Mom Is 73 and Wants to Sell the $1.4 Million House, Rent an Apartment and Live on 5% Treasury Interest. Is It a Crazy Idea?

A 73-year-old mother has a paid-off house worth $1.4 million. She wants to sell it, rent a comfortable apartment, and live on Treasury interest. At 5%, that’s $70,000 a year, or about $5,833 a month, without touching the principal. Her adult children worry the plan is reckless.

This is a conversation many families would immediately recognize, and one recent Reddit poster, a 60-year-old married retiree with a paid-off home worth around $1M, asked whether selling and renting made sense. For most people in Mom’s position, my answer is that the plan is sound. However, it has one weak spot in that it treats $70,000 as a fixed paycheck for life while her rent keeps rising.

Where a 5% Treasury Yield Actually Comes From Right Now

It’s hard to ignore that Treasury bills pay less than 5% today, while a 52-week bill only yields roughly 4.48%. If the whole $1.4 million sat in one-year bills, it would only produce about $62,720, and that rate resets every time the bills mature.

To get 5%, she has to buy longer bonds. The 5-year note yields 4.95%, the 7-year 5.03%, and the 10-year 5.13%. Bonds held to maturity lock in those rates. Her 5% target is realistic, but only if she commits money for seven to 10 years.

Taxes on the sale are probably manageable. A single filer can exclude up to $250,000 of gain under 26 U.S.C. § 121(b)(1), as long as she owned the home and lived in it for 2 years or more of the last five. If her late partner co-owned the house, part of its cost basis (the starting value used to calculate the taxable gain) probably reset to market value at death, which reduces the gain further. Treasury interest is federally taxable but generally exempt from state and local taxes, which gives it an edge over CDs in high-tax states.

Rising Rent Is What Can Break This Plan

Treasury coupons stay the same every year, while rent will undoubtedly go up. Let’s say mom signs a lease at $4,000 a month. That’s $48,000 a year, or about 69% of her $70,000 in interest. Over the past year, prices have risen about 4%. If her rent rises at that rate, it would rise from $4,000 to roughly $5,750 a month in a decade. At 83, rent alone would take nearly all of her Treasury income.

Social Security is her built-in inflation protection. Benefits rise 3.6% in 2027, and the average aged widow(er) will receive about $2,005 a month. That check should cover food, healthcare, and everything else besides rent.

Inflation-protected Treasuries (TIPS, whose principal rises with inflation) show what her money really earns. The 10-year TIPS yields 2.76% above inflation, or about $38,640 a year in today’s dollars on $1.4 million. That’s what she can spend while keeping her full purchasing power. Anything above it slowly uses up principal, which is acceptable at 73 if she does it on purpose.

Two Ways to Fund the Rental Years

As a result of this decision, Mom has two direct paths to choose from today.

Path 1: A Treasury ladder plus TIPS. A ladder means buying bonds that mature in different years. She would split the proceeds between regular Treasuries maturing each year from one to 10 years out and a meaningful portion of TIPS. This locks in today’s roughly 5% long-term rates and keeps cash coming due every year. It also lets some income rise with inflation. She should plan to spend small amounts of principal in her 80s. This path fits most people with similar needs.

Path 2: All short-term bills. This is the simplest option, but also arguably the worst. She would earn under 5% today, and her income would drop if rates fall. Short bills give her flexibility and leave her income exposed to falling rates.

On the one hand, her timing to sell looks good. The Case-Shiller national home price index hit its highest level in two years in July 2026, up 2% from a year earlier. Renting also ends property taxes, maintenance, and the work of keeping up a large house at an age when that work gets harder.

What Mom Should Settle Before She Lists the House

1. Run the rent test first. Starting rent should take roughly half of her Treasury interest or less. If the apartment she wants would use 70% or more, the plan only works if she draws down principal faster. Choose the apartment based on that number.
2. Know her cost basis before signing a listing agreement. If the expected gain exceeds the $250,000 exclusion, or a spouse’s death may have reset the basis, a few hours with a CPA can save five figures in tax. That’s a clear case where professional help pays for itself.

The mistake to avoid is putting everything in one-month bills and assuming 5% will last. A sounder plan locks in long-term rates for part of the money, protects another part against inflation with TIPS, and lets Social Security cover living costs as they rise.

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