Bay Area Tax Planning Strategies for High Earners Approaching Retirement

If you live in the Bay Area, you already know it’s one of the most expensive places in the country to call home.

Between California’s steep income taxes, sky-high housing costs, and the region’s overall cost of living, planning for retirement here can feel like trying to run uphill with a weighted vest, while pulling a resistance parachute, in the pouring rain.

Maybe that’s a tad extreme. Nevertheless, the stakes are high for business owners, tech executives, medical professionals, and other high earners. Without a tax strategy, years of diligent saving and stock-based compensation can erode quickly once the IRS and California Franchise Tax Board take their cut.

That’s why Bay Area retirees need a tax plan that reduces liabilities, maximizes income streams, and positions your wealth to work as hard in retirement as you did during your career.

A Breakdown of Key California Tax Laws

Retirement planning is challenging everywhere, but California is a unique situation. Its tax code adds an extra layer of complexity. Understanding how these rules affect your financial future is the first step toward minimizing the dollar impact of taxes.

California’s Income and Capital Gains Tax Rates

California levies some of the highest state income tax rates in the nation — topping out at 13.3% for high earners. Unlike federal brackets that cap capital gains at lower rates, California taxes capital gains as ordinary income. That means the sale of company stock, real estate, or a business can quickly push you into the highest brackets.

Property Taxes and Proposition 13

On the surface, California property taxes may seem modest compared to other states, thanks to Proposition 13’s cap on annual assessment increases.

But for Bay Area homeowners sitting on multimillion-dollar properties in San Francisco, Oakland, or Walnut Creek, those taxes still add up — especially if you buy a new property at today’s elevated values. For instance, let’s assume your effective property tax rate is 1.1%. On a $2 million home, that’s still $22,000 annually.

Rules around transferring Prop 13 assessments (for example, to children) also play a major role in estate planning.

Community Property Rules

California is a community property state, which means assets acquired during marriage are generally considered jointly owned. This has two major implications:

• Estate planning: At a spouse’s death, community property typically receives a full step-up in basis — not just half. This can significantly reduce capital gains taxes if the surviving spouse sells appreciated assets.
• Divorce and business ownership: For entrepreneurs, community property rules can complicate succession planning or the sale of a closely held business.

Estate and Gift Tax Considerations

While California does not impose a separate estate or inheritance tax, federal estate tax rules still apply. For high-net-worth individuals, estate planning is imperative. It’s critical to use trusts, gifting strategies, or charitable vehicles to transfer wealth efficiently and avoid tax issues down the road.

Knowing the rules is the first step. Now it’s time to apply them strategically to unlock sizable savings.

Tax-Smart Retirement Income Planning for Bay Area Professionals

It’s your money, why not devise a plan to keep it? For high earners in California, where state income tax stacks on top of federal rates, smart sequencing and strategic planning can save hundreds of thousands over a lifetime and stabilize your financial situation.

Maximize Contributions

Arguably the simplest tax strategy to execute prior to retirement is maximizing contributions, while you’re likely at peak earnings of your career.

Employer retirement plans. If you’re contributing to a 401(k), make sure you’re hitting the annual limit ($23,000 in 2025). For those 50 and older, the IRS allows an extra catch-up contribution of $7,500, which can help accelerate your retirement savings. This should also max out any employer match, which is essentially free money.

Health Savings Accounts (HSAs). If you’re enrolled in a high-deductible health plan, HSAs can be an underrated retirement planning tool. They offer a triple tax advantage: contributions are tax-deductible, growth is tax-deferred, and withdrawals for qualified healthcare expenses are tax-free. After age 65, you can even withdraw HSA funds for non-medical expenses (subject to ordinary income tax), making it a “stealth” retirement account.

Roth strategies. High earners typically exceed the income threshold for direct Roth IRA contributions. Fortunately, the backdoor Roth IRA provides a workaround: contribute to a traditional IRA, then convert it to a Roth. Some employer plans even allow a mega backdoor Roth, letting you contribute after-tax dollars to your 401(k) and roll them into a Roth — potentially sheltering six figures annually in tax-free growth.

Withdrawal Sequencing

How much, when, and from where? Those are the three questions you need to answer as you devise a retirement income plan.

A common mistake is drawing down retirement accounts in the wrong order. Coordinating across taxable, tax-deferred, and tax-free accounts creates more control over your annual tax bill.

