Each option comes with trade-offs involving liquidity, taxes and risk.

Investing Tips for Beginners

A financial advisor can help you determine the best portfolio for your situation. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
Before investing, most advisors recommend that you pay off any high-interest debt you owe. At the same time, consider creating an emergency fund to allow you to cover unexpected expenses without dipping into your investment portfolio.