Are You Financially Ready to Retire in Southern California?

Scott Rojas, CFP®, MBA

For many Southern Californians, planning for retirement can be a daunting task. We live busy, fast-paced lives, and developing a financial plan often takes a back seat. You’re saving for a car, saving for a down payment on a home, saving for college, paying off debt, and enjoying life today. The need to plan for retirement seems like something you can do next year—only to find you now have no plan and only a handful of years left before retirement.

It is not uncommon for our Fullerton financial planning firm to have a meeting with a prospective client and after the meeting wish we could have met with them five, 10, or 15 years ago. In the world of financial planning and investments, time generally creates more options for retirement. 

What does it look like to have developed a sound retirement plan? For our most prepared clients, their financial situation before retirement looks similar to this:

  1. Paid off their home and all other debts

  2. Developed a retirement projection that factors in taxes and inflation

  3. Saved enough to last them until age 95

  4. Outlined a plan for health care expenses

  5. Prior to retirement, lived on the income they expect to have through retirement

  6. Developed an estate plan

  7. Planned to retire to something, be it a hobby, part-time job, volunteer work at a nonprofit, etc.

In addition to the items noted above, you have other issues that you should consider as you prepare for retirement. These other issues include:

  • State income taxes. California is a great state and offers us the beach, mountains, great weather, Disneyland, and many other activities. But it is also expensive, and state income taxes will require planning.

  • High property taxes. Even with Proposition 13, property taxes can be an issue, and when combined with the SALT deduction limit of $10,000, they can squeeze the pocketbook.

  • High home prices. Buy a house you can afford so you can enjoy today, save for the future, and have your home paid off by the time you retire.

  • High gasoline taxes. Southern Californians love to drive, and California loves gasoline taxes. Combine these two, and California has the most expensive gas in the country.

  • Health care expenses. If you are going to retire before you’re eligible for Medicare, it is critical that you understand what your medical expenses will be. Even with Medicare, health care can be a large expense and a major hurdle for those who would like an early retirement.

  • Earthquake insurance. This insurance becomes even more important when you have paid off your house. Coverage has become more affordable recently through the California Earthquake Authority. Consider giving your insurance representative a call and request a quote.

  • Long-term-care insurance. This coverage is more critical for married couples who are living close to the maximum that should be withdrawn from their investment portfolio. Long-term care can run anywhere from $2,000 to $7,000 per month. For most couples, this expense would leave little for the other spouse to live on.

Combine all of these challenges along with the needs to send kids to college, and developing a financial plan that includes a retirement plan becomes even more imperative. The sooner you start this process, the likelier it is that you will have options and time to plan for the future you would like to enjoy. The goal is to have financial freedom by the time you reach retirement age.

So, where do you start? Given your current situation, here are some starting points:

If you are within five years of retirement, focus on the following items:

  1. Estimate your current living expenses, and make some adjustments for savings, potentially a reduced tax rate, and other work-related expenses that will no longer exist through retirement. This is your new baseline for retirement income.

  2. Plan to live until you are 95 and develop an investment portfolio that supports longevity.

  3. Maximize your Social Security or pension income, and think twice before claiming Social Security prior to your full retirement age (FRA).

  4. Plan for taxes. Outline a withdrawal plan that keeps you in a manageable tax bracket through retirement.

Top three tips if you are not on track and have some time before retirement:

  1. Pay off debt.

  2. Save for retirement.

  3. Keep working and turn on Social Security as late as you can (age 70).

If you are many years away from retirement, focus on:

  1. Save 5% of your income in a retirement account.

  2. Pay down your consumer debt.

  3. Develop a budget, and consider using an online service such as

  4. Consider using a target date fund to invest your retirement funds.

  5. Build a strong balance sheet.

Please contact us for a no-cost, no-obligation meeting to review your financial situation and to see how Eclectic Associates can strive to meet your financial planning needs.

Schedule a 15-minute discovery call with a fee-only financial advisor to discuss your personal situation.

Scott Rojas, CFP®, MBA