There are nearly 3 million federal retirees who live in the state of California. 

Moreover, this state has the largest number of retirees who receive annuities. 

Retirement is the golden years of your life if you can achieve your long-term goals, stay close to your family, and participate in local communities. 

It is imperative to plan ahead of time to determine the true cost of retirement in California. 

Several features make California a special place for retirees with attractive benefits – 

• California property taxes are capped at 1 percent of the purchase value. 
• The property taxes increase by 2 percent every year. 
• Property values increase by 6.2 percent every year. 
• Enforcement for government employees to receive pension benefits. 
• No taxes are levied upon the Social Security income. 

California has diverse cultures, an impressive climate, and an advanced lifestyle. Located along the Pacific coast, the state is home to some major US cities including San Francisco, Los Angeles, and San Diego. 

The weather drastically varies based on the geography of the region. It can experience warm and hot summers followed by cold and chilly winters. 

California is an ideal place to relocate after retirement because of its rich cultural diversity, scenic landscapes, pleasant lifestyle, and multiple retirement benefits. 

Is retiring in California profitable or a financial nightmare? Identify the myths and the realities with the best federal retirement advisors. 

The California Public Employees’ Retirement System (CalPERS) was formed in 1932 to look into the retirement and healthcare benefits of retirees. 

It is the largest public pension scheme in the US that combines employees from the private and government sectors. More than 2 million members receive retirement and health benefits from this retirement system. 

State government, school, and public agency employees including safety employees, non-teaching officials, and non-certificated school employees get benefits based on years of service, age, and final compensations from the CalPERS. 

The benefits of the CalPERS include – 

• Monthly retirement income is also known as pension benefits.
• Early or disability retirement options for employees who are unable to continue services due to injuries and illnesses suffered during the service term. 
• Pension benefits and other types of benefits are paid to the survivors or beneficiaries of members within the CalPERS.
• Employees are eligible to receive pension benefits from CalPERS if they complete five years of service. 
• There are two types of pension tiers within the CalPERS. These are the Classic Members and PEPRA Members. 
• CalPERS memberships ensure guaranteed income, health coverage, portability options, and survivor and disability benefits.

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Explore a detailed guideline about the best retirement destinations in California – 

• San Diego – Mild weather and excellent healthcare opportunities with a variety of recreational options, it is one of the coastal cities of California. 
• Santa Barbara – Wineries, cultural attractions, and beautiful coastal views make it an appealing retirement destination. 
• Ventura – Affordable and a beautiful coastal city with a low population. 
• Palm Springs – This is an inland city in California providing ample retirement services and opportunities to seniors. 
• Sacramento – The home of the beautiful Lake Tahoe, Sacramento is a city with affordable housing and accessible healthcare. 
• Napa Valley – Known as the wine county, the city has some of the best vineyard landscapes throughout the US. 
• Fresno – Close to the Yosemite National Park, it is one of the cities with a steady and growing senior community of retirees. 

Get detailed insights into the cost of retirement in California – 

• California has the most expensive real estate market in the entire US. 
• People above the age of 55 years qualify for Proposition 19 enabling them to transfer the tax base for purchasing a new home. 
• Renting a property in California is pocket-friendly compared to purchasing. 
• Buying and renting properties in coastal areas of California is higher than inland areas. 
• The cost of living is higher in coastal regions and urban centers of California and the hike is more than the national average. 
• Out-of-pocket healthcare expenses are higher than in other states but healthcare facilities are better as well. 
• All sorts of retirement income from different sources except for the Social Security benefits within the Federal Employees’ Retirement System (FERS) are subject to income tax deductions. 
• California has lower property taxes compared to the national average. 
• The state has the highest sales tax in the US which increases the cost of everyday items. 

California has the most advanced hospitals. Stanford Health Care and UCLA Medical Center are some of the renowned healthcare facilities in this state. 

Adults who are more than 65 years old and disabled individuals who have low incomes can receive government-sponsored health and medical care through the Medi-Cal program. 

Seniors in California can access advanced and specialized treatments for complex conditions. 

Retirees in California qualify to get Medicare from the age of 65 years. This includes several hospital and medical expenses. There are different vision, dental, and wellness programs within the Medicare Advantage plans. 

California retirees also get the Medicare Supplement plan which is a secondary insurance option to cover out-of-pocket expenses that are not included within the Medicare. 

Retirees may be eligible to receive dual insurance from both Medi-Cal and Medicare to increase their coverage. 

Continuing Care Retirement Communities (CCRCs) is one of the specialties in California enabling retirees to access assisted living and nursing care with a sense of shared community. 

Other communities specifically focus on retirees suffering from memory problems such as Alzheimer’s disease or dementia. 

The tax considerations for retirees in California are as follows – 

• The rate of income tax in California ranges between 1-13 percent. 
• Full income taxation from pensions, individual retirement accounts, and 401(k)s. 
• No taxation on Social Security benefits. 
• Proposition 13 for property taxes in California increases tax caps by 2 percent every year. 
• Proposition 19 is the property tax portability option for homeowners above 55 years. 
• The Property Tax Postponement Program in California enables qualifying seniors to defer property taxes. 
• Contributions to Health Savings Accounts and annuities enable retirees to reduce their taxable income. 
• Allows retirees to relocate thrice within the state of California under the Proposition 19 of the property taxes.

Read Also: How To Maximize Retirement Tax Benefits in Florida?

