Retirement PlanningLast updated: 2026-06-27Author: Hans Goldstein, NPN 20602398

Where to Put House Sale Proceeds — The MYGA, CD, T-Bill, and Brokerage Decision

TL;DR: After capital gains tax on the home sale, $400K-$2M lands in your checking account and starts losing purchasing power immediately. The right destination depends on three things: when you need the money, your post-sale tax bracket, and whether you're replacing the home equity income or just parking cash. Below: side-by-side after-tax yield math for MYGA, CD ladder, T-bills, and a diversified brokerage.

First: the §121 exclusion math

Before deciding where to put proceeds, calculate what actually hits your account after tax. The §121 home sale exclusion shelters the first $250,000 of gain (single) or $500,000 (MFJ) if you owned and lived in the home as a primary residence for at least 2 of the last 5 years.

Example — California couple, sale price $1.6M, basis $400K:

Item	Amount
Sale price	$1,600,000
Adjusted basis (purchase + improvements)	$400,000
Realized gain	$1,200,000
§121 exclusion (MFJ)	($500,000)
Taxable LTCG	$700,000
Federal LTCG tax (20% top bracket + 3.8% NIIT = 23.8%)	$166,600
CA state tax (~13.3% top bracket on LTCG)	$93,100
Selling costs (6% commission + closing)	$96,000
Net to account	~$1,244,300

You now have $1.24M to deploy, plus an IRMAA surprise coming in two years because the $700K gain pushed your MAGI into the top IRMAA bracket. Plan for it.

Goal #1: Cash you need within 12 months

If the proceeds are funding the next house purchase, a child's tuition, or near-term living expenses, lock to short-duration Treasuries via TreasuryDirect or a brokerage. Your priorities are liquidity, FDIC/Treasury safety, and yield.

Vehicle	Yield (mid-2026)	State tax-exempt?	Liquidity	FDIC/Treasury?
4-week T-bill	~4.30-4.50%	Yes	Daily on secondary market	Treasury
13-week T-bill	~4.30-4.40%	Yes	Daily on secondary market	Treasury
VUSXX (Vanguard Treasury MMF)	~4.40%	~80% state-exempt	Daily	SIPC, no FDIC
HYSA (Marcus / Ally / Synchrony)	~4.40%	No	Daily	FDIC
Fidelity SPAXX sweep	~4.10%	Partial	Daily	SIPC
Brokered 6-month CD	~4.80%	No	Secondary mkt	FDIC at issuer

For a high-tax-state resident (CA, NY, NJ, OR, MN), the after-state-tax yield ranking flips. A 4.40% T-bill in California beats a 4.40% HYSA by roughly 50 bps after the state exemption (CA top bracket is 13.3%; T-bill state exemption saves ~13.3% × 4.40% = 58 bps).

For balances of $250K+, you're past FDIC at a single bank — split across 2-3 institutions or use brokered CDs / Treasuries instead.

Goal #2: 3-5 year horizon (income replacement)

If you're sized to live on the house proceeds for the next 3-5 years (e.g., downsizing into a paid-off smaller home, the $1M extra is now your "income engine"), the math favors a CD ladder vs MYGA comparison.

Vehicle	5yr APY (mid-2026)	$1M growth over 5yr	After-tax (CA 22% fed + 9.3% state)	Liquidity
5-year CD ladder (top rates)	~4.40%	$240,000 gross	~$165,000	1/5 matures each year
5-year brokered CD	~4.60%	$252,300	~$173,300	Secondary mkt
5-year MYGA (A-rated)	~5.60%	$313,200	~$215,200 (deferred until withdrawal)	10% free annually + surrender after
Treasury notes (5-yr)	~4.10%	$222,000	~$180,000 (state-exempt helps in CA)	Daily on secondary mkt
60/40 brokerage	~6.5% expected	$370,000 expected	~$250,000 (mostly LTCG)	Daily

The MYGA wins on guaranteed after-tax yield for the 5-year horizon, because the interest defers tax until withdrawal (and many retirees withdraw in lower-bracket years). The 60/40 has higher expected return but with sequence-of-returns risk — if year 1 is -20%, the income engine is broken precisely when you need it.

Goal #3: 10+ year horizon (legacy / late-retirement)

If the proceeds are not needed for current living — you're already retirement-income-secure from pensions, Social Security, and an existing portfolio — the question becomes: maximize legacy or maximize flexibility?

The three main paths:

Diversified 60/40 brokerage: Highest expected return (~6-7% annualized over 10+ years). Triggers ongoing 1099 dividends + capital gains. Estate gets stepped-up basis at death — the single biggest tax advantage of a brokerage account vs MYGA.
MYGA ladder (5-10 year terms): Guaranteed 5.4-5.8%. Tax-deferred growth. No 1099 noise during accumulation. Heirs inherit deferred-gain (not stepped-up basis) — they pay tax on gains as ordinary income at distribution.
Hybrid: 30% MYGA for floor + 70% brokerage for growth + heirs.

The step-up basis issue is critical for legacy. If you die with $1M in a brokerage account containing $600K of unrealized gain, your heirs inherit at the date-of-death fair market value — the $600K gain disappears for tax purposes. If you die with $1M in a MYGA containing $600K of deferred gain, your heirs owe ordinary income tax on the full $600K as they distribute (within the 10-year SECURE Act window for non-spouse beneficiaries).

