Recently, a close relative sold her house in South San Jose, packed up her belongings, and moved clear out of California. Fortunately for her, she had equity in her home (as she bought the home in 1997). But, with this move I began to think about retirement for many in the Bay Area. How much does a proper retirement cost?
Of course, all calculations depend on your particular situation. Some have a house that they own outright. Some have no children. Some are able to live frugally with other family members. But let’s take a look at some basic numbers. The figures come from the U.S. Census bureau.
First, let’s explore a house. The average (median) residence in Santa Clara County is estimated at $702,000. Proposition 13 (California law that states that property taxes are based on the value of the date the home purchased, plus a small increase each year), if allowed to remain intact, would have significant benefits to those that have lived in their homes for a number of years. However, even considering Prop 13, taxes alone can be quite significant. In one area of San Jose (Almaden/Leigh High School) the property taxes are as follows (see Santa Clara County Assessor):
Tax | Tax Rate |
1% Maximum Tax Levy | 1.00000% |
Co. Retirement Levy | 0.03880% |
Co. Bond 2008 Hosp. Fac. | 0.00950% |
Union Elementary 1999 | 0.07860% |
San Jose City G O Bonds | 0.03500% |
Campbell Union High 1999 | 0.01960% |
Campbell Union High 2006 | 0.01310% |
West Valley Coll 2004 | 0.01390% |
SCVWD-State Water Proj | 0.00700% |
SCVWD-Zone W-1 Bond | 0.00020% |
Total | 1.21570% |
Thus, at the median house in Santa Clara County of $702,000, the yearly tax rate would be $8,534.21 annually (or $711.18 per month). Other necessary residential costs to consider include utilities, homeowner’s insurance, and maintenance (including furniture, kitchen supplies, and electronics replacement).
Next, start to add up vehicle costs, insurance, gas, food, travel, entertainment, cell phone bills, clothing, ever-increasing medical bills, charitable contributions, gifts to family, and, of course, other taxes.
One category I did not state already, DEBT. For many individuals and families, debt is the overpowering category that dictates how much work is done, and for how many more years. For those considering retirement, this debt is forcing behavioral changes that have not been seen before. Especially here in the beautiful, but expensive Silicon Valley, we are seeing increasingly high number of seniors living off credit cards.
An article in the Chicago Sun Times details the effects of this debt. We are seeing an increasing number of seniors filing for bankruptcy. Also, baby boomers are simply not prepared, or even preparing for retirement.
To close, here is one thing to consider when looking at debt payments. Avoid taking money from your retirement accounts to pay off debts. This is especially important when that debt starts to become unmanageable. The reason for this is that in California, in general, retirement plans are completely exempt in bankruptcy. This means that the money that you have worked so hard for so many years and placed in those accounts will remain yours even after bankruptcy.
Other bankruptcy exemptions will apply to each and every individual. Therefore, if you have been losing sleep trying to figure out how you will be able to climb out of debt in order to have a retirement, come see us at the Henshaw Law Office for a free consultation.
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