How is California for retirement?

California is known for its diverse landscapes, stunning beaches, mild climate, and rich cultural attractions, making it a top destination for retirees. Retirees get to enjoy a diverse set of lifestyles from big cities to small towns or beach towns to the mountain ranges surrounded by nature. Generally, several features make California a preferred destination for retirees.

California offers retirees a comfortable retirement due to its upscale amenities, good infrastructure, reliable public transport, and plenty of outdoor recreation opportunities. However, the state has a relatively high cost of living and high state income taxes, which can put a strain on your retirement income.

Is California Tax-friendly for retirement?

California has one of the highest state income taxes, higher than any other US state, with a maximum tax rate of 13.3%. While California does not tax Social Security and Tier 1 Railroad Benefits, you will pay state income taxes on other retirement incomes such as pensions and retirement plan distributions.

Withdrawals from retirement accounts like 401(k) and IRA, and pension incomes from private or public pensions are considered taxable income in California. This income is combined with other sources of income like salary and taxed according to the state income tax brackets.

However, California offers a tax credit to seniors, in addition to the personal exemption. If you are at least 65 years old, you will receive an income tax credit of up to $1,695. However, to be eligible for this tax credit, you must have qualified as a head-of-household filer for at least one of the previous two years, your qualifying person must have died in the previous two years, and your income must be below $89,931.

Are sales taxes high in California?

California has the highest sales taxes in the United States, with a tax rate of 7.25%. Local sales taxes can be as high as 2.5%, meaning you will pay a higher rate anywhere in the state. The average statewide sales tax rate can go up to 8.82%. However, the state exempts some goods from state sales taxes, including groceries and prescription drugs.

Are property taxes high in California?

The average effective property tax rate in California is 0.75%, but the high property values in California mean that property taxes are higher than in other states. A homeowner in California pays an average of $4,585 in property taxes. The high property taxes contribute to the overall property costs, which are above the national average.

California offers a homeowner property exemption program to eligible homeowners. Homeowners may qualify for a tax exemption of up to $7,000 in assessed value of their primary residence. The property tax exemption reduces the annual tax bill for eligible homeowners.

Additionally, the Property Tax Postponement Program allows homeowners to defer their property taxes. To be eligible to defer current year property taxes, you must be at least age 62 or older, blind, or have a disability, have at least 40% equity in your home, and your annual household income must not exceed $51,762.

Pros of retiring in California

Miles of coastline

California has a 900-mile coastline, with more than 200 white sandy beaches along the coastline. There is no shortage of scenic places to explore along the coastline, and seniors get to enjoy the tranquility of beach town life. You can go for boardwalks in the evening, and enjoy swimming and surfing in the warm ocean waters.

Good climate

California is known for its Mediterranean-like weather, mild winters, and warm summers, which allow retirees to explore the outdoors year-round. They can go swimming, hiking, boating, biking, board walking, camping, and much more. The favorable weather is also beneficial for seniors with health conditions such as arthritis and asthma, and it can help improve their overall wellness.

Quality healthcare

The state hosts some of the best healthcare facilities in the United States, and some retirees travel to California for medical tourism. Some of the popular hospitals in California include Stanford Health Care, UCSF Medical Center, Cedars-Sinai, and other specialized healthcare facilities. Retirees also benefit from cutting-edge medical technologies, with the state investing heavily in medical innovations and research.

Rich culture

The state is famous for its cultural attractions, including art galleries, theatres, and museums. You can also enjoy the diverse culinary scene, including traditional Japanese sashimi, French pastries, and other ethnic cuisines. You can try farm-to-table restaurants to have a state of the various foods grown in the state.

Vibrant communities

If you want to retire in a community that gives you a sense of belonging, you may want to move into a retirement community in California. The 55+ retirement communities provide a sense of connection since you will live with other seniors who share the same interests and values as you.

Most of the retirement communities are located in the natural environment, where seniors have easy access to various outdoor recreational opportunities, including golf courses, beaches, and mountains. This provides an opportunity for seniors to maintain their physical and mental health.

Cons of retiring in California

High cost of living

California has one of the highest costs of living and income taxes, which can put a strain on your fixed retirement income. You are likely to pay more for health care, housing, food items, and utilities. If you are planning to retire in California, you should research the most affordable cities and plan your budget. You can also take advantage of senior discounts on services such as insurance and gym membership to save on costs.

Traffic congestion

California's major cities have a high population, and this means you are likely to experience traffic congestion on the streets and highways. The long commutes can be long and stressful, and result in smoke-filled air. Retirees who prefer a more relaxed environment may find the crowded cities overwhelming.

High housing costs

The major cities in California such as Los Angeles, San Francisco, and San Diego have some of the highest housing costs. They have expensive rents and home prices, which makes it difficult for retirees to find affordable housing. However, towns outside the bigger cities may have affordable housing costs.

Natural disasters

California is prone to various natural disasters, including tornadoes, earthquakes, wildfires, and drought. Before moving to California, you should be aware of the potential consequences of these events and take appropriate measures. You can consider investing in earthquake insurance and preparing evacuation plans.

Best places to retire in California

Berkeley

While Berkeley is not traditionally a popular destination for retirees, it is a vibrant city located in the San Francisco Bay Area. The city is home to various state parks and beaches, where retirees can visit to explore nature and enjoy the mild climate. Berkeley's proximity to San Francisco provides easy access to big city amenities and cultural attractions. 

Santa Cruz

Santa Cruz offers a blend of a natural environment and a vibrant beach town, making it a top destination for retirees seeking an active and outdoorsy lifestyle. The coastal city is known for its long breathtaking sandy beaches, scenic cliffs, and the Santa Cruz boardwalk. Retirees can enjoy swimming, surfing, fishing, and evening leisure walks along the coastline.

Palo Alto

Palo Alto is an attractive city for retirees who want to stay connected to industry events and get access to opportunities for learning and intellectual stimulation. The city is located close to Stanford University, which hosts cultural events and exhibitions that can provide learning and engagement opportunities. The city is also home to the Stanford University Medical Center, which is known for high-quality medical care and specialized treatment options.

Santa Barbara

Santa Barbara is known for its Mediterranean climate, breathtaking coastline, and vibrant downtown area. A fifth of the city's population is made of 60+ people, allowing retirees to create connections with their age mates. The warm winters and cool summers allow retirees to explore the outdoor attractions year-round.

San Diego

If you want to retire in a bigger city with a lower cost of living than San Francisco, San Diego is a good option. The city offers an active beach retirement, and retirees can explore a variety of outdoor activities such as surfing, fishing, scuba diving, etc. Retirees can also enjoy high-quality healthcare services at the UC San Diego Health Jacobs Medical Center and Scripps La Jolla Hospitals.