William Huston, AIF®, AIFA®

How to Invest 2 Million Dollars for Income

William Huston, AIF®, AIFA®

William Huston, AIF®, AIFA®

How to Invest 2 Million Dollars for Income

Just hit your $2 million savings target? Just sold your business? Just inherited that money? Or, perhaps, just won a lottery?

You've got 2 million dollars in your account right now. Congratulations on accumulating that wealth!

millions of dollars savings

Now, the big questions: What do you do with it? How do you use that 2 million dollars to generate even more income for yourself? How can you invest it to generate a steady income stream?

Investing such a large sum of money can be overwhelming, but with the right strategies and guidance, you can make the most of your wealth and secure a comfortable financial future.

In this blog, we'll explore various investment options and provide you with expert insights on how to invest 2 million dollars for income. Let's go through step by step on how best you can convert that money to sustainable income.

Key Takeaways
  • Consulting with a financial advisor, diversifying your portfolio, and rebalancing your portfolio occasionally are three important investment rules
  • Generating ample regular income to live off from 2 million dollars investment is dependent on type, duration and market conditions of investments
  • Lifestyle choices, spending habits, and inflation determine if a person can live off of a 2-million dollar investment portfolio through retirement
  • Annuities, bonds, real estate and exchange traded-funds are good options to have in your portfolio

The contents of this article are for educational purposes only. They are not intended to serve as a source of professional financial advice. Find experts on real estate, financial planning and wealth management here. More on disclaimer here.

3 Golden Rules of Investing

man sorting out investment funds and proceeds
Check in With a Financial Advisor or Wealth Manager

Before you think of splurging or investing that 2 million dollars, check in with a financial advisor or wealth manager. They will guide you on how best to manage your money and make it work for you long term. Even after you've come up with a clear investment plan and executed it, be sure to regularly check in with your advisor just to make sure that you stay on top of things in order to hit your financial goals.

Diversify Your Investment Portfolio

Every investment that you make is a risk as that's the nature of the industry. However, you can mitigate these risks by diversifying your investments depending on your investment strategy. As the popular saying goes, don't put all your eggs in one basket. The same principle applies when it comes to investing. Allocate different assets in different investment vehicles so that you maximize your gains while minimizing your risks.

Rebalance Your Portfolio Occasionally

With the ever changing market rates, it is important that you do regular check ins on your money so that you make sure that you're not overemphasizing on one asset category while ignoring the others. This will help you monitor your assets easily while minimizing your risks.

How Much Income Will 2 Million Generate?

The amount of income that 2 million dollars can generate depends on various factors, such as the type of investment, the duration of the investment, and the prevailing market conditions. Generally, a diversified investment portfolio that includes a mix of stocks, bonds, and other income-generating assets can yield an average annual return of around 4% to 6%.

Based on this, a 2 million dollar investment portfolio could potentially generate an annual income of $80,000 to $120,000. However, it's important to note that investment returns are not guaranteed, and there is always a risk of losing some or all of the principal investment. Additionally, taxes and other fees may also affect the net income generated by an investment portfolio.

Therefore, it's crucial to consult with a financial advisor who can help you create a personalized investment plan based on your financial goals, risk tolerance, and overall financial situation. Connect with a knowledgeable financial advisor today and start making smart investment decisions.

Can You Live off of 2 Million in Investments?

happy couple beginning life in a new home purchased with investments

Whether or not you can live off of 2 million in investments depends on your lifestyle, spending habits, and other financial factors.

Assuming a 4% withdrawal rate, a 2 million dollar investment portfolio could potentially provide an annual income of $80,000. However, this amount may not be sufficient for some individuals or families to cover their living expenses, especially if they have high living costs or live in an expensive area. On the other hand, individuals with lower expenses and a more frugal lifestyle may be able to live comfortably on this income.

It's also important to consider that investment returns are not guaranteed, and market fluctuations can impact the value of your investment portfolio. Therefore, it's crucial to work with a financial advisor who can help you create a comprehensive financial plan that takes into account your income needs, investment goals, and risk tolerance.

How Long will $2 Million Last in Retirement?

2 million dollars can last you more than a decade or two, but these all depends on several factors. The duration that $2 million will last in retirement depends on various factors, such as the individual's spending habits, investment returns, and inflation.

Assuming an annual withdrawal rate of 4%, which is a commonly recommended safe withdrawal rate, a $2 million portfolio could potentially provide an annual income of $80,000. This means that if an individual spends $80,000 per year, their portfolio could potentially last for around 25 years.

However, if the individual withdraws more than 4% annually, the portfolio could potentially run out of funds sooner. Moreover, if there are significant market downturns or unexpected expenses, it could also impact the portfolio's longevity.

It's important to note that retirement planning is a complex process that requires a personalized approach. It's crucial to work with a retirement planning advisor who can help you create a comprehensive financial plan that takes into account your income needs, investment goals, and risk tolerance.

Regular reviews and adjustments to the plan may also be necessary to ensure that it remains on track to meet your financial goals throughout retirement.

Smart Investment Strategies

If you have $2 million at your disposal, here are some smart ways that you can invest for income.

meeting between an investor and a financial advisor

An annuity is a type of insurance policy where you pay periodic premiums or a lump sum payment and then in return, you receive regular payments right away or at a a specified duration in the future.

The payments may last till the day you pass away or for a predetermined period. This is all dependent on the type of annuity that you have as there are different types.

If you're looking for a low risk but also low growth investment, this is a good option for you.


Bonds are structured debt sold by the federal government/ its agencies and municipal governments to raise funds. Usually, the interest is tax free. They are a preferred type of investment by many because of their stable nature and interest payments.

