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3 answers

First off, a single CD account is only insured for $100,000, so it would be wise to have 10 different CD accounts in different banks totalling $1,000,000. At 5% APR, the total annual income would be $50,000 or $4166.66 a month.

At the marginal tax rate of 28%, you would pay $14,000. Of course, this figure could be lowered by exemptions and deductions.

2007-07-19 05:42:15 · answer #1 · answered by Alison P 1 · 1 0

A check of 1 year CDs today indicated that you could expect an interest rate of 5.20% (interest paid at maturity).

$52,000 per year or $4,333.33 per month. Some CDs pay interest monthly, but at a slightly lower rate of about 5.00% to 5.10% ($4,166.66 to $4,250.00 per month).

A single person, less than 65, with no other income other than $52,000/yr in interest would have paid in 2006 $7,451 in federal income tax. If the person lived in a state with no state income taxes, that would be the total tax due.

$52,000 - $7,541 tax = $44,549 per year or $3,712.42 per month.

Due to the limit on FDIC insurance ($100,000) you would probably want 10 different CDs from 10 different banks.

2007-07-19 07:50:51 · answer #2 · answered by skipper 7 · 0 0

That depends upon the interest rate and how often the interest is compounded. At 3% simple interest you'd earn $30k per year or $2,500 per month. That is ordinary income so the tax will depend upon your tax bracket.

2007-07-19 05:27:55 · answer #3 · answered by Bostonian In MO 7 · 1 0

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