Let say I have 1 million dollar saved. I want to live off its interest rate. What is the best way?

Question

Let say I have 1 million dollar saved. I want to live off its interest rate. What is the best way?

Answer 1

I don't know how old you are, but living off the interest only on $1,000,000 won't get you far with current interest rates around 3.5%. That's $35,000 a year BEFORE taxes (which Obama has promised to raise). Even if you could live off that today, 10, 20, 30 years from now it won't be enough. You need a lot more. A million dollars just isn't what is use to be.

Answer 2

The answer is it depends;  on your family size, your present age,  your home city & state, income taxes, health, and your quality of life.

For a family of four living in, say Seattle, with kids not yet in college,  $50-$60 K would be a bare minimum.  

If you are a senior citizen with spouse in Orlando, perhaps $35K + Social Security would be adequate.

To live off interest, you cannot afford to risk the principal; therefore they need to be in safe investment vehicles like Money Market Accounts, or Bonds.  Interest rates on these are woefully low, about 3-4% at most, giving you no more than $40K on a million.

If you need to get more, you will have to increase the risk and add dividend stocks, or REITs, or the like.  You could add ETFs or Mutual Funds.  Whatever you choose, the level of risk increases.  But you may get 6-7% off such a portfolio.

Weigh your options, and go to the library and get a good book on investments.  Then make the most educated decision based on your requirements and risk tolerance level.

Good Luck!