How and Where to Invest 1 Million Dollars This Year

Immediate Annuities Advantages

For retirees who worry about running out of money at some point, an immediate annuity offers perhaps the single most attractive feature of any retirement product: a fixed-income stream that is guaranteed for life—whether the purchaser dies the day after buying the annuity or lives to be 120.

Immediate annuities are sold by life insurance companies. They are not classified as investments but as contracts by which the retiree places a lump sum into the annuity, which draws interest. The annuity’s principal and interest balance are amortized with a series of fixed, regular payments to the retiree. A couple of factors determine the amounts of these payments. One is prevailing interest rates; when interest rates are high, annuities pay more. The other factor is the retiree’s life expectancy. The longer they are expected to live, the lower the monthly payments. For this reason, women, who generally outlive men, receive smaller annuity checks on the same balance.

While life expectancy is used to calculate benefit amounts, the checks do not stop coming once that age is reached and the annuity balance is amortized. Rather, the retiree receives checks for as long as they live. “Purchasing an immediate annuity is like buying a pension. You exchange a lump sum for the insurance company promising to pay you for the rest of your life,” says Georgia Bruggeman, CFP, Meridian Financial Advisors LLC, Holliston, Mass.

An annuity is essentially insurance against outliving one's money, with the insurance company assuming the risk of the individual living too long. A retiree who prioritizes peace of mind in this regard, knowing that their parents and grandparents all lived to 100, should consider an annuity.

3 Questions to Ask Before Investing a Windfall

  1. How much cash do I need over the next 5 years?

First, think about how much cash you’ll need over the next five years. Factor in both month-to-month expenses and large one-time purchases like home renovations, traveling, or paying for a child’s wedding. As a general rule, one should not invest money needed over the next five years in the stock market (although one can argue in favor of investing for short-term goals).

Setting aside five years of expenses serves another purpose, too. It helps create mental preparation for the market potentially going sideways or down for that period of time. Historically, there have been a number of periods where returns stayed flat or gone down over a five year period. For that reason, cash is king over short time periods. 

  1. Do you invest in one lump sum or dollar cost averaging

My approach has always been to invest a windfall in a lump sum rather than dollar cost averaging over an extended period. It’s the approach I followed when I received bonuses at work. It’s also the approach I took when I sold my business a few years ago. Further, studies show that lump sum investing beats dollar cost averaging most of the time.

Notice I said most of the time. There will be periods of time when it would have been better to dollar cost average into the market. The key here is to accept that we cannot know the future, and therefore, we cannot know which approach would be the best at any given point in time.

If it makes you feel more comfortable to dollar cost average of say a 12 month period, that’s perfectly reasonable. Just put your plan in writing and follow it.

  1. What are your specific investing goals?

The last thing to consider is how hands-on you want to be with your portfolio. Many investorsprefer to be hands-off and automate the management of their investments. Others enjoy investing and what to handle everything from fund selection to rebalancing on their own.

There is no right or wrong choice here. What you chose to do, however, may affect how you invest and where you keep your money. A DIY investor may open a standard brokerage account. Someone who wants an automated service, by contrast, might select a robo-advisor such as Betterment.


How Did We Come up With This List?

When designing this list, we looked for investment strategies that are available to most people that will help them build a diverse portfolio and earn solid returns. We also considered the cost of the investment strategy, as costs play a direct role in your returns. Every penny you pay in fees can have a compounding effect on your future returns.

We also tried to come up with a list of investment strategies that meet different risk tolerances and investing goals. People who are less risk-tolerant may not want to invest in real estate because real estate investing often involves high risk and leverage. Instead, they might want to focus on safer investments like mutual funds or even CDs.

Advice for Picking Your Investments

There are so many ways you can invest $1 million dollars. But before you get started, here are a few more factors to consider when picking the investments and strategies that are right for you.

Consider Working With a Professional

If you’re not comfortable investing your own money or even using an automated service, working with an investment professional may be the best choice. And many financial advisors work with high-net-worth clients on a one-on-one basis. They’ll not only manage your investments for you but can often provide advice on overall financial management, such as estate planning.

Investment advisers are commonly associated with large brokerage firms and generally charge annual fees between 1% and 2% of the assets under management. That can be a lot if you have $1 million.

An alternative is to work with Personal Capital. They’re a hybrid between a Robo advisor and a full-service personal investment manager. You’ll get one-on-one advisory services but at a much lower fee than you’ll pay to a traditional investment manager.