Beneficial housing options for retirees in California include – 

• Communities for 55+ Years Retirees – Access to amenities such as social clubs, golf courses, fitness centers, and community events. This type of facilities enable retirees in California to enjoy a premium lifestyle without the requirement of maintaining upfront costs on home ownership and maintenance. However, there is a lack of on-site medical support in such facilities. 

• Continued Care Facilities for Assisted Living – These types of facilities offer housing, meals, and personal care to people who need assistance with day-to-day activities. The facilities have emergency response systems and 24×7 staff. Nevertheless, the cost of assisted living is high and offers less independence. 

• Continuing Care Retirement Communities – A special community for retirees in California with complete access to assisted living, skilled nursing, and overall healthcare. Also, it creates a sense of inclusiveness among retirees who can share common interests within a community environment. However, it is important to understand that this type of facility requires monthly fees. 

Retirees should be aware that the cost of retirement in California is higher than the living costs of other states in the US. 

However, residing in inland areas or suburban cities can reduce the cost of living in California. 

Explore the best strategies to retire in California – 

• Identify Annual Expenses – The cost of living in California is 38 percent higher than the living in other states within the US. Determine the overall living costs in California for a financial year to confirm if they match or exceed your retirement savings. Apply the 4 percent rule during your retirement. This rule enables retirees to withdraw only 4 percent of their retirement funds in one year and if this amount of money is suitable to sustain a retirement life for a year in any region of California. Also, consider unpredictable factors such as inflation. Focus on expense and revenue to prepare an estimate for annual living costs in California. 
• Keep Track of Retirement Age – There is no specific retirement age in California. However, it is possible to withdraw Social Security benefits from the age of 62 years. The full retirement age throughout the country is 67 years. Postponing your retirement even after 67 years increases the retirement benefits by 8 percent annually. So, if a retiree waits until 67 years to withdraw their Social Security benefits, it will grow by 40 percent. 
• Consider Retirement Taxes – Minimizing taxes plays a pivotal role in your state-specific retirement planning. California exempts Social Security benefit taxes. Also, property taxes are lower in California compared to other US states. Nevertheless, all other sources of retirement income are taxable in California. Determine if the tax deductions exceed your retirement savings. Understanding the tax implications during retirement will clarify your doubts related to living in the state after retiring. 
• Delay Social Security Benefits – Delaying the withdrawal of Social Security benefits during retirement can boost your retirement savings significantly. Retirees can maximize their Social Security benefits by 8 percent every year if the withdrawal is delayed past the age of 62 years. Moreover, the California government does not deduct taxes from Social Security benefits withdrawals and savings. 
• Maximize Savings – A higher cost of living naturally requires a higher income percentage. Formulate high-savings strategies to maximize your earnings during retirement. Contributing to a 401(k) plan apart from thrift savings plans, IRAs, and other retirement accounts gives the advantage of getting employer-matching contributions. Rollover 401(k) to ROTH IRA or ROTH TSP account to get rid of taxable income from retirement savings. Different factors affect your returns. Starting to save and invest earlier in your career can reduce overall tax bills during retirement. Furthermore, a dedicated retirement account such as an IRA, 401(k), or the TSP (ROTH and traditional) enhances your retirement income. Lastly, connect with the best federal retirement advisors in California to navigate the complex financial structures, maximize savings, and safeguard your retirement income. 
• Best Cities to Retire in California – Compared to high-cost living in coastal and urban cities of California, inland towns and suburban areas are pocket-friendly for retirees to settle down. Some of the key retirement locations in the State are Napa Valley, Sacramento, Palm Springs, and Santa Barbara. 

Read Also: Retirement Planning Made Clear and Confident for Texas Federal Employees

Navigate through the advantages and drawbacks of retiring in California to determine if it is the best place for you to settle down after retirement. 

Pros 

Get the complete list of benefits for retiring in California – 

• Diverse Climate – Sunny coastal regions and cool mountain ranges offer mild temperatures throughout the year. 
• Scenic Beauty – The chance to enjoy breathtaking landscapes, and explore beaches, mountains, national parks, wineries, deserts, and forests all in one state. 
• World-Class Healthcare – Access to the best medical facilities with advanced healthcare options for special conditions. 
• Combination of Cultures – Museums, festivals, wine tasting, and cultural events expose the diversity in culture and the rich heritage of California. 
• Tax-Free Social Security – Retirees can get tax relief from their Social Security benefits. 

Cons 

The disadvantages of settling down in California during retirement are – 

• High Living Cost – Expenses in California are higher compared to the US national average. Grocery and utility bills are significantly higher than in any other state in the US. 
• Retirement Income Taxation – All types of pension income for retirees in California are taxable. This includes IRAs and 401(k)s. 
• Natural Disasters – California experiences some of the drastic and life-threatening natural disasters such as forest wildfires, earthquakes, and tornadoes. 
• Stark Economic Inequality – There is a major difference in the cost of living between inland areas and urban areas of California. 

Retirement in California is challenging but offers several opportunities as well. For example, the cost of living is high but there are remarkable healthcare options. 

Retirees should assess overall conditions including long-term goals, sources of retirement income, location of settling in California, environmental dangers, and tax implications before settling down in this state. 

Our expert federal retirement consultant in California helps you explore all the drawbacks and opportunities to provide you with solutions related to finances and lifestyle choices.

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