San Francisco has a much higher cost of living than most cities in the United States. Even excluding rent, the cost of living is 42.3% higher than in Kansas City, Missouri, according to Numbeo. Restaurants cost 34.6% more, groceries 35.4% more, and rent costs a dizzying 159% more.
San Francisco isn’t the only extravagantly expensive city in California, either. “Similar costs apply in San Diego, Santa Barbara, Los Angeles, Palo Alto and San Jose; they are all high-cost, high-pressure retirement locations,” said financial planner Adam Spiegelman of Spiegelman Wealth Management.
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So what money mistakes should California retirees avoid at all costs?
Also see the 25 Cheapest Cities to Retire in California.
With a median home price of $1,240,382, according to Zillow, San Francisco homeowners could be saddled with a huge capital gains tax bill. Even with owners excluded from the first $250,000 in capital gains, sellers could suffer a tax shock.
Downsizing can also come with other hidden costs. That condo may seem affordable compared to your current home, but remember that condo rates generally increase each year. That can affect retirees who live on fixed incomes.
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Most long-time homeowners struggle with the idea of renting, even for just a year. But it can save you tens of thousands, both when purchasing a home and avoiding losses from selling too soon.
“Rent for a few months or a year,” Spiegelman said. “Get a feel for the local neighborhoods, the climate, the real costs of living there and only then commit.”
Sure, you’re fit today, but that doesn’t mean you’ll be able to climb stairs or live independently 10 to 20 years from now.
Look for your “forever home” while you are healthy and fit. Look for single-story homes, with amenities within walking distance, and consider small upgrades, such as equipping the shower with handlebars.
Aging in place can save you a lot of money in California. The average cost of an assisted living facility is $8,750 in San Jose per CareScout, compared to more than $5,900 in Kansas City.
Since many of the major homeowners insurance companies have pulled out of California, premiums have skyrocketed. Melanie Musson, an insurance expert at Clearsurance.com, noted that many homeowners in California now underinsured their home, or go uninsured altogether.