Be Mindful of Fees

Options like investing with a robo-advisor or DIY investing are some of our favorite ways to invest $1 million because of the low fees. If you decide to go another route like real estate investing or dabbling in alternative assets, make sure you account for potentially higher fees for your projected returns.

Simplicity Is Often Best

Time and compound interest are two of the most powerful things investors have on their side. So, unsurprisingly, keeping investments simple and sticking to a gameplan often yields the best results rather than trying to micro-manage every aspect of your portfolio.

When you invest $1 million, consider your long-term investing strategy and how actively you want to manage your portfolio.

Strongly Consider Working with a Professional

If you have $1 million to invest, you have to be incredibly smart with how you manage that money. As we’ve written about before, $1 million isn’t a lot these days–in fact, the argument can be made that you need $2 million to retire.

So, it’s important that you not only preserve the $1 million the best you can but also help it grow. Investing is one thing you have to do–but only if you are comfortable managing that large of a portfolio. If you’re not (and even if you are) I would STRONGLY consider looking at working with a professional.

I get that you’d want to manage $1 million on your own (heck, even getting to this point is an accomplishment) but don’t be silly and mismanage it.

Traditional Portfolio Disadvantages

The main downside to the traditional portfolio strategy is that, unfortunately, no method exists to project future market returns or inflation rates with any certainty. The years following the Great Recession have been excellent for stocks and mutual funds, and equally good as far as low inflation is concerned. However, a protracted bear market or a period of unusually high inflation—the 1970s featured both—will cause a retiree’s $1 million to evaporate much more quickly if it is invested using the strategy outlined above.

How To Invest $1,000,000 In 2020

So you want to know how to invest a million dollars: this is what I think would be the best way to invest 1 million dollars if I had to start over.

If I had a million dollars to invest today, I’d put most (at least 60%) of it into VTSAX. This is Vanguard’s total stock market index fund. It has an expense ratio of just .05% and provides exposure to the entire US equity market.

I’d put smaller amounts of money into VTIAX (Vanguard’s international stock market index fund) and VEMAX (Vanguard’s emerging markets index fund). Every year, I’d rebalance. I’d also take advantage of tax loss harvesting when markets drop. This is the best way to invest a million dollars – avoid high fee mutual funds, you do

And if that sounds like too much work, consider a robo-advisor like Betterment. Betterment automatically invests your money in low fee, Vanguard funds. The service also rebalances your portfolio and performs tax loss harvesting. It’s completely hands-off, and you don’t need a financial advisor. Investing has never been easier.

You could also consider real estate investment, and if you put in the effort you’ll likely get a higher return, but it isn’t a truly passive investment.

Getting Help

There are reasonably priced methods of getting professional investment advice. As a rule of thumb, avoid advisory fees that exceed 50 basis points (.50%). For example, Vanguard offers advisory services for 30 basis points (.30%). To the best option is an advisor who charges by the hour or a flat fee. There’s simply no reason to give away part of your wealth each and every year for financial advice.

Real Estate Investment Properties

Some investors feel that owning rental properties is one of the finest things to buy if you have $1 million to invest and want diversity as well as excellent risk-adjusted returns. You can produce income and expand your investment money in real estate in three ways:

  1. Recurring cash flow generates passive income.
  2. Equity appreciation occurs when the value of a property rises over time.
  3. Deducting operations and business expenditures, as well as depreciation expenses, can help you lower your taxable net income.

You may invest in a variety of asset classifications, including residential, commercial, industrial, and land. Remote real estate investment is also possible with today’s technology, and it’s a wonderful alternative for investors who live in cities with a high-cost-of-living like New York or San Francisco.

If you invest in real estate online, you may identify low-cost property in locations with greater yields while leaving the day-to-day minutiae of property management to your local real estate team.

Because real estate may be leveraged or funded, your one million dollar investment might theoretically go further and create better profits while spreading out the risks.

Instead of spending $1 million on a tiny apartment complex in one location, you might invest in a far bigger portfolio of single-family homes in a number of high-growth cities throughout the country.


Certificates of deposit (CDs) and money market accounts are two of the safest methods to generate a return while keeping your money accessible.

CD and money market account annual percentage yields (APY) are nearly equal to inflation, which means you won’t make any money on your savings.

On the bright side, they’re similar to having a deposit account and may be an excellent method to secure your money while keeping it liquid.

