How to Maximize Your Retirement Income While Living in High-Cost Areas like Claremont, CA
Retirement in a place like Claremont, California, has plenty of perks: walkable neighborhoods, cultural amenities, great weather, and proximity to family and friends. But living in a high-cost area also comes with a big question: How do I make my retirement income last longer when everything around me costs more?
Whether you’re a retired Claremont Colleges professor, a former Kaiser Permanente physician, or simply someone who loves this community and doesn’t want to leave, this guide will walk you through how to stretch your retirement dollars while staying rooted in a high-cost area.
Why Cost of Living Matters in Retirement
Many retirees underestimate how local expenses can erode their income. In high-cost regions like Claremont, you may face:
Higher property taxes
More expensive healthcare and insurance premiums
Elevated everyday costs (utilities, groceries, services)
State income taxes on retirement income (California does not tax Social Security, but does tax most other income)
This means your retirement drawdown strategy, tax planning, and income mix all matter more than ever.
1. Get Strategic About Withdrawal Order
When pulling money from retirement accounts, the sequence matters. For example:
Tax-deferred accounts (e.g., 403(b), 401(k), IRA): Withdrawals are taxed as ordinary income.
Roth accounts: Withdrawals are tax-free if qualified.
Taxable brokerage accounts: You’ll pay capital gains, which may be lower than income tax.
In high-tax states like California, optimizing your withdrawal sequence can save you thousands over time. One rule of thumb is to draw from taxable accounts first, then tax-deferred accounts, and save Roth withdrawals for last—this helps preserve tax-free growth while managing your tax bracket. However, a fiduciary advisor can help tailor this strategy to your specific income needs and tax picture.
2. Plan Around Required Minimum Distributions (RMDs)
Once you reach RMD age, you must start taking distributions from most tax-deferred accounts, even if you don’t need the money. These RMDs can:
Push you into a higher tax bracket
Affect how much you pay for Medicare (via IRMAA surcharges)
Trigger additional taxes on Social Security benefits
Consider Roth conversions before RMD age to smooth out your lifetime tax liability.
3. Leverage Local Tax Exemptions and Rebates
While California isn’t known for being tax-friendly in retirement, you may find some cost-saving opportunities, such as:
Property tax reassessment exclusions for seniors who downsize or transfer their home
Homeowner’s exemptions on primary residences
Medical expense deductions at the state level if you itemize
Don’t leave money on the table. Make sure your tax plan reflects all the credits and exemptions available to you at both the local and state levels. Talk to a financial advisor or tax professional to determine the strategies that will work for you.
4. Optimize Your Housing Decisions
If you’re “house rich but cash poor,” your home can become an asset, not just an expense. Options include:
Downsizing to reduce property taxes and maintenance
Relocating within the community (e.g., from single-family to townhouse or senior community)
Considering a reverse mortgage (with caution and guidance)
Just a small change in housing costs can significantly increase your income flexibility in retirement, especially in Claremont’s competitive market.
5. Maximize Social Security Timing
When to claim Social Security is one of the most important retirement income decisions you’ll make:
Claiming at age 62 reduces your benefit permanently
Taking benefits at your full retirement age gives you 100% of the benefit you’re entitled to based on your work record
Waiting until 70 increases the maximum monthly payout (up to 32% more than at full retirement age)
In a high-cost area, that extra income can be a meaningful buffer against inflation and rising medical costs.
6. Use Tax-Efficient Investment Strategies
Retirees in higher brackets can benefit from:
Municipal bonds (potentially tax-free at the federal and state levels)
Tax-loss harvesting to offset gains
Asset location strategies (placing income-generating assets in tax-advantaged accounts)
A well-allocated portfolio can lower your taxable income without compromising your goals.
7. Get Professional Help from a Local Fiduciary Advisor
Every dollar counts more when living in a high-cost area like Claremont. Working with a fee-only, fiduciary advisor can help you feel confident that your strategy isn’t driven by product sales, but by what actually helps you succeed.
At Evermont Wealth, we specialize in helping retirees and pre-retirees in the Claremont area create smart, tax-aware income strategies. We help clients:
Minimize taxes on retirement income
Build a withdrawal plan to extend portfolio longevity
Understand local housing and healthcare costs
Coordinate pension, Social Security, and investment income
Final Thoughts
You don’t have to move away to make retirement work. With thoughtful planning and the right financial structure, you can stay rooted in Claremont while enjoying a financially sound and fulfilling retirement.
This material was written in collaboration with artificial intelligence (ChatGPT) derived from sources believed to be accurate. This information should not be construed as investment, tax, or legal advice.