tax planning California

Tax Planning Tips for California Pre-Retirees in 2025

Are you worried about how taxes in California are impacting your income and your ability to save for retirement? Retirement planning in California comes with a unique set of challenges. However, there are tax planning tips you can implement to help build financial comfort in your California retirement goals.

At Bulman Wealth Group, we bring decades of professionalism in guiding individuals and families through the complexities of retirement planning. Our approach is personalized, crafting strategies tailored to each client’s needs while aiming to maximize available tax benefits.

This article outlines practical 2025 tax planning tips to help you manage your finances effectively and prepare for a successful retirement.

Tax Considerations for California Pre-Retirees

California’s state income tax rates are among the highest in the nation, especially for mid-to-high-income earners. Income from investments, pensions, and other sources can quickly add up, potentially pushing you into higher tax brackets. Understanding how taxes affect your retirement income is key to identifying opportunities for savings.

California’s Tax Brackets in 2025

The state’s progressive tax system impacts many retirees:

  • Middle brackets: Single filers earning between $61,214 and $312,686 face rates of 9.3% to 11.3%, with married filers taxed similarly on income from $122,428 to $625,372.
  • Top bracket: Taxable income over $1,000,000 is taxed at 13.3%, the highest in the state.

For retirees relying on pensions, 401(k)s, or taxable investments, these tax rates emphasize the importance of proactive tax planning.

Retirement Income Sources

Different income streams come with varying tax implications:

  • Social Security benefits: Exempt from California state taxes but often subject to federal taxes depending on overall income.
  • 401(k) and IRA withdrawals: Taxed as ordinary income, which can significantly influence your total tax liability.
  • Pensions: Often taxable, requiring careful analysis to optimize income distribution.
  • Investment income: Taxation depends on long-term vs. short-term gains, qualified dividends, and interest income.

Knowing your income sources is the first step in identifying potential tax-saving strategies.

Property Tax Considerations

Real estate plays a key role for California pre-retirees, particularly if you’re downsizing, relocating, or buying a second home. While Proposition 13 caps annual tax increases, high property values keep baseline taxes significant.

Selling and purchasing a new property can reset the assessed value, increasing property taxes. Proposition 19 allows eligible homeowners to transfer their tax basis to a new property, but specific criteria and careful planning are required.

Understanding these factors is vital for retirees balancing housing costs with long-term financial goals. Bulman’s advisors focus on creating strategies that aim to help you maximize retirement tax benefits in California, addressing the challenges of high tax rates and recurring expenses.

Tax Planning Strategies for California Pre-Retirees

To navigate the challenges of retiring in California, implementing key tax strategies can help you benefit from reduced liabilities and maximize savings.

Tax Diversification

Diversifying your retirement income sources is a powerful way to manage overall tax liability. By combining withdrawals from taxable, tax-deferred, and tax-free accounts, you can create a balanced strategy that adapts to changing circumstances.

Asset placement: Allocating assets strategically may potentially reduce your tax burden:

  • Use taxable accounts for assets that benefit from favorable tax treatment, such as long-term capital gains, qualified dividends, or tax-free municipal bonds.
  • Reserve tax-deferred or tax-free accounts for investments with higher tax consequences, like REITs or actively managed funds with frequent capital gain distributions.

Roth IRAs and conversions: Roth accounts offer tax-free growth and withdrawals in retirement.

  • Consider a stair-step approach for Roth conversions to manage your tax brackets.
  • If you’re disqualified from contributing directly to a Roth IRA due to income limits, explore backdoor IRA strategies for tax-free growth.

For 2025, the contribution limits are:

  • Traditional IRAs and Roth IRAs: $7,500 for those aged 50 or older, including a $1,000 catch-up contribution.

Tax-Loss Harvesting

For taxable accounts, tax-loss harvesting can offset capital gains by selling investments at a loss.

  • Follow the wash sale rule, which prohibits buying a substantially identical security within 30 days.
  • Losses exceeding your gains can offset up to $3,000 of ordinary income annually, with unused losses carried forward to future years.

Estate and Legacy Planning

Thoughtful estate planning minimizes taxes while aligning with legacy goals. Consider:

  • Trusts and updated beneficiary designations to streamline wealth transfer and avoid probate.
  • Donor-advised funds provide a flexible, tax-efficient way to support your favorite causes over time while offering potential tax benefits.  
  • Qualified Charitable Distributions (QCDs) let individuals 73+ donate directly to charities as part of their RMD withdrawal strategies, reducing taxable income and meeting RMD requirements tax-efficiently.

Long-Term Care Costs

California’s expenses for extended care are among the highest in the nation. Exploring strategies for long-term care planning in California, such as long-term care insurance or hybrid policies, can offer tax benefits while safeguarding your assets.

By implementing these tips for 2025, you’ll be better equipped to tackle California’s distinct challenges, building a stronger foundation for financial comfort in retirement.

Bulman Financial Advisors in California Can Help

Tax planning is a cornerstone of financial health, and reviewing tips to enhance it should be an annual priority. Bulman Wealth Group offers tailored guidance to help you proactively manage the unique challenges of retirement planning in California.

Key benefits of working with Bulman Wealth:

  • Personalized tax planning: Our advisors consider your current tax situation and long-term goals to recommend effective strategies. Whether exploring Roth IRA conversions, utilizing QCDs, or implementing tax-loss harvesting, the goal is to help reduce your tax burden while keeping your plan adaptable.
  • Proactive RMD strategies: RMDs can create unexpected tax challenges, but a well-structured plan can help mitigate these issues. Bulman advisors assist with RMD tax strategies by integrating distributions with other income sources, aiming to minimize unnecessary tax implications.
  • Legacy and estate planning support: Wealth management legacy planning is about more than transferring assets—it’s about ensuring your wishes are honored while optimizing for potential tax savings. We can help integrate trusts, beneficiary designations, and charitable giving strategies to create a meaningful and lasting impact.

Whether you’re seeking a Roseville, CA, financial advisor or a financial advisor in Temecula, Bulman Wealth Group is ready to guide you through every phase of your financial journey.

Contact us today to schedule a consultation.