The 5% Treasuries Will Go in His Roth and the Stocks in His IRA. Over 20 Years That Will Be the Most Expensive Decision He Never Noticed
Putting safe Treasuries in the Roth feels like protecting tax-free growth, but that instinct quietly works against the account's biggest advantage. The order he chose matters more than the investments themselves.
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He’s 60, with about $250,000 in a Roth IRA and another $250,000 in a traditional IRA. Treasuries are paying around 5%, so he wants to lock that safe yield into the Roth, where the interest will never be taxed. The stocks go in the traditional IRA. It feels tidy and conservative. Lots of retirees set things up this way, and over 20 years it can quietly cost six figures.
The yield he’s counting on is real. On October 27, 2026, the 10-year Treasury yielded 5.0%, and the 20-year yielded 5.3%. That’s close to the 5% in the headline, with the 20-year a bit higher. Yields also drifted lower this month, as the 20-year was at 5.7% on October 7.
Which Account Holds What Matters as Much as What He Owns
A Roth grows tax-free, and qualified withdrawals, meaning those taken after age 59½ once the account is five years old, shall not be includible in gross income under 26 U.S.C. § 408A(d)(2). Roth owners also aren’t required to take distributions from your Roth IRA at any age.
A traditional IRA works differently. Taxes are deferred, but every dollar you take out counts as taxable income under 26 U.S.C. § 408(d)(1).
Here’s the simplest way to picture it. In a traditional IRA, the government effectively owns a piece of whatever the account grows to. Put the faster-growing investment there, and the government’s piece grows right along with it. Put that same investment in the Roth, and all the growth stays his.
Running 20 Years of Numbers Both Ways
The assumptions are simple: $250,000 in each account, Treasuries making 5% a year, stocks averaging 8% a year, everything reinvested, and a 24% tax rate on traditional IRA withdrawals. Under his plan, the Treasuries in the Roth grow to about $663,000, all tax-free. The stocks in the IRA grow to about $1.17 million, but the IRS takes roughly $280,000. After tax, he ends up with around $1.55 million.
Switch it, with stocks in the Roth and Treasuries in the IRA, and the after-tax total comes to about $1.67 million. The government’s piece drops to roughly $159,000. That’s a gap of about $120,000, and he owns the exact same investments either way.
Everything here depends on stocks actually beating Treasuries, and that isn’t guaranteed. If both make the same return, the gap goes away.
Bigger IRA, Bigger Forced Withdrawals
Required minimum distributions, or RMDs, are the annual withdrawals the IRS forces from traditional IRAs. For someone who turns 74 after 2032 (which covers a 60-year-old today), RMDs start at age 75. If you fill the IRA with stocks, it grows faster, so your RMDs get bigger too.
These actions can also raise Medicare costs. Medicare charges extra premiums, called IRMAA, once income exceeds $109,000 for single filers or $218,000 for joint filers. Part B costs $202.90 a month at the standard rate and can rise to $689.90, plus Part D surcharges.
A bigger Roth helps heirs instead. Withdrawals to a beneficiary after the owner dies count as qualified distributions, and most non-spouse heirs must empty the account by the end of the 10th year after death.
When Keeping Treasuries in the Roth Is Defensible
If he expects to spend that safe money in the next few years, or chooses to keep it stable, the long-run gap matters less. If stocks lag, it shrinks or even reverses.
There’s also a third home to consider. Treasury interest is subject to federal tax but no state or local taxes. In a high-tax state, a regular taxable brokerage account can be a reasonable place for Treasuries, which frees up both IRAs for stocks.
Fixing It Costs Nothing in Taxes
An IRA is exempt from taxation under 26 U.S.C. § 408(e)(1), and a Roth shall be treated the same way. So he can sell the Treasuries inside the Roth and buy stocks there, then do the reverse inside the traditional IRA. His overall mix stays the same, and neither trade creates a tax bill.
The broader point, that where you hold an asset can quietly cost six figures, is the same kind of trap we mapped across nine IRS rules in a free retiree tax trap guide.
One Question for Every Account
For each account he owns, he can ask: if this account doubles, who keeps the extra money? In the Roth, he keeps all of it. In the traditional IRA, the IRS takes a cut. The goal is to choose investments based on which one is most likely to grow.
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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.
