What to Do With 5 Million Dollars

What if I snapped my fingers and granted you a $5 million net worth lifestyle? Where does your imagination take you? Are you twirling (head up, eyes closed, arms out, the whole deal) in your swanky executive home? Are you traveling the world in first class? Or maybe you’re on the bow of your mega-yacht, letting the sun hit your face and the wind blow through your hair? Dang, that $5 million lifestyle is looking pretty sweet—if all of those things were true, that is.

What is it really like to have a net worth of 5 million dollars? Can you have a massive house, travel the world, and lounge on your private yacht once in a while? I don’t want to spoil this entire article, but let’s just say you can’t do all those things.

You’ll likely have to be more selective than that—even with 5 million dollars.

In addition to answering the question, “How much is 5 million dollars?”, we’ll also discuss and explore:

• How many people have 5 million dollars (and are you rich if you have $5 million)?
• Actual lifestyles of people that have a net worth of $5 million.
• How to save 5 million dollars?
• What to do with 5 million dollars (i.e., how to invest it and make it last)?

And, perhaps most importantly, “Can you live off 5 million dollars?”or do you need more to live the life you want?

If you’re interested in a 5-million-dollar lifestyle, you might also enjoy the following posts:

And perhaps—if you’re just getting started on your journey—the Best Debt Snowball Spreadsheet and the Best Budgeting Templates.

How Much Is 5 Million Dollars? Is It a Lot of Money?

A lump sum of 5 million dollars sounds like a dream come true. And, to be fair, it’s far more than most people will ever have. But is $5 million a lot of money?

5 million dollars in cash—what does it look like?

Ever watch those movies where bad guys walk around with a million dollars in a briefcase? Is that actually real? Could a million dollars really fit in that small of a space?

What about $5 million? What does that look like? 

Surprisingly, the movies are fairly accurate. I bet you could actually fit a million bucks into a thick briefcase. This means that $5 million is roughly five briefcases worth of cash.

Looking for alternative ways to build wealth?

The stock market is volatile and shouldn’t be your sole investment strategy. Consider adding these top alternative investments to your portfolio:

How many people have 5 million dollars?

Honestly, I thought $5 million in cash would look more impressive than it does (you can prove me wrong by sending the said amount to my address).

But is it still an inordinate amount of money in practice? I mean, how many people can actually say they have a $5 million net worth?

The 2020 Federal Reserve Survey of Consumer Finances (the most recent study we have until late 2023), says that those that have a $5 million net worth are in the upper 3% of all households in America.

The estimated number of households in the US is 128 million, which means that approximately 3.8 million households have a net worth over $5,000,000.

Does a $5 million net worth make you a VHNW individual?

A very high net worth individual (VHNWI) is someone who has a net worth of $5 million, excluding personal assets and property. So, if your net worth is $5,000,000 without including the value of your home and land, you would be considered a VHNWI.

Is $5 million rich?

If you have a net worth of 5 million dollars, you are in the upper 3% of Americans. You can also divide investable wealth into three tiers:

• Millionaires: $1 to $5 million
• Mid-tier millionaires: $5 million to $30 million
• Ultra millionaires: over $30 million

Meaning, if you were in a room of a hundred people, you’d likely be the 3rd richest person in the room. (I’d consider that rich.)

How much is 5 million dollars after taxes?

A wise individual always thinks in terms of net dollars. In other words, what is their money worth after taxes?

If your money is in long-term investments, your tax bracket will likely be 15%. This means that after tax, your $5 million will be cut down to $4.25 million.

If you’re pulling money out of a retirement account, your withdrawals will be taxed at an ordinary income rate. For example, if you pull out $200,000 a year as a married couple filing jointly, you’ll put yourself in the 24% tax bracket.

Since we have a graduated bracket system in America, the net tax percentage calculates to 16.8% (I could dive more deeply into this—but that’s not what this article is about, so just trust me on that percentage, okay?).

This means that $5,000,000—when withdrawn $200,000 at a time—is worth approximately $4.16 million. Still, not too shabby.

(Interested in learning more about net income and tax brackets? All income tax rates can be found at IRS.gov.)

How Much Interest Would You Earn on $5 Million?