Fees Will Eat Your Retirement

Until recently, I didn’t pay attention to mutual fund fees. I ignored and dismissed them:

Hey, it’s only 1 or 2 percent. No big deal.

It turns out fees are a big deal. A really big deal.

Back in July 2013, my investment portfolio was worth about $685,000. I had recently signed up for Personal Capital, an incredibly useful (and free!) service that aggregates investments. One of the tools on the Personal Capital site is the Fee Analyzer.

I fired it up one day and was shocked to discover that if I stayed with my current funds, I’d pay almost $600,000 in fees over the next 26 years; losing 3 years of precious retirement:

I took immediate action, rebalancing into lower cost funds. Even though the mutual fund portion of my portfolio is now worth $300,000 more than it was before I rebalanced, I’ll pay only $144,880 in fees:

By bringing my expense ratio from .79% to .11%, I saved over $450,000.

You can see how much of your retirement is currently being eaten up by fees using Personal Capital’s fee analyzer. It’s totally free!

Max Out Your 401(k)

The government gives you a wealth-building gift: the 401(k) account. Here’s how you can use it to make your first $1 million: Enroll in your employer’s program and invest the maximum amount allowable by law — that’s $20,500 for 2022, and an additional $6,500 catch-up contribution for those over age 50.You gain an immediate reduction in your taxable income for any contribution to the 401(k). So if your income is $60,000, and you contribute $19,500, you’re only taxed on $40,500.As long as the money remains in the account, it grows and compounds tax-free. In practical terms, if you contribute $19,500 annually to your 401(k), and earn 7% by investing in an average stock mutual fund, you will be a millionaire in 23 years. Invest less or earn a lower return, and it will take longer to make your first million. “You don’t need to be the next Richard Branson to make your first million,” said Grant Bledsoe, founder of Three Oaks Capital Management and blogger at Above the Canopy. “Just take what the IRS gives you.”

Asset allocation and minimizing risk

With any size portfolio, it is wise to diversify your investments among several asset classes. Having a mix of different types of investments is known as "asset allocation." A common asset allocation technique is to subtract age from 110 to determine how much you should have in stocks. The rest would be invested in bonds with the goal of reducing risk as you get older and closer to your goals.

However, this approach doesn't take into account other investment classes beyond stocks and bonds. A better asset allocation approach involves stocks, bonds, real estate, and alternatives (like crypto, commodities, or precious metals). The stocks should include small, medium, and large companies from the U.S. and foreign countries.

Having a diversified portfolio that involves numerous asset classes allows you to minimize risk and reduce volatility. When reviewing all of your investment options, you may be tempted to pick just one investment. This is known as concentration risk, and your investments could be lost if that investment fails. By comparison, if you have a diversified portfolio, it is very unlikely that all sectors of the economy will fail all at once.

How Much Interest Can one Million Dollars Earn Per Year?

A $1 million investment can earn interest from $33

A $1 million investment can earn interest from $33,000 per year invested in US Treasury bonds to around $1.2 million invested in real estate after a ten-year investment term. If you want to know how to earn a million dollars to live off the interest, it all depends on where you invest your money. 

There are many roads that will lead you to earn different rates of interest or profits when you invest your 1 million dollars. Before you roll the dice with your money, it’s better to make sure you’re not too averse to risk since your potential profits will vary tremendously.

As you will see from the list below, the stand-out method to grow your million dollars is investing it in real estate. There is never a 100 percent sure winner in any investment, but real estate, time and time again, is a sure-fire way to grow your 1 million dollars because you actually have assets you can rent or sell if necessary.

A Word Of Caution: Utilize Leverage the Right Way

There are several methods for making money using your funds. When you take money, you’re able to get far better returns than if you invested your own money. As a result, funding is frequently known as “leverage.”

Please use care and caution when using other people’s money. If things go wrong, you may find that you’re over-leveraged and unable to repay your loan.

Never invest in something you don’t fully comprehend. Never put your money in the hands of someone who hasn’t been successful in the particular investing plan on several occasions.

Private loans and the property that’s rented can be very profitable. Still, they can also be money traps if your investments are in areas with high crime, deteriorating cities with no employment development, or property with unresolved maintenance concerns, for example.

It is critical to be informed about the investments you intend to pursue or seek mentorship from someone who has successfully done what you are doing.

How Much Does a $1,000,000 Annuity Pay Per Month?

