Where Is the Most Affordable Place to Retire in California?

California’s allure, with its diverse landscapes and vibrant culture, often comes with a reputation for high living costs. Many individuals considering retirement in the Golden State might view it as financially out of reach. However, opportunities for a more affordable retirement exist within the state. This article explores factors influencing retirement costs and guides readers toward regions and strategies for a practical California retirement.

Key Drivers of Retirement Affordability in California

The cost of living in California is significantly higher than the national average, impacting retirees through several key financial areas. Housing expenses represent the largest portion of a retiree’s budget. As of mid-2025, the average monthly rent for a two-bedroom apartment statewide is around $2,791, though this figure can vary widely; for instance, Modoc County offers two-bedroom apartments for around $958, while Santa Cruz-Watsonville can exceed $4,000. The median home price across California for all home types is projected to be around $909,400 for 2025. Mobile homes typically offer a lower entry point.

Beyond housing, general living expenses contribute to California’s elevated cost of living, which is about 144.8% to 150% higher than the national average. Groceries are approximately 12% higher than the rest of the country, and utilities are about 31% higher. Transportation costs are also notable, with California having the second-highest gas prices in the U.S., averaging around $4.64 per gallon in February 2024.

Healthcare costs are a substantial consideration for retirees, even with Medicare coverage. A healthy 65-year-old male retiring in 2024 is projected to spend approximately $281,000 on healthcare expenses during retirement with Original Medicare plus Medigap and Part D coverage, or $128,000 with Medicare Advantage plus Part D. For a healthy 65-year-old female, these projections are $320,000 and $147,000, respectively. While Medicare provides foundational coverage, out-of-pocket expenses for deductibles, co-pays, and services not covered by Medicare, such as long-term care, can add up. Healthcare service fees can vary regionally within California.

California’s tax structure also influences retirement affordability. The state imposes a progressive income tax on retirement income, including pensions, 401(k) withdrawals, and IRA distributions, with rates ranging from 1% to 12.3% for 2024, and an additional 1% tax on incomes over $1 million, leading to a top marginal rate of 13.3%. Social Security benefits are exempt from state income tax.

California’s statewide sales tax rate is 7.25%, but local district taxes can increase the total rate to as high as 10.75%. Property taxes are governed by Proposition 13, which limits the basic property tax rate to 1% of the assessed value. The assessed value is generally the property’s purchase price, and increases are capped at a maximum of 2% per year. This provides tax stability for long-term homeowners, but for new buyers, the assessed value resets to the purchase price, potentially resulting in a higher initial tax bill.

Identifying California’s More Affordable Retirement Regions

Despite California’s overall high cost of living, several regions offer comparatively more affordable retirement options, typically characterized by lower housing costs and general expenses.

The Central Valley, stretching through the heart of California, is known for its agricultural economy and tends to have a lower cost of living than coastal cities. Cities like Bakersfield and Fresno offer more affordable housing, with Bakersfield consistently ranking as one of the most affordable places to live in California. In August 2025, the average rent in Bakersfield was $1,206 per month, and in Fresno, it was $1,286 per month. The region benefits from a Mediterranean climate, a slower pace of life, and access to healthcare facilities.

The Inland Empire, located east of Los Angeles, offers relative affordability compared to the highly populated Southern California coast. Areas within the Inland Empire, such as Victorville and San Bernardino, have lower housing costs, with Victorville offering a median home price of $365,000 as of May 2025. The region provides access to Southern California amenities without the premium coastal pricing, and its climate features hot, dry summers and mild winters.

Far Northern California provides a rural, slower-paced environment with significantly lower housing costs. Towns like Redding and Etna offer a calm atmosphere and access to outdoor activities. For example, Etna’s cost of living is significantly lower than the California average, with housing costs also well below the state average. Communities in this region present opportunities for a quieter lifestyle amidst natural beauty.

Desert communities in Southern California, including parts of the Coachella Valley and the High Desert, are recognized for their sunny climate and more reasonably priced housing options. Borrego Springs, for instance, offers a median home cost of $337,100, and its overall cost of living is lower than the California average, though still higher than the U.S. average. These areas attract retirees seeking warm weather and outdoor recreation, though they can experience seasonal population shifts and extreme summer temperatures.

Mountain towns, particularly in the Sierra Nevada foothills, also present more affordable living. Towns like Mariposa and Grass Valley offer a tranquil environment and lower housing costs, with Mariposa’s cost of living being 27% lower than the California average and housing costs 51.5% below the state average. Lee Vining, a small town in the Eastern Sierra, is another example where housing is significantly more affordable than in coastal or Central Valley cities. While appealing for nature lovers, these areas may have higher utility costs and more limited amenities in remote locations.

Financial Planning for an Affordable California Retirement

Financial planning is essential to navigate the costs of retirement in California. Creating a detailed budget is a fundamental step, accounting for California’s specific cost structures. This budget should factor in fixed costs, like housing payments, and variable expenses, such as utility fluctuations or healthcare needs.

California’s income tax structure requires careful consideration for retirement income. While Social Security benefits are not taxed by the state, withdrawals from pensions, 401(k)s, and IRAs are subject to California’s progressive income tax rates. Retirees should factor these state tax liabilities into their income projections. Some tax credits, like an additional exemption for seniors aged 65 or older, may help reduce the tax burden.

Property tax planning is another component due to Proposition 13. For new homeowners, the property’s assessed value for tax purposes resets to the purchase price, and subsequent annual increases are limited to a maximum of 2%. This means new buyers may face higher property tax bills than long-term homeowners in comparable properties. Strategies to manage property tax burdens could include considering smaller properties, mobile home parks, or areas with generally lower property values.

Managing healthcare costs is paramount for retirees. While Medicare provides primary coverage, supplemental plans, Medicare Advantage plans, and prescription drug plans are typically needed to cover gaps. Retirees should budget for premiums, deductibles, co-pays, and out-of-pocket maximums. Health Savings Accounts (HSAs), if utilized before retirement, can provide a tax-advantaged way to save for future medical expenses, as qualified withdrawals are tax-free.

Considering downsizing and lifestyle adjustments can enhance affordability. Downsizing to a smaller home or a different housing type, such as a condo or mobile home, can reduce housing costs and property taxes. Reducing reliance on personal vehicles by utilizing public transportation or living in walkable communities can lower transportation expenses. Adopting a more frugal lifestyle, such as cooking more meals at home or seeking out free or low-cost recreational activities, can also contribute to stretching retirement savings.