taken care of? That’s how much interest you get with 1 million euros

Saving money is playing an increasingly important role. Because: The European Central Bank (ECB) has initiated the turnaround in interest rates. That’s why more and more banks are jumping on the interest rate train. But: Can you actually live off the interest on an investment of one million euros? A theoretical calculation example.

“One million is enough”: A few years ago, this or something similar was still the phrase used when it came to the subject of interest and savings. Since then, however, the financial world has turned around. In the meantime, zero interest rates or even negative interest rates have dominated the industry.

But now the European Central Bank (ECB) – to counteract inflation – the turnaround in interest rates initiated. The key interest rate is currently back at 3.5 percent (as of April 2023). More and more banks are therefore gradually jumping on the interest rate train. But is the phrase correct: “One million is enough”?

Call money account vs. fixed deposit account

Fixed-term deposit or call money account: That is the first question. Depending on the investment amount, the truth probably lies somewhere in the middle. Because both austerity measures currently promise relatively lucrative returns. But the differences are complex and essential.

The interest on a fixed deposit account is usually a little higher – German banks now pay up to three percent fixed deposit interest – the European ones even up to 3.5 percent. But there’s a catch: With a fixed-term deposit account, you entrust your money to the bank for a fixed period of time.

Only then do you receive the interest. However, you cannot access your money during this period. It’s different with a money market account: The interest rates are a bit lower – ideally they are currently around two percent. However, you can access your money at any time. If the investment amount falls, the returns are logically lower.

Interest: The returns with a million euros

However, if you want to invest a million euros in order to benefit from the current interest rates, you have to consider a few other important aspects. Because most banks and brokers link both daily and time deposit accounts to a minimum and maximum deposit.

The latter is likely to be the more decisive factor with an investment amount of one million euros. Most banks do not insist on a minimum deposit when it comes to money market accounts. With a time deposit account, many banks often charge a four-digit or five-digit thousand amount for the higher interest rates.

But to invest one million euros, the maximum deposit plays the decisive role. Because this is currently 50,000 euros to 100,000 euros for almost all call money accounts. With a time deposit account, the maximum deposit is often somewhat higher. However, there are limits there too. These are currently often between 100,000 and 500,000 euros.

Investing a million euros: Can you live off the interest?

In order to determine the interest for an investment amount of one million euros, the calculation can currently be of a more theoretical nature. If we assume a possible maximum deposit of one million euros, the bottom line is 20,000 euros per year for a call money account with two percent interest.

With a corresponding fixed deposit account with three percent interest, it would be 30,000 euros per year. Of course, whether you can make a living from it depends on your individual needs and circumstances. However, there is one decisive factor: the issue of taxes.

Because interest falls withholding tax at. And the legislator also requires a flat rate of 25 percent capital gains tax on dividends, profits from the sale of securities and the like. In addition, there is always a 5.5 percent tax as a solidarity surcharge. In concrete terms, this means that the tax deduction is usually 26.38 percent. With church tax, it is even 27.82 or 27.99 percent, depending on the federal state.

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