Managing retirement income can feel like being in a maze, especially in California, with its complex tax laws. Understanding how your income is taxed is an important key to making informed decisions and enjoying the financial confidence California retiree deserves.

At Bulman Wealth Group, we fully recognize the dedication it takes to build your wealth and the value of preserving it. Our team of experienced financial advisors in California is committed to helping individuals and families create sustainable wealth through our tailored strategies.

In this article, we’ll explore vital tax considerations for retirees in the Golden State, offering insights to optimize your retirement income and minimize tax burdens.

Key Tax Considerations for California Retirees

State Income Tax

California’s progressive tax system has some of the highest rates in the nation, with brackets ranging from 1% to 13.3% for taxable income. Retirees drawing income from Social Security, pensions, or 401(k) withdrawals must consider how these streams interact with state taxes.

Fortunately, California does not tax Social Security benefits, offering an opportunity for tax savings. However, other sources like pensions and distributions from retirement accounts are fully taxable as ordinary income, potentially pushing retirees into higher tax brackets.

Federal Income Tax

Federal taxes are a primary consideration for retirees with multiple income streams. Social Security benefits are taxed based on combined income (adjusted gross income + nontaxable interest + half of Social Security benefits):

• Up to 50% taxable for combined income between $25,000–$34,000 (single) or $32,000–$44,000 (married filing jointly).
• Up to 85% taxable for combined income above these thresholds.

Withdrawals from retirement accounts are taxed as regular income, and required minimum distributions (RMDs) starting at age 73 can increase your tax bill. More taxable income from these withdrawals could move you into higher federal tax brackets. This makes it vital to use RMD tax strategies to manage income sources and reduce tax liability.

Property Taxes

Property taxes in California remain a significant cost for retirees, especially with the state’s high property values. Proposition 13 caps annual property tax increases, offering stability for many homeowners. Proposition 19 allows eligible homeowners—those 55 or older, severely disabled, or relocating due to a natural disaster—to transfer their tax basis when purchasing a new property. This benefit can reduce future property taxes but requires careful planning to meet eligibility criteria.

Capital Gains Tax

For retirees with taxable investment accounts or real estate, understanding California’s capital gains tax is crucial. Unlike federal taxes, which offer lower rates for long-term gains, California treats all capital gains—whether from stocks, dividends, or real estate sales—as ordinary income. These profits can move you into a higher state tax bracket, increasing your overall tax bill.

Estate and Inheritance Taxes

While California does not currently impose an estate tax, federal estate tax laws still apply. For 2025, the federal estate tax exemption is $12.92 million per individual, with amounts above this threshold taxed at rates up to 40%. However, this historically high exemption is set to expire at the end of 2025 unless Congress extends it. If it expires, the exemption will revert to pre-2018 levels of approximately $5–6 million.

The Bulman Wealth team can help you navigate these complex tax challenges, from maximizing retirement tax benefits in California to implementing effective RMD withdrawal strategies.

Retirement Income Strategies To Consider

Tax-Efficient Withdrawal Strategies

A well-structured withdrawal plan can significantly reduce tax liabilities and preserve retirement savings. Key strategies include:

• Start with taxable accounts: Prioritize withdrawals from taxable accounts to take advantage of favorable long-term capital gains rates, leaving tax-deferred accounts to grow longer.

• Delay tax-deferred withdrawals: Postpone withdrawals from accounts like 401(k)s or IRAs until RMDs begin at age 73, allowing you to minimize taxable income in the early retirement years.

• Consider phased Roth conversions: Spreading conversions over several years can reduce the immediate tax hit while creating a source of tax-free income in the future.

Strategies To Minimize Capital Gains Tax

Managing taxable investments strategically can help you keep more of your earnings:

• Tax-loss harvesting: Sell underperforming assets to offset capital gains and reduce taxable income, keeping the “wash sale rule” in mind.

• Asset location optimization: Place tax-efficient investments in taxable accounts and hold tax-heavy investments in tax-advantaged accounts.

• Timing sales carefully: Spread large sales over multiple tax years to avoid bumping into a higher tax bracket.

Charitable Giving for Tax Efficiency

Philanthropy can match with tax reduction goals:

• Donor-advised funds (DAFs): Set up a DAF to donate appreciated assets, receive an immediate tax deduction, and grant funds to charities over time.

• Charitable remainder trusts (CRTs): Provide an income stream while reducing capital gains taxes on donated assets.

• Donation of appreciated assets: Donating stocks or other highly appreciated investments avoids capital gains tax while supporting causes you care about.

Whether you need a financial advisor in Roseville, CA, or a financial advisor in Temecula, Bulman offers support to help you with wealth management and legacy planning techniques.

The Importance of Comprehensive Financial Planning

Retirement planning isn’t a one-size-fits-all process—especially in California. Tax laws, healthcare costs, and market conditions evolve, requiring regular adjustments. A comprehensive strategy covers income, taxes, investments, estate, and legacy planning to ensure all aspects of your financial situation work cohesively.

Skilled financial professionals, like those at Bulman, address often-overlooked areas such as Social Security claiming strategies, which can significantly impact retirement income. Also, medical and long-term care costs are rising rapidly, making healthcare and long-term care planning in California essential.

Bulman’s financial advisors in California provide complete and proactive strategies you can rely on.

Bulman Wealth Can Help With Retirement Planning in California

Planning for retirement can often feel overwhelming and complicated—that’s why we created the Financial Compass.

The Financial Compass simplifies the complexities of retirement planning, guiding you through every stage of your financial journey. Our professional guidance covers key areas such as retirement income planning, investment management, tax strategies, healthcare in retirement, and estate/legacy planning.

With decades of experience, our team is dedicated to crafting strategies that match your unique goals.

Contact us today to schedule a complimentary consultation, and let us help you turn your retirement vision into reality.