For legacy-focused house-sale proceeds: brokerage with low turnover wins the heir math, even though the MYGA wins the lifetime growth math. Run both scenarios with your tax bracket and intended heir profile.

Tax-bracket-specific recommendations

Your post-sale tax bracket dictates which vehicle is most tax-efficient:

0-12% marginal bracket (sub-$94,300 MFJ taxable)

You're in the 0% LTCG bracket up to $94,050 single / $188,000 MFJ. CD interest at ~4.5% is ordinary income at low rates. Brokerage with high dividends actually beats MYGA here because qualified dividends + LTCG are taxed at 0%. Recommendation: 50/30/20 split brokerage / MYGA / Treasury.

22-24% marginal bracket (typical retiree)

The tax-deferred wrapper of the MYGA starts paying off. CD interest at 4.40% nets to ~3.20% after tax; MYGA at 5.60% deferred allows full compounding. Recommendation: 40/40/20 MYGA / brokerage / Treasury.

32-37% marginal bracket (high-income retiree)

Tax drag becomes the dominant factor. MYGA's deferred growth and brokerage's preferential LTCG rates dominate CDs. Treasuries also gain from state-tax exemption. Recommendation: 50% MYGA / 30% tax-efficient index brokerage / 20% Treasury ladder; avoid taxable CDs entirely.

Don't forget the IRMAA aftershock

Selling a house with $700K+ taxable gain after the §121 exclusion almost certainly pushes your MAGI into a higher IRMAA bracket — with a two-year lag. Sell in 2024 → pay higher Medicare in 2026. Sell in 2026 → pay higher Medicare in 2028.

The IRMAA surcharge can be $5,000+ per person per year for one year. Two strategies:

SSA-44 appeal: If your MAGI dropped meaningfully the next year and you had a qualifying life event (retirement, work stoppage), file Form SSA-44 to ask SSA to use the more recent year. House sales by themselves do NOT qualify, but if combined with retirement they may.
Park the proceeds in MYGAs: Once the gain year is behind you, MYGA-deferred interest doesn't add to MAGI in subsequent years — preventing the IRMAA hit from compounding. CDs and brokerage dividends keep adding to MAGI every year.

See our IRMAA brackets explainer for the full table.

Frequently Asked Questions

How much capital gains tax do I owe on a $1.6M home sale?

Depends on basis and filing status. Example MFJ with $400K basis: $1.2M gain − $500K exclusion = $700K taxable. Federal LTCG at 23.8% (incl. NIIT) = $166K. State tax varies; CA top bracket adds ~$93K. Total federal+state: roughly $260K plus selling costs.

Can I avoid capital gains by buying another house?

No, the §1031 like-kind exchange does NOT apply to personal residences (only to investment property). You get the §121 exclusion ($250K single / $500K MFJ) and that's it — the rest is taxable regardless of what you buy next.

What's the best place to park $500K for 6 months while shopping for a new house?

Short-duration Treasuries (4-13 week T-bills) or VUSXX Vanguard Treasury MMF. Both yield ~4.40% with daily liquidity and state-tax exemption. HYSAs work but lose ~50 bps after state tax for residents of high-tax states.

Is a MYGA appropriate for house sale proceeds?

Yes if the time horizon is 3+ years and the money isn't earmarked for the next house. MYGAs trade liquidity for ~110 bps higher rate than CDs and tax-deferred growth. Not appropriate for the down payment fund on the next home.

Should I pay off my mortgage with proceeds?

Depends on mortgage rate vs alternative yield. If mortgage rate is 6.5% and your alternative is a 5.6% MYGA at 22% federal bracket: mortgage payoff wins. If mortgage rate is 3.0% (legacy refi) and MYGA yields 5.6%: keep the mortgage, park in MYGA. Run the math — tax-deductible mortgage interest still has value in some cases.

How fast does IRMAA hit after a home sale?

Two-year delay. A 2026 sale affects 2028 Medicare premiums. Plan for the surcharge two years in advance — or rely on MYGA-deferred income to keep MAGI lower in the lookback years.

Can I split proceeds across multiple FDIC banks?

Yes, this is standard for balances over $250K. Each bank's FDIC coverage is independent. Splitting $1M across 4 banks gives $1M coverage. Easier alternative: brokered CDs at Fidelity/Schwab which auto-allocate across multiple FDIC issuers.

Disclosure

This article is general educational information, not personalized financial, tax, or legal advice. All rates, IRS limits, Social Security PIA factors, IRMAA brackets, FDIC/NCUA coverage, and state guaranty fund coverage figures are current as of the publication date and subject to change. IRMAA brackets and Roth/Traditional IRA limits cited reflect IRS guidance for 2026 and may be updated by the IRS or SSA; confirm current figures at irs.gov and ssa.gov before acting. Hans Goldstein is an independent licensed insurance producer (NPN 20602398) appointed with multiple A-rated annuity carriers; he does not sell bank CDs, money market funds, or Treasury securities and is not affiliated with any bank, brokerage, or government agency discussed. No compensation has been received from any third party in connection with this article. Bank CDs are FDIC-insured deposit products; credit union share certificates are NCUA-insured; money market funds are SEC-regulated investment products with no FDIC coverage; Treasuries are direct obligations of the U.S. government; MYGAs are insurance contracts backed by carrier balance sheets and state guaranty associations. These are different product categories with different protections, tax treatments, and trade-offs. Always confirm current rates and tax law with the issuer or a CPA before acting.