Rather than thinking about how little your pile of money might be worth after taxes, let flip the script and consider what can be earned with 5 million dollars—

Yearly interest on 5 million dollars

Based on my research and my experience, you can expect to get the following rates for the respective investments:

• Savings: 2%
• Certificate of Deposit: 4%
• Annuity: 6%
• Real Estate: 8%
• S&P 500 Index Fund: 10%

The real estate percentage is my estimate based on the high price of homes today (and FYI, rental rates have not yet caught up with housing prices). And, the S&P 500 is based on the historical average when including dividend reinvestment.

Given the above information, what is the interest on 5 million dollars annually? 

• With a 2% savings account: $100,000 a year
• 4% Certificate of Deposit: $200,000 a year
• 6% annuity: $300,000 a year
• 8% real estate: $400,000 a year
• And, 10% in S&P 500: $500,000 per year

Now that’s a decent chunk of change right there—

Monthly interest on 5 million dollars

This is what you can expect to earn per month with $5 million

• With a 2% savings account: $8,333 a month
• 4% Certificate of Deposit: $16,667 a month
• 6% annuity: $25,000 a month
• 8% real estate: $33,333 a month
• And, 10% in S&P 500: $41,667 a month

The multi-millionaire author of ESIMoney.com said it well, “The assets themselves provide an income which allows us to both spend a considerable amount each year ($100k) and give away that much as well.”

$5 Million Net Worth Lifestyle—What Does It Actually Look Like?

With the help of ESI Money, we found a group of actual people that have a net worth of 5 million dollars. Fourteen of them to be exact. They’re the mentors behind the Millionaire Money Mentors, a team of people that advise other aspiring millionaires.

We asked them two main questions:

1. Do you consider $5 million net worth as rich? What kind of lifestyle does it lend you?
2. For those that aspire to earn a $5 million net worth, what do you suggest they do?

Their answers may surprise you—

What can you do with 5 million dollars?

When most people visualize multi-millionaires, they’re picturing yachts, mega-mansions, and expensive dinners out every night. This isn’t the case for those in the $5 million net worth category:

“To me, I always envisioned rich guys like the Duke brothers in the movie Trading Places. Numbers on paper may say we are technically rich, but I don’t feel that way at all.”

Another respondent had similar sentiments:

“$5 million allows for a comfortable lifestyle that is not encumbered by concerns about money. But, it also depends upon your definition of rich. $5 million doesn’t pay for the life of the 0.1%—an estate, a staff, a yacht, private air travel, etc.”

So what is it like to have a $5,000,000 net worth lifestyle?

“We can afford the major home-improvement projects, fly first class whenever it makes sense to us, buy quality groceries without checking prices or coupons, and tip generously.”

It’s a pretty sweet life. Not the swanky life of the rich and famous, but a great life nonetheless.

What can you buy with 5 million dollars?

If you have 5 million bucks, you could buy:

• A 7-bedroom, 5-bath house directly on the shores of Lake Michigan (value: $1.65 million)
• A brand-new Ferrari F8 Tributo (value: $280,000)
• Porsche Macan SUV (value: $100,000)
• Brand new 50′ Cruisers Yacht (value: $1.8 million)
• Cottage away from home with acreage (value: $1 million)

And you’d still have $170,000 for stocking stuffers.

But here’s the thing. No one that has $5 million will actually buy all of these things.

And why not?

Because then they’d have nothing left—

If you want a mansion, fancy cars, a cottage, and a yacht, then you should probably have a net worth of $10 million, if not more.

Can you live off 5 million dollars?

This is a no-brainer. Yes, you can retire comfortably with $5 million and live anywhere in the world. However, you have to invest and spend wisely to make the money last.

Placing 5 million dollars into a savings account and spending $100,000 a year should be enough for fifty years of retirement.

Can you live off the interest of 5 million dollars?

What if you wanted to keep the $5 million whole and only live off the interest it produced? Could you do that with $5 million?

Easily.

Remember our calculations above? If you earned just 2% on your money, that would produce $100,000 a year in income. And again, no matter where you live in this world, you could likely survive on $100,000.

Don’t want to “suffer through life” on just $100,000? Earn 4% on your money (still very doable) and you could live on the interest of $200,000 a year instead.

How to Get 5 Million Dollars

Do you think a $5 million net worth lifestyle is for you? Then the next question you should be asking is, “How do I get it?”

