Skip to navigationSkip to main contentSkip to right columnADVERTISEMENTGerelyn TerzoFri, June 26, 2026 at 12:03 PM GMT+2 5 min readQuick ReadTreasury interest counts toward provisional income, potentially pushing up to 85% of a retiree's Social Security benefit into taxable territory above $34,000.A $200,000 shift into a 4.5% Treasury generates $9,000 in interest that can make the effective after-tax yield far lower than advertised.Holding Treasuries inside a Roth IRA shields the interest from provisional income calculations; the same bond in a taxable brokerage triggers the drag annually.Are you ahead, or behind on retirement? SmartAsset's free tool can match you with a financial advisor in minutes to help you answer that today. Each advisor has been carefully vetted, and must act in your best interests. Don't waste another minute; learn more here.She is 72, retired, and watched her brokerage statement shrink after the June 17, 2026 Federal Reserve meeting. Fed Chair Warsh held the federal funds rate at 3.5% to 3.75% and signaled possible hikes ahead. Stocks fell. Treasury yields, already near multi-year highs, looked like a gift: roughly 4.2% on the 2-year, 4.5% on the 10-year, and 4.9% on the 30-year. So she moved a chunk of her portfolio out of equities and into Treasuries.shurkin_son / Shutterstock.comHer reasoning is familiar. At her age, a market drop is harder to wait out than it would have been at 50. A yield above 4% from the U.S. government feels like found money. One woman on a retirement forum described the same move almost word for word, saying Treasuries were the only thing letting her sleep.Then her tax preparer ran the numbers and the safety net turned out to have a cost.Treasury interest is exempt from state income tax, which is the part everyone remembers. The fine print many retirees miss: it is fully taxable at the federal level, and the IRS folds it into something called provisional income, the number that decides how much of your Social Security gets taxed.Are you ahead, or behind on retirement?