How to Invest Over a Million Dollars

Before you get $1 million, it doesn't seem like it would be all that difficult to deal with the asset. However, if you have suddenly found yourself with a million dollars through a settlement, inheritance or even a lottery winning, investing the money may leave you in unfamiliar territory. Financial advisers from banks, brokerage houses and insurance companies will woo you with what they tout as the perfect investment, each investment different from the next. Don't let the sales pitches confuse you. Approach this asset systematically to find the right asset allocation that fits your investment objectives.

Talk to a tax adviser about any tax consequences you have from getting the money. While life insurance and certain types of lawsuit settlements are tax-free, others such as an inheritance from an IRA may have both estate transfer and income taxes associated with the money. Find out how much the tax bill amounts to and set that money aside in a time certificate or savings account available when the taxes are due.

Establish how much risk you are willing to take with the money. Your risk tolerance is determined by the time frame you plan on investing the money and your comfort level with investment fluctuations.

Write an asset-allocation plan. This can be a pie chart or table breaking down what percentages of the money you want to go into certain asset classes. For example, the 401(k) Help Center suggest those under the age of 40 place all assets for retirement in equities, breaking the 100 percent down into 40 percent large cap stocks, 25 percent in small cap stocks, 25 percent in value funds and 10 percent in international stocks or funds.

Discuss with your tax adviser your annual tax scenario based on your existing income and investments. If increasing taxes is a major concern, deferred annuity products or tax-free municipal bonds should become an option with a portion of the money. Deferred annuities come in fixed and variable forms, allowing you to create the asset-allocation mix you desire.

Consider investments outside of the stock market such as real estate. Using part of the $1 million to purchase rental properties is another way to diversify your portfolio.


  • Annuities defer taxes on the earnings until the money is distributed. Distributions after age 59-1/2 have earnings added to gross income while distributions prior to this age are added to gross income and penalized 10 percent by the Internal Revenue Service.


  • Be leery of any investment adviser offering you one product as the perfect solution for all your investment needs. Certain products such as variable annuities offer high commissions to brokers and are heavily watched by the Securities and Exchange Commission for inappropriate sales.