June 26, 2012 – This is the latest in our Retirement 101 series, which joins earlier reports about retirement in the Southwest, Florida, and the Carolinas (see bottom of article for links). At the end of this article we will provide lists of the 10 most popular California retirement towns and the 10 most popular California Active Adult Communities.
If California is anything it is big and diverse. It has fans and legions of detractors. In our experience California has not had that much success in attracting retirees as new residents. Those who retire here from elsewhere either have family in the state, or they move to a town or area they know about. For those who have spent their working lives in the Golden State, most will continue to live in the state, but perhaps will move to a smaller home or a less expensive or congested area. There are many who say they want to leave as soon as they retire, hoping to escape California’s high taxes, cost of living, and crazy traffic. But for people who have the resources or the creativity to find a way to live in California, its beauty and climate are very hard to beat.
A Few Facts
California is a huge state by any measure. It is the most populous state with over 37 million people (12% of the U.S.). There are over 4 million people over 65 in the state (11.4% of the population, vs. 13% of the general U.S. population over 65). The state has 8 of the 50 largest cities in the U.S. It is the 3rd biggest state by area (after Alaska and Texas). Population and income data in this article is from American Fact Finder-U.S. Census Bureau.
Economics and Home Prices.
California’s median home sold in 2012 for $295,300, which is double the U.S. median of $148,000. Home prices vary dramatically by region. Generally the big cities along the coast (Los Angeles, Santa Barbara, San Francisco) are the most expensive according to Zillow, whereas distant suburbs and communities in the interior are least costly. For example, in Bakersfield the mean home price is $117,000 vs. well over $400,000 in the San Francisco Metro. The California Association of Realtors just reported that home sales in May were 21% above the year earlier period with prices up over 6%. Unsold inventory of homes has decreased to a very low 3.5 months supply.The median household income in California is $60,883, about $10,000 higher than the U.S. median.
Being a large state with a long north/south coastline as well as a considerable east/west dimension, California has an extremely diverse climate. Death Valley in the southern part of the state is one of the hottest places on earth. At Lake Tahoe and in the mountain of the Sierra Nevada it is not unusual to have snowstorms dump more than a foot of snow. San Francisco and the coastal north is often cool and rainy, whereas San Diego has such consistent and sunny weather that the joke is that the weatherman is never wrong there. The interior valleys up through Sacramento tend to be cool in winter and hot and dry in summer. The highest mountain in the contiguous states is California’s Mount Whitney at 14,505′ – whereas just 90 miles away in Death Valley it is 282′ below sea level.
California has a very progressive income tax. Couples with incomes below $33,780 pay 2% income tax (the rate is 4% between that and $53,314). Social security income is not taxed, although pensions are. The data below is from the Tax Foundation and Tax-Rates.org. For more details about taxation and other information about each state see our California Retirement Guide.
Tax Burden Ranking – 6th highest
Highest Inc. Tax Rate – 10.3% (for a couple who makes $2 million)
State Sales Tax – 7.25%
Med Prop Tax Rate – .074% of property value
Localities may add additional sales taxes
Social Security Taxed – No
Taxation of Pensions – Yes
Places to Live in California
The warmest climate and some of the highest home prices are found in southern California, from San Diego just above the Mexico border to beautiful Santa Barbara north of LA. Retirees are attracted to these areas for the beaches, the weather, and the lifestyle. Going east from LA the far suburbs are cheaper but not as appealing until you get to the desert. For people with plenty of income La Jolla, Oceanside, and Santa Monica the lifestyle will be hard to beat. Home prices in Riverside, which is a bit inland, are half what they are in Los Angeles. Claremont is the city of colleges and is very attractive to retirees.
Northern California Coast
San Luis Obispo, halfway between Los Angeles and San Francisco, is an extremely desirable place to retire. It has beaches, a major university (Cal Poly), and an interesting and livable city. San Francisco is of course beautiful but very expensive, as are its suburbs of Berkeley and Walnut Creek. Going north from there Mendocino and Eureka offer plenty of charm and less congestion.