Out of the 14 mentors we interviewed, they made their money via three different avenues:

1. Inheritance (1 of them).
2. Starting their own business, working hard, and earning as much as possible (4 of them).
3. Finding a good paying job, living on far less than they made, and investing early (9 of them).

We obviously can’t choose to receive a massive inheritance (unless you’re trying to marry into it—which I wouldn’t recommend)—so you’re really left with two choices, either #2 or #3.

How to save 5 million dollars in 20 years

Based on the conversations I have with people, I’d say that only a few want to work their butts off in their own businesses to make their wealth.

Instead, most are interested in earning a decent paycheck, living somewhat frugally, and investing over time so they can continue to live a fairly normal and carefree life while they do it.

Makes sense to me.

So how do you do this? How much do you have to put away each month to accumulate $5 million in twenty years?

According to my free investment calculator tool, if you stashed away $6,600 a month and earned 10% interest, you’d be worth 5 million dollars in twenty years. That’s a big chunk of change each month, but that’s what it’s going to take if you want to be in the top 3% wealth bracket.

How to Invest 5 Million Dollars

Let’s say you’ve accumulated your wealth. What do you do with it? What’s the best way to invest 5 million dollars?

At this point—once you’ve got $5 million—you’re really looking just to maintain your wealth and live off the interest. To do this, you first need to decide how much you’d like to spend each year. This will dictate how much you need to earn. 

• For a $200,000/year lifestyle, you’ll need to earn 4% on $5 million.
• For a $300,000/year lifestyle, you’ll need to earn 6%.

So what can you do with 5 million dollars, and what’s the best way to earn between 4% and 6% on your money?

High-Yield Savings Accounts

A high-yield savings account is a type of savings account that rewards you with a higher interest rate—typically 20 to 25 times more than the typical savings account.

Having a high-yield savings account allows your money to grow without risks, as you don’t need to stress about risks associated with market volatility.

Certificate of Deposit (CD)

A Certificate of Deposit (CD) is a type of savings account that holds a lump sum of money for a fixed time period—usually from three months to five years.

CDs are fully insured and come with a fixed interest rate which has higher rates than typical savings accounts. However, the higher rates come in exchange for not accessing your money until the fixed withdrawal date. 

Corporate Bonds

A corporate bond is a debt obligation, like an IOU, which is issued by cooperations and sold to investors.

By purchasing the bond, the investor is lending money to the cooperation that has issued the bond. In doing so, the cooperation makes a legal commitment to pay interest on the bond once it expires. 

Treasury Bonds

You can purchase treasury bonds for a term of 20 or 30 years. Treasury bonds come with a minimum $100 purchase and a maximum of $10 million.

Interest rates are fixed at auction and are paid every six months until it reaches maturity; however, you also have the option to sell the bond before it matures. 

Dividend stocks

Dividend stocks represent the payments companies reward their shareholders to share their profits.

Dividends are paid out regularly by companies that have a good reputation for distributing their earnings back to shareholders. Dividend stocks are a smart way for investors to earn a return on their stocks. 

Annuities

If you’d like to get more aggressive with your investments (higher risk, but greater rewards), you could also invest in:

What Would You Do With 5 Million Dollars?

What if you had $5 million? What would you do with it?

I’ll tell you what I’d do (as if you care, but I’m going to pretend you’d humor me anyway). I’d personally change nothing in my day-to-day life. I’d still run this website because I freaking love it.

But, I’d probably splurge on a few things and do the following:

• Finish our basement.
• Add a master suite addition above our garage.
• Build a pole barn onto our property (mainly for my golf simulator).
• And, my wife will certainly petition for a few horses, so we’d get some of those too.

All this would probably cost $500,000, so I’d still have $4.5 million left. I imagine we’d also buy a cottage in northern Michigan (it’s our favorite place to be).

Beyond that, I’d safely invest the rest. Some in real estate, some in index funds, and then probably a bunch in low-risk bonds.

What would you do if you had $5,000,000? Would you blow it all? Would you invest it all? Tell me in the comments below.

Are You Targeting a $5 Million Net Worth Lifestyle? How Will You Achieve It?

Do you aspire to have a $5 million net worth? What are you waiting for? Go out there and get it!