Saving for retirement can feel like an uphill battle—especially in California, where the cost of living and taxes are some of the highest in the country. Gone are the days when Social Security and a company pension could comfortably see one through retirement. Many pre-retirees feel unprepared, worrying they’re underestimating how much they’ll need to retire.

At Bulman Wealth Group, our mission is to help Californians pursue their retirement goals with confidence. By focusing on effective strategies like 401(k) and IRA contributions, you can build a stronger financial foundation for the years ahead.

This blog discusses practical ways to maximize your retirement savings while navigating the unique issues of retirement planning in California.

Understanding California’s Retirement Landscape

Retiring in California presents both opportunities and challenges. The state’s unparalleled quality of life comes with rising costs of housing, insurance, and everyday expenses that consistently exceed the national average.

California’s progressive tax system also impacts retirement income, particularly for higher earners. With increasing healthcare costs and the potential need for extended nursing care, retirees face financial pressures demanding thoughtful preparation.

Tax-advantaged accounts like 401(k)s and IRAs play a pivotal role in addressing these challenges. Partnering with an experienced financial advisor in California, like those with Bulman Wealth, can help you align contributions with your retirement goals.

Maximizing 401(k) Contributions

For many Californians, 401(k)s are the cornerstone of retirement savings. These employer-sponsored accounts offer:

• Tax advantages: Contributions are made pre-tax, reducing taxable income in the year they’re made.

• Employer matching: Taking full advantage of an employer match is essentially free money, doubling your contributions up to a certain percentage.

• Compounding growth: Funds grow tax-deferred, allowing for more significant returns over time.

If your employer offers a 403(b) or 457 plan, these accounts provide similar benefits to 401(k)s, including tax-deferred growth and potential employer matching.

2025 Contribution Limits

For 2025, the contribution limit for 401(k)s has increased to $23,500, with an additional $7,500 catch-up contribution available for individuals aged 50 and older. Also, under the SECURE 2.0 Act, individuals aged 60 to 63 can make a higher catch-up contribution of $11,250, offering an even greater opportunity to boost retirement savings.

Roth 401(k) Contributions

Some employers offer Roth 401(k) options, which allow for after-tax contributions. While these don’t reduce your taxable income now, withdrawals in retirement are tax-free. This can be especially advantageous for those anticipating higher tax brackets later, aiming to maximize retirement tax benefits in California and exploring RMD tax strategies for future planning.

401(k) Loans

While not ideal, loans from your 401(k) can be a financial lifeline in emergencies. However, frequent borrowing can undermine long-term growth, making it critical to use this option sparingly. Consulting with a Roseville, CA, financial advisor or a financial advisor in Temecula with Bulman can help you weigh the pros and cons before making a decision.

Strategies for Maximizing IRA Contributions

In addition to 401(k)s, Individual Retirement Accounts (IRAs) provide another powerful way to save for retirement. Depending on your income and financial situation, you can choose between Traditional IRAs or Roth IRAs, each offering unique benefits.

Traditional IRAs: Depending on your employment status and income level, contributions may be tax-deductible, lowering your taxable income for the year they’re made. However, withdrawals in retirement are taxed as ordinary income. Even if you don’t qualify for a tax-deductible contribution, your money still grows tax-deferred, providing a valuable savings tool.

Roth IRAs: Contributions are made with after-tax dollars, but qualified withdrawals, including earnings, are tax-free in retirement. While you can withdraw contributions anytime without penalties, the growth on your investments must remain in the Roth IRA for at least five years and cannot be withdrawn until after age 59 ½ to avoid taxes or penalties.

Contribution Limits for 2025

In 2025, the annual IRA contribution limit is $7,000 if you’re under 50 and $8,000 if you’re 50 or older. This limit applies to all IRAs combined, not each one separately. Contributions must come from earned income.

Backdoor Roth IRA Strategy

For Californians with incomes exceeding Roth IRA eligibility limits, the backdoor Roth IRA strategy offers a way to benefit from tax-free growth. This involves contributing to a Traditional IRA and then converting those funds to a Roth IRA. While Traditional IRAs require Required Minimum Distributions (RMDs) starting at age 73, Roth IRAs allow funds to grow tax-free without RMDs, offering flexible RMD withdrawal strategies.

Spousal IRAs

If your spouse isn’t currently earning income, they may still contribute to an IRA through a spousal IRA, provided you have earned income. This strategy allows couples to maximize contributions and build long-term savings together.

Retirement Planning Beyond Contributions

While maximizing contributions to tax-advantaged accounts is essential, comprehensive retirement planning goes beyond just savings strategies.

Social Security benefits: Timing is critical. Delaying Social Security benefits until age 70 can increase monthly payouts. Spousal benefits are another factor that can boost total household income.

Pension income: If applicable, explore payout options to determine the most tax-efficient strategy for receiving pension benefits.

Taxable investment accounts: Diversifying income sources with taxable brokerage accounts can provide liquidity and flexibility. Investment income from stocks, bonds, and real estate may complement retirement accounts while offering different tax treatments.

Emergency savings: A well-funded emergency fund ensures you won’t need to draw from retirement accounts prematurely, avoiding additional taxes and penalties.

Also, addressing solutions for long-term care planning in California and estate and legacy planning helps your financial plan account for the unexpected while leaving a lasting impact on your loved ones.

Partner With Bulman for Your Retirement Planning in California

Retirement planning in California is very challenging these days, but the good news is you don’t have to manage it alone. 

At Bulman Wealth, our team brings decades of expertise in comprehensive financial planning. From retirement income strategies and tax optimization to healthcare in retirement, wealth management, and legacy planning, we provide tailored solutions to help you stay on course.

Reach out to us today to schedule a complimentary consultation. Let us help you build the financial confidence California retirees and pre-retirees like you deserve for a fulfilling retirement.