“Will I be able to retire in Southern California?” “How much should I be saving for retirement?” If these questions are keeping you up at night, you are not alone. For a working person, the golden years of retirement in Southern California can be both easy and difficult to imagine. It is common for people hoping to retire in the not-too-distant future to question whether they can actually afford to retire at some point. Without a clear understanding and a sound plan of what their future retirement income will look like, many people hoping to retire will simply choose to work longer out of fear of the unknown.
With the second-highest cost of living of any state, California is not a cheap place to retire. But fear not, you can retire in Southern California, with the right planning and advice. What it really takes to retire is a solid grasp of your budget, a carefully considered investment and spending plan for your life savings, debt that is under control, and a plan you are excited about.
Is it Smart to Retire in Southern California?
You may be wondering whether it is smart to retire in Southern California, or if you should consider moving out of state in order to afford retirement. For the quality of life, California is a great place to retire. The beautiful weather nearly year-round, opportunities to work part-time or engage in abundant outdoor and cultural activities, and the availability of quality healthcare contribute to a high quality of life. But California is also a very expensive state to live in, and therefore to retire in. Low housing affordability creates financial stress for many retirees. Fortunately, housing costs are more manageable for many long-time residents with significant home equity and property tax payments held in check by Proposition 13. So if you are asking whether it is smart to retire in Southern California, the answer will depend on your situation, your plans, and your preference. Perhaps you prefer to retire in Southern California in order to stay close to family and friends, even if financially it may be more prudent to move out of state. This is a highly personal decision, and one that is worth asking yourself every few years as your situation and your goals may change.
How Much Do I Need to Retire in Southern California?
Financial planners have estimated that retirees need 80% or more of preretirement income to maintain their standard of living, although of course, individual situations vary greatly.
To figure out exactly how much it will take to retire comfortably, it is important to consider what kind of lifestyle you expect to lead in retirement. Will you keep your current home, or want to downsize? Do you hope to travel? If so, where? Luxury cruises around the world or perhaps RV trips around the country? How often do you want to eat out? Go to Broadway shows? Do you want to move closer to the beach? Will you be helping raise your grandchildren or paying for their education?
Based on these factors, you can estimate what you will actually need to spend in retirement. According to the Bureau of Labor Statistics’ annual survey on consumer spending, the average retired household spends 25% less than the average working household each year. But, while many expenses may go down, such as health care premiums, 401(k) contributions, commuting costs, etc., others may go up. Now that you have more free time than you had while you were working, expenses such as dining out, travel, recreational activities and others may likely increase. Even your utility bills may increase, now that you are spending more time at home.
The important thing is to be realistic. Don’t shortchange your future self by assuming you can live off of low-cost goods and “senior specials” at your local diner. It is also recommended to have a cushion for unpredictable costs. The key to a comfortable retirement is laying a foundation for a fixed income to pay for essential monthly expenses as if you still were employed. Any investments outside the desired monthly paycheck are secondary. The goal is to achieve your desired fixed income with the least amount possible money, leaving the remainder of your retirement savings for vacations, luxuries, investments, and emergencies.
At What Age Should I Start Saving For Retirement?
You may be wondering whether now is the right time to start planning your retirement. It is very important to make steady progress toward saving for retirement, no matter what your age. Ideally, most financial planners in Southern California and nationwide recommend that you start saving in your 20s when you first start earning a paycheck and may not yet have too many expenses, such as a mortgage. When retirement seems so far in the future, it may be difficult to plan for it, with so many competing priorities in the present. But starting early pays off in multiple ways: it gives you more time to save and also increases the power of compounding, which means generating earnings from previous earnings.
But what if you are 45? Or what if you are already in your 50s? If you are closer to retirement, now is the time to get specific about your desired lifestyle, spending, and sources of income in retirement. Talk to your financial advisor about how much risk you should be taking, based on when and where you plan to retire and how much you will need. The bottom line is, it is never too late to get started saving for retirement, even in Southern California. No matter how old you are or how much or how little you have saved so far, there is always something you can do to ensure a safety net for your later years. The first step a financial planner may ask you to take is to determine the assets needed by age 65. While that number depends on a lot of factors, income is the biggest one. Since higher earners will get a smaller portion of their income in retirement from Social Security, they generally need more assets in relation to their income.
If you plan to retire in Southern California, the higher cost of living is a major factor to consider. However, you may also have more equity in your home, due to the higher real estate values. Regardless of your circumstances, speak with a local financial planner who is familiar with the nuances of living in the Golden State during your golden years.
Retirement Planning For Southern California Residents and More at AIM Inc.
While retirement planning may seem an overwhelming task, particularly in Southern California, it doesn’t have to be. The experts at AIM Inc. can help remove the stress and worry of retirement planning by offering proven strategies and a variety of options for every life situation. Whether you are a single person planning for adventure-filled golden years, a couple hoping to put your grandkids through college one day, or a philanthropist who wishes to support the causes near and dear to your heart when you have retired, we can help. AIM Inc. specializes in providing objective financial planning to help clients in the Inland Empire and Southern California build, manage, grow, and protect their assets for each stage in life. We offer retirement planning, life insurance, lifetime income, social security benefit maximization, annuities, 401K plans, IRA, and financial planning services. In addition to a variety of financial services, such as investing advice, financial education, retirement planning, and more, we provide each and every client with unparalleled customer service.
Call 1-800-301-8818 today to arrange a free evaluation of your retirement goals and get started with worry-free retirement planning today. There is no obligation of any kind, there is no risk on your part, you don’t have to pay any money to get the free knowledge. Please visit our website to view video testimonials of clients who have used our services. You can call us to schedule an appointment, or email us at email@example.com to select a time that is convenient for you.