To get started, investors purchase bonds by paying a principal, which is an upfront initial investment. When the bond matures/ expires, the investors are paid back their principal amount. Periodically, investors usually receive a fixed interest payment from the institution that issued the bond.

The prices for bonds usually depend on the length of maturity, interest rates and rating.

Dividend Stocks

For investors looking for regular income, dividend stocks are a great choice. Dividend stocks are companies that pay dividends or distribute a portion of the income generated by a company to their investors on a regular basis. Some investors may choose to continue building their portfolios by re-investing their dividends to buy more shares.

Well established companies are the ones that tend to pay dividends to their investors. This type of investment can add some stability to your investment portfolio and they are generally considered low risk.

It is important to note that dividend amounts can fluctuate depending on the profits made by the company as well as the fluctuation of the prices of shares. Also, dividend stocks are subject to double taxation as the corporations usually pay tax on their earnings before paying out the dividends, and then the individual investors also pay additional tax on the income earned.

Before dividends are paid out, they are usually approved by the company's board who also have the power to cancel dividends.

Exchange-Traded Funds (ETFs)

Exchange-traded funds are a pool of investments like stocks or bonds that let individuals invest in multiple securities all at the same time. They are packaged into individual shares that trade like regular stock in the stock market.

How ETFs work is that the provider of the fund remains the owner of all the underlying assets. The fund provider is the one who sells shares to investors and tracks their performances. This therefore means that the shareholders only own a portion of the ETF but not the underlying assets. Shareholders are entitled to a share of the profits, such as interest or dividends periodically.

ETFs often have lower fees than other types of funds and are traded more easily too.

Master Limited Partnerships (MLPs)

A master limited partnership (MLPs) is an investment option that is publicly traded on an exchange. MLPs offer a combination of tax benefits of a private partnership with the liquidity that publicly traded securities like bonds and stocks offer.

It is also important to note that MLPs are limited to companies in the natural resources and real estate sectors.

If you're an investor looking for an investment option with high yields, MLPs are something that you should consider as the earnings are taxed only once. MLP distributions are similar to the dividends from a dividend-paying stock or mutual fund.

You can invest in MLPs directly or through funds.

Preferred Stocks

Having stock in a company means that you have equity or some percentage of ownership in a company or firm.

Preferred stocks differ from common stocks as dividends for preferred stocks have a fixed interest rate and dividends for these stocks are usually paid out before those for common stocks.

When it comes to dividends, preferred stocks generally have higher yields than common stocks and can be paid on a monthly or quarterly basis. The interest rates for preferred stocks are usually benchmark rates used by the London Interbank Offered Rate (LIBOR).

Peer-to-Peer Lending

Peer-to-peer (P2P) lending, also known as “social lending” or “crowd lending" is a form of lending that uses money from individual investors to directly loan to other individuals. This makes things easier as it cuts out the middleman.

For P2P lending, the returns can be great but the risks are higher especially because of defaulters who may not pay back their loans. Another thing to look out for is the fees charged on the different transactions.

Real Estate

Another way that you could invest your 2 million dollars is by purchasing rental property. This type of investment can offer high returns if you choose the right market.

Real estate investing can offer you financial security as there is monthly cash flow. Many investors see real estate investing as a great option as there is guaranteed income and with this, you can be able to afford the lifestyle that you want.

Real Estate Investment Trusts (REITs)

A REIT is a company that owns or manages commercial real estate that is income producing. They can manage the property itself or the mortgage on that property.

REITs are a good investment choice for people who want to invest in rentals that generate income or own the mortgage on such property without having to own rental property. Generally REITs focus on residential and commercial real estate but you can also find hybrids that combine a variety of assets. If you're looking to purchase REIT shares, you can do so through a company or a fund.

Overall, REITs are a good investment option if one of your priorities is portfolio diversification as they offer high returns and the risks are lower.

Other Securities

Low cost index funds is another investment vehicle that doesn't even require a million dollars to purchase. Low-cost alternatives are available to acquire a diversified portfolio that tracks an index passively.

Secure Your Future

Investing 2 million dollars wisely can secure your financial future and provide you with a steady income stream, but it's crucial to make informed decisions.

Take the first step towards financial freedom and consult with a reputable financial advisor who can help you create a comprehensive investment plan tailored to your needs, goals, and risk tolerance.

Don't let this opportunity slip away, start your journey towards financial success today! Connect with a knowledgeable financial advisor today and start making smart investment decisions.

Bay Street Capital Holdings

Bay Street Capital Holdings

Bay Street Capital Holdings is an independent investment advisory, wealth management, and financial planning firm headquartered in Palo Alto, CA. They manage portfolios with the goal of maintaining and increasing total assets and income with a high priority on managing total risk and volatility. Although many advisors may focus on maximizing returns, they place a higher priority on managing total risk and volatility.

Our founder, William Huston founded Bay Street after 13 years of supporting the United States' largest retirement plan ($650B) Thrift Savings Plan. He is recognized as Investopedia’s Top 100 Financial Advisors for 2021. In California, only two black-owned firms out of nineteen firms received this recognition.

In Scottsdale Arizona, Ekenna Anya-Gafu CFP, AAMS is recognized among the Best Financial Advisors for his responsiveness, friendliness, helpfulness, and detail. Bay Street was founded to advocate for diverse and emerging fund managers and entrepreneurs. In 2021, Bay Street was selected as a finalist out of over 900 firms across the US in the category of Asset Manager for Corporate Social Responsibility (CSR).

Are you interested in talking to a financial partner to guide you through your investment options? Schedule a meeting with Bay Street today to review the best investment options that fit your financial goals.













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