Should You Leave California When You Retire?

A lot of California teachers think about this. The cost of living here is real. The state income tax is real. And after 30 years in the same place, the idea of a fresh start somewhere the dollar goes further is appealing.

But there are things people do not think about until it is too late. Healthcare coverage being the biggest one.

Here is an honest look at the tradeoffs so you can make the decision with clear eyes rather than a spreadsheet that only counted the wins.

Your pension follows you wherever you go

Start with the good news. Your CalSTRS pension does not care where you live. It pays you the same amount whether you are in Ventura County or Vegas or Vermont. There is no penalty for leaving California. The checks keep coming.

CalSTRS pays roughly 30,000 retirees living outside California. It is more common than people think and there is zero financial penalty for doing it.

The tax reality is significant

California taxes pension income as ordinary income. If you have a $60,000 annual pension and you are a single filer in California, you are paying state income tax on most of that. California's top marginal rate is 13.3%, the highest in the country, though most teachers will be in the 6% to 9% range depending on total income.

Several states have zero state income tax: Nevada, Texas, Florida, Washington, Wyoming, South Dakota, Alaska, and Tennessee. Arizona taxes income but has some pension exclusions worth looking into. Oregon taxes pension income but has lower property taxes than California in many areas.

On a $60,000 pension the difference between living in California and living in Nevada is roughly $3,600 to $5,400 per year in state income tax. Over 20 years that is $72,000 to $108,000. That is not nothing.

Healthcare. This is the one that trips people up.

CalSTRS offers retiree health benefits through the Educators Benefit Services plan. The coverage is solid. But here is what most people do not find out until they have already moved: the provider networks are California-based. If you retire to Arizona or Nevada or Florida you may find that your CalSTRS health plan has very limited in-network coverage where you now live, or none at all outside of emergency situations.

This does not mean you cannot move out of state. It means you need to figure out your healthcare plan before you move, not after. Some retirees who leave California switch to Medicare and a supplemental Medigap policy once they turn 65, which gives them national coverage. Others pay out of pocket for a local plan for the period between retirement and Medicare eligibility.

The gap between retirement age and 65 is the riskiest window. If you retire at 62 and move to Nevada you have three years where you need to sort out health coverage that actually works where you live. Do not underestimate the cost or complexity of this.

Social Security and the Fairness Act

If you now have Social Security income as a result of the 2025 Fairness Act changes, how that income is taxed varies by state. At the federal level up to 85% of Social Security can be taxed depending on your combined income. But many states exempt Social Security entirely from state income tax.

California does not tax Social Security income. Neither do most other states. But it is worth verifying for whatever state you are considering because it affects the total income picture.

States California teachers commonly consider

The stuff that does not show up in a spreadsheet

You can optimize every number and still make the wrong decision.

Thirty years in California means doctors who know your history, friends who know your kids, neighborhoods you understand, and routines that work. That has real value and it is genuinely hard to replicate somewhere new.

The teachers we work with who have moved out of state and been happiest about it almost always had one of two things going for them: family already in the destination state, or a very specific reason for wanting to be somewhere else beyond just the taxes. The ones who moved purely for financial reasons and did not love the destination have had more mixed experiences.

This is not an argument for staying. It is an argument for being honest about why you are going.

How we help with this decision

We do not tell you where to live. That is not our job.

But we can model out the full financial picture of your specific pension, Social Security income, investment accounts, and healthcare situation in different states so you are comparing real numbers rather than assumptions. We can show you what your monthly retirement income looks like after taxes in California versus Nevada versus Arizona, factoring in everything that actually affects the outcome.

A lot of people do this analysis on the back of a napkin and miss the healthcare piece entirely. We do not miss that piece.