1. Start with taxable brokerage accounts, which should mostly be subject to long-term capital gains rates (likely 15%). In California, those gains are taxed as ordinary income, so spreading sales across years can help reduce the burden.
2. Transition to IRAs or 401(k)s, strategically before RMDs begin at 73. Taking controlled withdrawals earlier can help you avoid large, forced distributions later that may push you into higher tax brackets.
3. Save Roth IRAs for last. Their tax-free withdrawals provide flexibility, especially if you anticipate higher expenses or want to leave tax-advantaged assets to heirs.

Roth Conversions

Converting assets from a traditional IRA or 401(k) into a Roth IRA during lower-income years can dramatically reduce your lifetime tax bill. While conversions generate taxable income in the year of conversion, future withdrawals from a Roth are tax-free and not subject to required minimum distributions (RMDs).

Let’s assume you retire at 60 with $4 million spread across a taxable brokerage account and traditional IRAs. You plan to delay Social Security until 70, which gives you a decade with relatively low taxable income (pulled from your brokerage accounts).

Converting $200,000 annually into a Roth IRA during this “gap decade” lets you pay taxes at lower brackets, avoid higher RMDs later, and create a pool of tax-free income for your 70s and 80s. This is particularly useful if tax rates continue to climb higher in the future.

Social Security Timing

Claiming Social Security benefits at the “right” time can significantly impact your guaranteed, lifetime paychecks.

Filing at 62 locks in a reduced benefit (up to 30% less) for life. Waiting until full retirement age (66–67 for most) ensures you get your “full” benefit, while holding out until age 70 increases benefits by 8% annually beyond your FRA.

For someone expecting $4,000 per month at FRA, delaying until 70 could boost that benefit to over $5,000 per month — an additional $12,000 annually. For couples, coordinating spousal and survivor benefits can add even more long-term value.

However, there are a lot of variables here: your life expectancy, lifestyle plans, and other retirement accounts all factor into when you should claim Social Security.

Managing Capital Gains

For Bay Area professionals holding concentrated stock positions or real estate, poor planning can result in large, unexpected tax bills.

There are a few practical strategies to keep in mind:

• Spread large equity sales across several years instead of realizing all gains in a single tax year. It’s similar reasoning as roth conversion timing — spreading out sales can help you avoid leapfrogging into larger tax brackets.
• Pair gains with tax-loss harvesting in your broader portfolio. For example, selling a $500,000 block of company stock might be partially offset by realizing losses from other holdings.
• Consider gifting highly appreciated assets to charity via donor-advised funds, avoiding capital gains altogether while securing a charitable deduction.

Charitable and Legacy Strategies

For those with philanthropic or family legacy goals, charitable vehicles and trusts can help reduce taxable income.

Examples include:

• Donor-Advised Funds (DAFs): Contribute appreciated stock, avoid immediate capital gains, and receive a tax deduction — while retaining flexibility on when to disburse funds to charities.
• Charitable Remainder Trusts (CRTs): Provide income to you or your heirs for a set term, with the remainder going to charity.
• Gifting strategies: For Bay Area families with estates above federal exemption limits, gifting shares to children or irrevocable trusts now can transfer appreciation outside your taxable estate.

How a Fiduciary Financial Advisor Can Help

Tax planning in the Bay Area is far from straightforward. Your financial life has multiple moving parts — retirement accounts, equity compensation, real estate, estate planning. Meanwhile, you have to account for California’s tax laws and then optimize for your unique needs and financial goals.

That’s where financial planning with a fiduciary advisor can make a substantial, wealth-saving difference. Unlike brokers or sales-driven providers, fiduciaries are legally bound to put your interests first. For high earners approaching retirement, that can translate into:

Integrated planning. Coordinating retirement planning, investment management, tax strategy, and estate planning into one cohesive roadmap.

Scenario modeling. Testing how different tax strategies — from Roth conversions to charitable giving — impact your retirement income and lifetime tax liability.

Equity compensation expertise. Navigating the federal and state tax implications of stock options, RSUs, and concentrated company stock.

Estate planning alignment. Ensuring that liquidity events, business sales, or large charitable gifts are structured to reduce estate taxes and transfer wealth efficiently to heirs.

Peace of mind. Acting as a sounding board so you don’t feel like you’re tackling complex, high-stakes financial decisions alone.

You probably have decades of experience in your field. But chances are, this is your first and only retirement. Retirement planners and certified tax professionals can help facilitate a smooth transition into whatever life you want to live post career.

At BEW, we call this shift Life After Work — the stage where your career success fuels the next chapter of purpose and financial freedom.

Ready to explore what your own Life After Work could look like? Download our free guide, Retirement Redefined: Your Guide to Life After Work.