After years of saving, investing, and preparing, retirement is finally in sight. But this isn’t a finish line, it’s the start of something new. Whether your dream is retiring on the coast in Santa Barbara or wherever you’ve always imagined settling down, making your income last requires strategic and intentional planning. Let’s explore some ways to maximize and manage your retirement income.
What Is Retirement Income?
Retirement income is the money you receive during retirement to cover your living expenses and maintain your lifestyle after you stop working full-time. Common sources include:
- Pensions: Pension payouts received from an employer or pension plan.
- Social Security: Federal program that provides benefits based on earnings history.
- Investments: Stocks, bonds, mutual funds, or real estate. Income can come in various forms, including withdrawals, dividends, interest, or rental income.
- Qualified retirement accounts: 401(k)s, 403(b)s and similar accounts, traditional and Roth IRAs. All tax-deferred qualified retirement accounts are subject to specific IRS withdrawal rules, including annual RMDs (required minimum distributions) which begin at age 73.
- Other sources: Annuities, cash value life insurance, part-time work, royalties, online income streams.
Tax Considerations
Generally, retirement income, such as Social Security benefits, pension payments, and retirement account distributions, are not considered earned income per IRS guidelines.
However, remember income taxes may still be due…or short- or long-term capital gains for that matter, depending on what money you are withdrawing from which accounts. Real estate may have completely different tax rules depending on how your investment is structured; for instance, if you have a REIT or have done a 1031 exchange.
And what some retirees forget is that withdrawals from traditional tax-deferred qualified retirement accounts are subject to ordinary income taxes, as is part-time work or self-employment. (Withdrawals from Roth accounts—if they’ve been in place five years or more—are not subject to income taxes because taxes have already been paid on the money used to fund those accounts.)
Even Social Security benefits may be taxed—up to 85% depending on your “combined” or “provisional” income every year, which includes withdrawals and RMDs from tax-deferred qualified accounts.
How Much Retirement Income Do You Actually Need?
While the “80% rule” suggests you’ll need about 80% of your pre-retirement income to maintain your current lifestyle, it’s just a general benchmark and starting point for estimating retirement calculations, not a personalized plan. Actual needs vary based on housing, healthcare, travel plans, debt, and lifestyle changes. Some retirees may need more, others less. Popular frameworks and alternatives to the 80% rule:
- The detailed budget approach: Expense-based planning estimating your expected monthly retirement expenses, including housing, healthcare, and discretionary spending, using a line-by-line budget. You can also use a budget calculator to simplify the process.
- The replacement ratio method: Income-based planning estimating how much of your pre-retirement income you’ll need to replace, adjusting for pensions, Social Security, and personal circumstances.
- The hybrid approach: Blending a detailed budget with income replacement ratios and withdrawal strategies to create a personalized, flexible retirement plan. Financial advisors can help you model difference scenarios, test assumptions, and adjust plans as your needs evolve, offering a more tailored strategy.
Strategies to Maximize Retirement Income
Once you know how much income you’ll need, you can consider strategies to maximize and protect it.
- Delay Social Security: You can begin taking benefits as early as age 62, but delaying past your full retirement age (67 for 2026) increases your monthly benefit by 8% per year, up to age 70. Couples should look at more filing options they have together especially if there is a disparity in their ages.
- Downsize or relocate to reduce housing costs: Cutting back on expenses is another way to have more spendable income for retirement.
- Consider annuities: An annuity is a contract between an individual and an insurance company designed to provide a monthly stipend or income during retirement.
- Catch-up contributions: If you’re 50 or older, catch-up contributions let you save extra in an IRA or 401(k) to boost retirement savings.
- Review tax-efficient withdrawal strategies: Work with a financial professional to plan tax-efficient withdrawals, such as using taxable accounts first or early Roth conversions, to potentially minimize taxes for the long-term and stretch retirement savings.
Special Considerations for Santa Barbara Retirees
Depending on your desired retirement location, your target retirement age, and how far away your retirement is, you will need to have enough money saved in order to live comfortably. Keep in mind that Santa Barbara retirees face living costs over 50% higher than the U.S. average, including:
- Housing costs: Santa Barbara consistently ranks among the most expensive housing markets in California, with median home prices well above the national average.
- Healthcare: Medical services, insurance costs, and long-term care planning costs in California are above the national average.
- Taxes: California has high state income taxes and property taxes.
- Inflation and cost of living: Housing and general living costs in Santa Barbara typically increase faster than the national average.
However, there are advantages to retiring in Santa Barbara:
- Lifestyle and recreation: Santa Barbara’s prime location offers easy access to beaches, cultural events, outdoor adventures, and a wide range of attractions, making it an appealing destination for cost-effective leisure. However, it’s important to stay mindful of discretionary spending.
Because living costs in Santa Barbara are so high, careful planning is essential. A financial advisor can help you estimate your retirement income needs and develop a strategy tailored to your lifestyle and timeline.
If you’re planning for retirement or already retired in Santa Barbara, we’d love to help you build a reliable income strategy that fits your life and long-term goals. Consider us your Financial Advisor Santa Barbara. You can reach Tremblay Financial Services in Santa Barbara at 888.569.1982.
This material is for general informational and educational purposes only and is not to be construed as financial, tax, or legal advice. Tremblay Financial does not provide tax services. Tax rules vary and may change, so always consult with your CPA, tax professional, attorney, and financial advisor for guidance specific to your situation.
Sources:
https://www.zillow.com/home-values/13712/santa-barbara-ca/
https://www.cbsnews.com/news/what-is-a-good-monthly-retirement-income-in-2025/
https://www.bestplaces.net/cost_of_living/city/california/santa_barbara?
https://www.cbsnews.com/news/social-security-retirement-age-2026-change-66-67-increase/
https://www.cbsnews.com/news/how-to-maximize-your-retirement-income-now-experts-say/
https://www.salary.com/research/cost-of-living/santa-barbara-ca
https://smartasset.com/retirement/80-rule-for-retirement
https://worldpopulationreview.com/state-rankings/average-retirement-income-by-state