Wine is grown in a large part of the state but the major growing areas are around beautiful Santa Barbara and the charming Danish tourist town of Solvang (that’s where the movie “Sideways” was filmed). Going north from there great wine and food are synonymous with Napa, Santa Rosa (home to several active adult communities), and Sonoma. These are great places to retire, if you can afford to live there.
Running north-south is the great agricultural district of California, sandwiched between the coastal mountains and the Sierra Nevada to the east and the Nevada border. Towns like Chico, Sacramento, Bakersfield, and smaller places like Grass Valley make interesting and less expensive places to retire.
The Sierra Nevada Mountains
The resort areas around Lake Tahoe, Squaw Valley, and Mammoth offer a retirement option in the mountains and lake environment. Winters are very snowy but the outdoor recreation in the form of hiking, skiing, mountain biking, and fishing are superb. The towns are small and life is quieter than along the coast.
As we mentioned California has its share of deserts. The most famous is the Mojave, home to a few small and somewhat dusty towns and a very large military presence. Palm Springs is the place in California that probably attracts the most out of state retiree residents. Many of them are snow birds, while a few live here full time. The town of Palm Springs is funky and gay-friendly with a strong cultural presence. But there is an endless string of other towns like Rancho Mirage, Palm Desert, La Quinta, and Banning in the area. Golf and tennis are big here as there are a large number of active adult communities here in the Coachella Valley. Idyllwild is a delightful small town in the mountains near Palm Springs.
Top 10 California Retirement Towns
Based on the number of visitors who read reviews of individual California towns at Topretirements for the last 6 months, the 10 most popular California towns for retirement are below. But, given that this site has reviews of 52 different California towns, we recommend you go deeper than that to find some that might appeal to you, as obviously in this short an article we cannot do them all justice.
1. San Diego
2. San Luis Obispo
3. Palm Springs
4. Santa Barbara
5. Napa Valley
8. La Jolla
(Oceanside, Chico, and Santa Rosa were close)
10 Most Popular Active Communities
California has an amazing array of active adult, 55+, and retirement communities to choose from. Laguna Woods Village is very large and by the most popular on this site. The Palm Springs area has dozens if not hundreds of such communities, as does the area south and east of Los Angeles. Prices can range from ultra-luxury to very, very inexpensive. We recommend that members explore our California Active Community Directory to check out specific communities. The 10 most viewed active communities during the last 6 months were.
1. Laguna Woods Village (Laguna Woods)
2. Pacific Regent (La Jolla)
3. Trilogy Central Coast (San Luis Obispo)
4. High Country Villas (San Diego)
5. Carlsbad by the Sea (San Diego)
6. Sunrise Terrace (San Luis Obispo)
7. The Fountains at the Carlotta (Palm Springs)
8. The White Sands at La Jolla (La Jolla)
9. Hummel Village (San Diego)
10. Ashby Village (Berkeley)
– California is a surprisingly diverse place to retire from the standpoint of geography, climate, type of environment, and cost of living.
– Topretirements has reviews of 52 retirement towns for California and 111 active adult communities, which makes it one of our most reviewed states.
– Coastal real estate is extremely expensive but inland there are bargains to be had.
– From a tax standpoint for retirees California is not a great place on some, but not all scores. Its overall tax burden is 6th highest in the nation. But if your income is not high your taxes will not be too bad, except for sales tax. Property tax is controlled so that if you have owned your house for a long time your property taxes will not be too onerous.
– If you want to retire in California, there are plenty of places where the living will be good, even affordable.
For further reference:
California Retirement Towns and Active Communities
State Retirement Guides
Gulf Coast Retirement: Sun, Tax-friendly, and a Lower Coast of Living
Florida Retirement 101
Retirement in the Southwest Comparison: AZ, NM, and UT
Dueling States: Arizona vs. Florida
Comparing the Mid-Atlantic States
Comments? Please let us know in the Comments section below what you think about a California retirement, whether you have considered it, currently living it, or whatever.