Retiring in California

What counts as the best place to retire in California will vary depending on your personal circumstances and what you want out of your retirement.

You may be interested in living by the ocean, making one of several coastal cities and beach towns an ideal retirement spot. Or you may want to be surrounded by nature, making the northern part of the state more appealing.

But even outside of your personal preferences, there are several areas in California that stand out that could promote a strong life after retirement.

California has a wide range of offerings when it comes to cities. Everything from local towns to full-blown metropolitan epicenters are represented throughout the state.

According to a retirement article from U.S. News and World Report, Santa Barbara is one less-thought-of area that could make a lot of sense for retirees. The Pacific coast city has a median home price of about $660,000, which is lower than you’ll find in some of the more populated cities in California.

A fifth of Santa Barbara’s population is 60 or older, giving you the chance to assimilate into a community that is already full of other retirees.

If you’re looking for a bigger city with more diversity in activities, then San Francisco could be a good option. Set right on the water, it’s a world class city with much to do and many different lifestyles available.

It also has a surprisingly large senior population. The downside is that you will need to have well-stocked savings to pull off a retirement here, since it’s one of the most expensive cities in the country.

One option that is a bit cheaper than San Francisco is San Diego. It’s a major city and includes many of the same advantages as the other more expensive cities in California.

You also may want to consider Fresno. It’s located far inland, so it doesn’t come with the same beach and Pacific Coast view advantages of other cities. But it is a significantly cheaper place to live while offering a more relaxing, retirement-friendly environment with many outdoor activities and good weather.

Given the size of the state, California unsurprisingly has a bevy of options when it comes to retirement communities, both big and small.

One of the largest and oldest is Laguna Woods Village. It houses nearly 19,000 residents in Orange County and offers a wide range of activities within its neighborhoods. According to its website, the community has two full golf courses, five swimming pools and everything from an art studio to equestrian center.

There are numerous options throughout the state, as well for retirees who would prefer a smaller community.

With more than 800 miles of coastline, California has no shortage of options when it comes to coastal cities and towns. Everything from sandy beaches to tall cliffs overlooking the Pacific Ocean can be found.

As one of the premier coastal cities in the world, San Francisco stands out as an elite option. The city is surrounded by water on three sides and is a center of Pacific coast culture.

San Diego is another major coastal city that may appeal to you. But when identifying where to retire, you may also want to look into areas in northern California.

According to Visit California, smaller and less-frequented Santa Cruz is another coastal destination. It offers both ocean life and nature activities in a quiet part of the state that may appeal to retirees more than the major and constant activity of a big city.

It’s important to remember that California has one of the highest standards of living in the country. So, even the more affordable parts of the state will still likely be more expensive to live in than what would pass for affordable in other states.

As far as larger cities within the state. Fresno may be one of the most affordable. According to California.com, Fresno’s median home price is around $250,000, which is astronomically lower than what you will find in other big Californian cities.

Fresno is also about two hours away from Los Angeles, keeping you within driving distance of one of the nation’s major cultural centers.

Bakersfield is another more affordable option, offering significantly lower housing prices than you’d find in the larger cities, but retaining its own vibrant culture. Sacramento – the state capital – is another possibility. It’s pricier than places like Fresno or Bakersfield but still not in the ballpark of what it would cost to live in Los Angeles or San Francisco.

Simply put, California is an incredibly expensive state to live in, separating it from many of the best retirement states. It costs more to live in California than almost any other U.S. state.

According to a data report from Missouri Economic Research and Information Center, California ranks 48th nationally for cost of living in 2021, behind only New York and Hawaii.

California ranks poorly for cost of living in categories like groceries, utilities and transportation. But the category that hurts the state the most is housing. Rent and property values are significantly higher in California than almost anywhere else in the country.

According to an article from Tax Foundation, the spending power of $100 in California is just $87.11. This means that your money will have significantly less value in California. That same amount of money has a spending power of over $100 in every bordering state.

For retirees, this means that moving to California for retirement would be a major financial adjustment. Unless you are coming from New York or Hawaii, you will be adjusting to a higher cost of living and your money will not go as far as it did in your current state.

Since many retirees are counting on a finite amount of savings to get them through retirement, it’s important to calculate exactly how far your money will go in California before making the decision to move there.

Things that go into cost of living like housing costs or groceries are not the only areas that will eat into your savings if you opt to retire in California. Taxes in the Golden State are higher than virtually any other U.S. state.

According to a report from Tax Foundation, California has the highest income tax in the nation, coming in at 13.3%. Only three other states have a double-figure income tax rate and Hawaii, which has the second highest in the country, is still more than two points lower than California’s.

California has a similarly high sales tax, which clocks in at 8th in the country.

California, however, is one of several states that does not tax Social Security. But you will still likely need hefty retirement savings to be able to live a comfortable post-retirement life in California to make up for the high cost of living and tax rates.

California offers solid health care for its residents, but it doesn’t necessarily stand out nationally. The United Health Foundation senior report placed California at 38th in its 2021 health rankings. It also noted that the state has a high prevalence of falls, which is an area of concern for older adults.

One area that the state does rank very well in is Medicare quality. While Original Medicare is provided at a federal level and is the same in all states, private companies offer regional Medicare Advantage plans.

More populous states tend to have more and better options for Medicare Advantage, and California is no exception. According to the U.S. News & World Report, it ranks second among all states in Medicare quality.

While California’s overall health rankings is middle of the pack, its large population and numerous options – especially in relation to Medicare – actually make it an ideal state for retirees from a health care perspective.

The main pro of retiring in California is the fact that the state offers a high quality of life in a variety of different environments. There are few states that can boast of everything from beaches to major cities to mountains and national parks.

Virtually every retiree can find a part of the state that appeals to them. And the high number of older Americans in several cities throughout the state can help you feel like you’re part of a community.

California has all the activities and excitement that come with big cities, while also offering the tranquility of beach town life just a short drive away. There are few places in the U.S. that can truly offer better living, along with regularly warm weather.

However, the tradeoff for such a high standard of living is the cost of it.

There’s no way around the fact that California is an incredibly expensive state to live in, even for retirees. This sets up a sizeable barrier that prevents most older adults from reasonably being able to retire in California.

Even if you spent years saving for your retirement and put lots of money away, the combination of cost of living, housing prices and taxes in California can quickly eat away at your savings and leave you in a precarious position.

Retirement in California simply may not make sense for those who don’t have a significant amount of wealth set aside for retirement.