From 24/7 Wall St. · David Beren · · 1m 30s
Mom Sells $1.4M House for 5% Treasury Interest
73-year-old mother sells home to rent apartment on 5% Treasury interest.
In brief
73-year-old mother sells home to rent apartment on 5% Treasury interest. A 73-year-old mother can sell her $1.4 million paid-off home, rent an apartment, and live on 5% Treasury interest without touching principal. Originally reported by 24/7 Wall St..
Selling Plan
A 73-year-old mother wants to sell her $1.4 million paid-off house, rent an apartment, and live on 5% Treasury interest without touching principal.
“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.”
Treasury Interest Math
At 5%, Treasury interest earns $70,000 annually or $5,833 monthly without touching principal.
“At 5%, that’s $70,000 a year, or about $5,833 a month, without touching the principal.”
Treasury Yield Reality
Treasury bills pay less than 5% today; 5-year notes yield 4.95%, 7-year 5.03%, and 10-year 5.13%.
“The 5-year note yields 4.95%, the 7-year 5.03%, and the 10-year 5.13%.”
Tax Considerations
Single filers can exclude up to $250,000 of gain under 26 U.S.C. § 121(b)(1) if owned for 2+ years.
“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.”
Rent vs. Interest
Rent rises 4% annually; at $4,000/month, it would reach $5,750/month in a decade.
“If her rent rises at that rate, it would rise from $4,000 to roughly $5,750 a month in a decade.”
Social Security
Social Security provides $2,005 monthly for aged widows, covering food and healthcare.
“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.”
Inflation-Protected Treasuries
10-year TIPS yield 2.76% above inflation, or $38,640 annually on $1.4 million.
“The 10-year TIPS yields 2.76% above inflation, or about $38,640 a year in today’s dollars on $1. 4 million.”
Two Funding Paths
Path 1: Treasury ladder plus TIPS locks in rates and keeps cash flowing yearly. Path 2: Short-term bills earn under 5% but risk falling rates.
“Path 1: A Treasury ladder plus TIPS. Path 2: All short-term bills.”
What Mom Should Do
Run rent test first: rent should take no more than 50% of Treasury interest. Know cost basis before listing to avoid tax issues.
“Run the rent test first. Starting rent should take roughly half of her Treasury interest or less.”
At a glance
A 73-year-old mother can sell her $1.4 million paid-off home, rent an apartment, and live on 5% Treasury interest without touching principal.