In today’s low-interest rates environment, a 65-year old person purchasing a 1 million dollar annuity would receive about $5,660 per month. This would last for the rest of your life, though women would receive a bit less due to having longer life spans.

Though it’s a nice amount of money to have guaranteed for the rest of your life, that 1 million will be tied up for as long as you live, so choose carefully!

How To Retire On A Million Dollars By Age

The following guaranteed income amounts are annual and do not include Social Security Benefits.

Retire At Age 55 With $1 Million

The following table estimates the guaranteed annual income a 55-year-old can retire with $1 million. This does not include Social Security Benefits

Annuity Purchase DateAnnual Income At 55
Age 40$98,750
Age 45$97,670
Age 50$69,999
Age 55$49,375

Retire At Age 60 With $1 Million

This table estimates the guaranteed annual income a 60-year-old can retire with $1 million. This table does not include Social Security Benefits.

Annuity Purchase DateAnnual Income At 60
Age 40$126,167
Age 45$113,732
Age 50$106,219
Age 55$77,875

Retire At Age 65 With $1 Million

The following table estimates the guaranteed annual income a 65-year-old can retire with a $1 million annuity. This table does not include Social Security Benefits.

Annuity Purchase DateAnnual Income At 65
Age 40$154,665
Age 45$141,971
Age 50$147,762
Age 55$121,450

How To Retire On 1 Million Dollars, Immediately

The table below illustrates how much monthly income can be generated immediately with a combination of annuity payments and Social Security Income (SSI).

ADDITIONAL READING: How Much Does A $1,000,000 Annuity Pay?

Total = Monthly Income for Life

Is it Really Possible to Save One Million Dollars?

According to Fidelity Investments, the answer is absolutely, positively “YES!”.  For example, the number of 401(k), IRA, and Thrift Savings Plan (TSP) millionaires is setting all-time records. So, if other people can save one million dollars or more, it’s possible for you too.

Here are 8 totally realistic ways to save one million dollars much faster than you might imagine, even if you don’t know a lot about personal finance:

1. Choose the right college degree. 

Careers with the highest median salaries include being a pharmacist, actuary, economist, information security analyst, and petroleum engineer. When you work in an industry that values what you do, your chances of being unemployed are also significantly reduced.

2. Start saving and investing early. 

If your employer offers a retirement plan, maximize your contributions to take advantage of pretax investments that can boost your annual return. If you’re self-employed, you can do the same thing by setting up a SEP IRA.

3. Maintain a good credit score. 

Your credit score doesn’t have to be perfect, but remember that the better your score is, the greater the odds are that you’ll qualify for low-interest rates. Lenders consider a FICO Score of 740 or more to be very good, while 21% of Americans have an exceptional credit score of 800 or above.

4. Use debt to your advantage. 

There are two types of debt – good debt, and bad debt. Bad debt includes paying interest on credit card balances or borrowing money to go on vacation. Debt can be a good thing if it allows you to invest, for example by taking a  low-interest student loan (assuming you choose the right degree) or wisely leveraging it to finance income-producing real estate to invest in multiple properties instead of just one. 

5. Buy a home.

Another potential good use of debt is buying a home to live in instead of renting from someone else. Owning your own home can grow your equity so that you have access to future investable cash with a cash-out refinance. According to the Federal Reserve, median sales prices of homes sold in the U.S. have increased by almost 200% over the past 20 years. 

6. Invest in assets when they are cheap. 

Investors who buy and hold for the long term take advantage of normal down market cycles to buy assets when they’re relatively inexpensive. 

Real estate investors who bought houses during the Global Financial Crisis of 2008 have seen their home values grow by more than 50%, while buyers of the S&P 500 who added to their portfolios during the recent dip have seen share prices rise by nearly 60%.

7. Create multiple income streams. 

There’s no rule that says you can only have one source of income. The good news is that there are plenty of ways to make more money without having to hold down two full-time jobs. 

Owning dividend-paying shares of a publicly-traded REIT or real estate mutual fund, starting a part-time business by working a side gig that you love, or renting out extra space in your house are three easy ways to generate streams of income that put you on the path to making your first $1 million.

8. Invest in real estate. 

Extremely wealthy people such as John D. Rockefeller and Robert Kiyosaki say the #1 way to make money and build generational wealth is by investing in real estate. Real estate investments can provide reliable passive income, appreciation over the long term, and IRS-approved tax benefits that other assets simply don’t offer.

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