California consistently ranks as one of the best states to retire in. However, it’s also one of the most expensive. Many Californians nearing retirement face a tough choice: the appeal of California’s lifestyle vs. financial realities. To complicate matters, most have strong ties to the state, with cherished family and friends.

The question is: Can you retire in California, stay connected to loved ones, and manage your finances effectively?

This blog post from Bulman Wealth Group is a guide for Californians nearing or in retirement. We’ll cover the basics and beyond of building your retirement plan in the Golden State.

Part 1: Building Your California Retirement Dream

Before diving into the details, it’s important to envision your ideal retirement lifestyle. Consider the following:

• Location: Where do you see yourself living in retirement? Would you prefer to stay in your current location or relocate to a new area?

• Lifestyle: What kind of lifestyle do you foresee? Do you dream of traveling, spending time with family and friends, pursuing hobbies, or volunteering in your community?

• Standard of living: Have you considered how much you’ll need, including housing costs, transportation, healthcare, and discretionary spending?

Evaluating these factors can clarify your retirement goals, help you determine how much you need to save, and guide you on potential investment strategies.

California-Specific Considerations

California has unique factors to consider when planning for retirement.

• Cost of living: The cost of living varies between Northern and Southern California, with Southern California being more expensive. When setting retirement savings goals, consider the cost of living in your desired location.

• Taxes: California’s high tax burden could impact your retirement income, but there are tax perks for retirees. Knowing California’s tax landscape can help you maximize savings.

Part 2: The Basics of Retirement Planning in California

Creating your retirement plan in California involves knowing your income sources. Here’s a quick rundown of the key components:

• Social Security and pension benefits: Social Security provides an important safety net for many retirees, with benefits based on your lifetime earnings. If you have a pension, learn how it works with your Social Security to plan your retirement income.

• Employer-sponsored plans (401(k), 403(b)): Maximize your retirement savings and be sure to contribute enough to take full advantage of any employer matching programs. If you’re over 50, make catch-up contributions to further accelerate your savings.

• Personal savings and investments: Consider investing in taxable accounts to boost your after-tax savings and maintain an emergency savings fund for unexpected expenses.

At Bulman, we can assist you in developing a customized income strategy to estimate your income today and for retirement 15, 20, and even 30 years later.

Part 3: Going Beyond the Basics: Maximizing Your California Retirement

Let’s explore strategies to help you further stretch your retirement dollars.

Leveraging Tax Benefits

California offers some tax advantages that can be beneficial for retirement planning.

Social Security income exemption: California does not tax Social Security income, which could help lower your state tax liability.

Property tax relief: California offers valuable property tax relief programs for retirees. The Senior Citizen Property Tax Assistance Program (SCPTAP) may reduce property taxes for qualifying homeowners aged 65 or older. This program can be an advantage for retirees wishing to stay in their homes.

While Proposition 60/90 and Proposition 19 don’t directly reduce property taxes, they allow homeowners to transfer their existing property tax base to a new primary residence. This can potentially reduce the tax burden on the new property, benefiting retirees looking to downsize or relocate within California.

Investing for Retirement

Investing your retirement savings is essential for growing your nest egg and keeping up with inflation. However, it’s vital to choose an investment strategy that matches your risk tolerance and time horizon.

Your risk tolerance is your ability to handle investment losses. Younger investors usually have more time until retirement and can generally accept higher risk. As you near retirement, you might shift towards more conservative investments to protect your principal.

A diversified portfolio is essential for reducing risk in retirement investments. Spread your investments across different asset classes like stocks, bonds, and real estate to avoid over-reliance on a single asset class.

Be cautious of over-investing in one asset or maintaining a concentrated stock position, as this can increase risk. Balancing potential returns with the risk of significant losses is crucial.

Long-Term Care Planning in California

Home health care and nursing home costs can be high, especially in California. Long-term care insurance can help offset these costs. Consider the premiums, benefits, and exclusions of these policies.

Also, Health Savings Accounts (HSAs) offer tax-advantaged savings for qualified medical expenses, including long-term care and insurance premiums.

Part 4: Taking Action Toward Your California Retirement Dream

Now that we discussed the basics and additional strategies for retirement planning in California, it’s time to take the next steps.

Develop a personalized retirement plan that includes:

• Assessing your finances: Review your current income, expenses, and debts to build a realistic retirement plan.
• Setting goals: Define your retirement age, lifestyle expectations, estimated future expenses, and retirement income to guide your savings and investment decisions.
• Creating a budget: Track your income and expenses to identify areas for additional savings.
• Choosing investments: Select investments that match your risk tolerance and time horizon, maintaining a diversified portfolio to mitigate risk.

Planning for retirement requires expertise and can be time-consuming. Consider the advantages of a financial advisor in California, such as those with Bulman Wealth Group. We will help you with:

• Personalized guidance: Tailor a retirement plan to your specific circumstances and goals.
• Investment strategies: Help choose suitable investments, considering diversification and asset allocation.
• Regulation updates: Keep your plan optimized with current tax laws, retirement regulations, and investment trends.
• Ongoing support: Offer continual guidance as your circumstances and goals evolve.

Bulman Wealth Group: Your Partner in California Retirement Planning

We serve clients throughout California at Bulman Wealth and look forward to assisting you with your retirement planning. Our experienced financial advisors are dedicated to helping you pursue your retirement dreams.

We offer comprehensive wealth management services and believe five key components are needed for retirement planning in Northern and Southern California: investment, income, taxes, health care, and legacy planning. 

Don’t let planning for your California retirement feel overwhelming.

Contact us today for a complimentary consultation.