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?

At 5.1% yield, $1.1M in Treasuries plus Social Security generates roughly $93,000 annually, which barely covers his $93,600 in spending before taxes.

Selling the taxable account triggers $22,500 in capital gains taxes plus higher Medicare premiums, while fixed coupons lose roughly $14,000 in real purchasing power by year ten.

A smarter approach keeps appreciated stocks in the taxable account, buys Treasuries and TIPS inside the IRA, and avoids triggering taxes while preserving a step-up in basis for heirs.

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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.

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.

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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.