For high-net-worth individuals (HNWI) and business owners, the decision to retire in California is a strategic lifestyle choice. From the ocean, beaches, and mountains to the state’s economy and diverse communities, life in California has it all.
But with that comes high taxes and cost of living. Or does it? Before moving to another state for “better taxes”, it’s worth looking at the full picture. The smartest move might just be staying in California, especially with the right financial and estate planning.
Let’s talk taxes
If you are planning to retire in California, then the state’s tax system could be beneficial. While it’s true California has the highest marginal income tax rate at 13.3%, if you’re living on Social Security and savings, then you could pay far less in taxes than other states.
That’s because California does not tax Social Security benefits. Under Prop 13, property taxes are capped annually at 2%, with assessments based on the original purchase price. For retirees who purchased homes years ago, that can be a financial advantage. Property values may have risen sharply, but changes in taxes have not.
Other forms of income — like pensions, traditional IRAs, and investment earnings — are taxed in California at rates from 1% to 12.3%. But remember, your overall tax burden depends on your full financial picture: Your income level, investments, and how you plan to use your assets.
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Some states with no income tax, like Washington, impose high estate taxes or heavy property taxes. Others, like Oregon, offer no tax relief on retirement income at all. If you’re under the $100K mark annually and rely mostly on non-taxable sources, then California may actually be a less expensive state to retire in.
Whether you’re becoming a permanent resident or weighing how to plan your retirement in California, consider speaking with an Asset protection attorney like Rod Hatley. Particularly in San Diego, he can guide you through California’s complex tax rules and help you avoid mistakes that could cost thousands.
Let’s talk lifestyle
The sun, the waves, the beaches — many people dream of moving to California for retirement. But making that dream a reality takes planning ahead. Will you be buying a house or renting? What community fits your pace of life? How close do you want to be to family, friends, or medical care?
Most importantly, stay flexible. Your needs may change over time. In fact, many retirees downsize, relocate within California, or even explore second homes. So give yourself options and get a second, or even third, opinion on your retirement strategy.
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Attorney Rodney J. Hatley has over 30 years helping clients navigate the legal logistics of asset protection and estate planning. For a free consultation, contact him today! Your finances, your health, and your family deserve thoughtful guidance every step of the journey.