How Much Interest Could You Earn on $1 Million?

$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 New Zealand?

The answer to our question depends on how you choose to save or invest that money, and for how long. In this article, we 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, for example, shares) and they allow you to earn a fixed rate of interest. Usually, the longer you invest your money, the higher the interest rate you will receive.

However, at the moment, most deposit takers are offering higher interest rates on shorter term deposits, up to two years. This is due to the current OCR of 5.5%, which is the highest it’s been since 2008. In the short term, the OCR is predicted to remain high, but from the end of next year it’s predicted to drop, which is affecting longer term deposit rates.

However, whatever the rate of return, most term deposit takers allow you to choose when you receive interest, such as monthly or at maturity. Generally, the more frequently you want your interest paid, the lower the interest rate.

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

This depends on the interest rate and when the interest is paid. For this article, we’ve considered $1 million deposited in a one-year term deposit with interest paid at maturity.

At time of writing, the highest one-year term deposit rate on Canstar’s database is 7.5%, Xceda Finance. So with a deposit of $1 million, you could earn $75,000 in interest paid at maturity (calculated via Canstar’s Term Deposit Calculator). But, of course, you would then have to pay tax on that interest, of at least 33%:

The results based on an investment of $1m for 12 months.
12-month term deposit rate Interest earned
7.50% $75,000
7.50% $75,000
6.30% $63,000
RaboBank wins Canstar award 6.30% $63,000
6.20% $62,000
To view a wider range of term deposit accounts, use Canstar’s Term Deposit Comparison Tool

How much interest could $1 million earn over five years?

Although, as we’ve mentioned above, long-term rates are not currently as high as short-term ones, they are still high compared to the past 10-year average. Below you can see what you could earn at the five highest 5-year rates currently in our database. Again, however, you would have to pay tax on the interest:

The results based on an investment of $1m for 5 years, interest compounded yearly.
5-year term deposit rate Interest earned
7.00% $402,552
6.75% $386,243
RaboBank wins Canstar award 5.75% $322,519
5.75% $322,519
5.65% $316,278
To view a wider range of term deposit accounts, use Canstar’s Term Deposit Comparison Tool.

Remember the amount of interest you earn on your investment will depend on the specific term deposit you choose and your tax rate. For up-to-date interest rates and full T&Cs, please refer to deposit takers’ websites.

Compare Term Deposits

About the author of this page

This report was written by Canstar’s Editor, Bruce Pitchers. Bruce has three decades’ experience as a journalist and has worked for major media companies in the UK and Australasia, including ACP, Bauer Media Group, Fairfax, Pacific Magazines, News Corp and TVNZ. Prior to Canstar, he worked as a freelancer, including for The Australian Financial Review, the NZ Financial Markets Authority, and for real estate companies on both sides of the Tasman.

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