Dad Is 71 and Wants to Sell Every Stock, Put His $1.1 Million in 10-Year Treasuries Now That the Yield Is Above 5% and Live on the Interest. Is It a Crazy Idea?
A 71-year-old with $1.1 million is ready to sell every stock and lock in Treasury yields above 5%, and the income math actually works until you factor in the tax traps, Medicare surcharges, and a retirement that could stretch two…
An adult son is watching his 71-year-old father plan a clean exit from the stock market. Dad has a $700,000 IRA, a $400,000 taxable brokerage account with a $250,000 cost basis, and $3,100 a month from Social Security. With the 10-year Treasury yield above 5%, he wants to sell every stock, buy Treasuries, and live on the interest.
Plenty of retirees are thinking the same way. The Fed held rates steady as inflation hit a three-year high, and the chief executive of BNY (NYSE:BK) told Reuters that current 10-year yield levels have historical precedent. Locking in 5% feels like a safe place to stop worrying.
Does Dad’s Income Math Actually Work?
The 10-year yield stands at 5.1%. On $1.1 million, that’s about $56,000 a year. Add Social Security and total income is roughly $93,000. He spends $7,800 a month, or $93,600 a year. So the plan is reasonable on income alone. The trouble is that $93,000 is a fixed, pre-tax number, and the plan’s problems start there.
Five Leaks in the All-Treasury Plan
- Selling the taxable account first. That sale produces $150,000 of gain, roughly $22,500 at the 15% rate, plus the 3.8% net investment income tax because his income tops $200,000. Two years later, Medicare bills him for it. Single taxpayers above $109,000 pay Part B premiums of $284.10 to $649.20 a month, up from the standard $202.90.
- Treasury interest is taxed. It counts as ordinary income. States can’t tax it, but the IRS taxes it fully, and adding $56,000 in interest on top of his benefits pushes 85% of his Social Security into taxable income. For 2026, single taxpayers pay 22% on income over $50,400.
- Inflation shrinks a fixed coupon. At 3% inflation, $56,000 is worth about $42,000 in today’s dollars by year ten. His spending keeps rising while the checks stay flat.
- Reinvestment risk. In ten years, the bonds mature at whatever rates exist then. The 10-year went from 5.3% to 5.1% in about two weeks this month, showing how quickly income on new money can shrink.
- RMDs arrive anyway. Required minimum distributions start at age 73, and on a $700,000 IRA the first one is about $26,000, taxable whether he needs it or not.
Why Inflation Is Dad’s Biggest Risk
A 71-year-old in good health could easily live into his 90s, spanning two full Treasury maturity dates of fixed income against rising prices. Social Security adjusts for inflation, with a 3.6% COLA set for 2027. His Treasury coupons never adjust.
The market is telling you the same thing. The 10-year TIPS (Treasury Inflation-Protected Securities, whose principal rises with CPI) yield 2.7% above inflation. The gap between that and the 5.1% nominal yield is the inflation he is quietly taking on.
A Version of Dad’s Plan That Works
Dad’s instinct to take less risk is sound for a 71-year-old, and the order of execution determines how well it works. Here is the order that keeps most of the safety and avoids the tax damage:
- Buy Treasuries inside the IRA. Selling stocks there triggers no tax. At current yields, $700,000 returns about $35,630 a year, and a ladder of maturity dates can line up with his RMDs. Putting part of it in TIPS protects against inflation.
- Keep the stock. It is appreciated and taxable. When he dies, his heirs get a step-up in basis (the cost basis resets to the value on the date of death), and the $150,000 gain simply goes away. Selling now turns that gain into a tax bill and higher Medicare premiums.
- Keep 30% to 40% in stocks. The taxable account alone is about 36% of his money, so it can serve as his stock allocation. Dividends supplement income, and growth hedges against inflation in his 80s.
The tradeoff is that Dad keeps some exposure to market swings, but with a Treasury ladder and Social Security covering most of his spending, a bad market year won’t affect his bills.
What Dad Should Do Before Selling Anything
Start by running the Treasury-only plan year by year with 3% inflation and federal taxes built in. If his inflation-adjusted income falls well short of $7,800 a month by his early 80s, that settles the question. This is where professional advice earns its keep: modeling taxes, IRMAA, and inflation together over 20 years is hard to do on a napkin, and one sale in the wrong order can cost more than $22,500.
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David Beren has been a Flywheel Publishing contributor since 2022. Writing for 24/7 Wall St. since 2023, David loves to write about topics of all shapes and sizes. As a technology expert, David focuses heavily on consumer electronics brands, automobiles, and general technology. He has previously written for LifeWire, formerly About.com. As a part-time freelance writer, David’s “day job” has been working on and leading social media for multiple Fortune 100 brands. David loves the flexibility of this field and its ability to reach customers exactly where they like to spend their time. Additionally, David previously published his own blog, TmoNews.com, which reached 3 million readers in its first year. In addition to freelance and social media work, David loves to spend time with his family and children and relive the glory days of video game consoles by playing any retro game console he can get his hands on.
