Here is a plain-English playbook with Roth conversion strategy and other local angles for Simi Valley and Moorpark, California residents.
1) Know what’s actually taxed—and what isn’t
- Social Security: California doesn’t tax Social Security at all. The federal government might tax up to 85% of your benefit depending on your income (“combined income” formula). State of California Franchise Tax Board+2IRS+2
- Capital gains: California taxes all capital gains as ordinary income—no lower “long-term” rate at the state level. (Federal still has 0/15/20% brackets.) State of California Franchise Tax Board.
- Municipal bonds: Interest from California munis is generally exempt from California income tax; interest from other states’ munis is usually taxable in CA. Legal Information Institute.
2) Sequence withdrawals to manage tax brackets
Think of your retirement income like selecting clubs on a par-5: use the right club at the right time.
- Early years (pre-RMD, post-retirement): Often ideal for drawing from pre-tax IRAs up to the top of a target bracket, then filling the gap with taxable accounts. This can reduce future Required Minimum Distributions (RMDs) and IRMAA surcharges (more on those below).
- RMD timing: Under current law, RMDs start at age 73 (75 if born in 1960 or later). You can delay the first RMD to April 1 of the following year—but that can force two RMDs in one calendar year.
3) Use Roth conversions intentionally (not randomly)
It’s good to have a well-planned Roth conversion strategy. Converting slices of a traditional IRA to a Roth in lower-income years can be powerful:
- You prepay tax at known (and potentially lower) rates, reduce future RMDs, and create a pot of tax-free income later.
- With several individual provisions scheduled to change after 2025, many households are modeling conversions in 2025 while rates are still under current rules. (Details are policy-dependent; the nonpartisan CRS summary is a good reference on scheduled expirations.) Congress.gov
Are you considering a Roth conversion? I have a ‘decision tree’ roadmap that can help you through the process. You can get it here.
4) Watch the “stealth taxes”: IRMAA + NIIT
- Medicare IRMAA (Parts B & D): Two years after your income shows up on your tax return, Medicare can tack on an income-related surcharge. For 2025, the standard Part B premium is $185/month; surcharges begin for 2023 MAGI above $106,000 (single) or $212,000 (joint) and scale by tier. CMS. There’s more on this, and other tax traps, in my video library. See the very first video at https://indfin.com/video-library/
- Net Investment Income Tax (NIIT): High earners may owe an extra 3.8% on investment income once MAGI exceeds $200k single / $250k joint. Planning levers include capital-gain timing, tax-loss harvesting, and asset location.
5) Give smarter: Qualified Charitable Distributions (QCDs)
If you’re 70½ or older, you can send money directly from an IRA to a qualified charity. It never hits your adjusted gross income (AGI), and it can satisfy RMDs once you’re subject to them.
- For 2025, the QCD limit is $108,000 per person (indexed).
6) Place assets in the right accounts (asset location)
- Keep tax-inefficient income producers (bond funds throwing off ordinary income, REIT funds) in tax-deferred accounts when possible.
- Keep tax-efficient or growth-oriented assets (broad equity ETFs) in taxable or Roth accounts, which is where having a well-planned Roth conversion strategy can be helpful. Especially for residents of high tax states like California.
7) Capital gains: harvest with intent
- Coordinate gains with low-income years; consider realizing gains up to the top of a federal 0%/15% bracket when it fits the plan.
- Remember: California will tax those gains at ordinary rates even if they’re long-term. State of California Franchise Tax Board
8) Property-tax relief when you move (Prop 19)
Many retirees downsize or “right-size.” Under Prop 19, Californians 55+ can transfer their Proposition 13 assessed value to a replacement home anywhere in the state, up to three times (subject to rules and timing). That can keep property taxes in check even if you relocate within or around Simi Valley/Moorpark. California State Board of Equalization
9) Local realities: Simi Valley & Moorpark
- No state tax on Social Security is a genuine win for local retirees; the trade-off is state tax on capital gains and most retirement distributions. If a big IRA or stock sale is in your future, plan ahead.
- Considering bonds? Again, a Ventura County or California muni fund can reduce your state bill versus an out-of-state muni fund; but I’m not a fan of bond funds in taxable accounts.. The reason is simple: there’s no maturity date and therefore no predictability.
10) A simple order of play (example)
This is an illustration, not advice—but it’s the kind of flow many Simi Valley/Moorpark retirees use:
- In years before RMDs, fill up a chosen federal bracket (say, the 22% or 24% band) with IRA withdrawals or Roth conversions (don’t forget this decision tree roadmap).
- Use taxable accounts for the remainder, tapping principal (which isn’t taxed) and qualified dividends/capital gains (federally lower rates).
- Once RMDs start, you may want to consider QCDs to keep AGI—and IRMAA—down. That’s a case-by-case consideration, however.
Frequently used reference numbers (as of 2025)
What to do next (practical, no-nonsense)
- Map your income by year (age 60–85) to see where conversions, RMDs, and Social Security overlap—and where IRMAA cliffs lurk.
- Decide a target bracket to fill annually with IRA withdrawals or conversions.
- Charitable? Set up QCDs before RMD season.
- Moving locally? Check Prop 19 timing rules before you list or buy.
If you’re within five years of retirement—or already retired in Simi Valley or Moorpark—let’s build a year-by-year tax strategy that puts more of your money in your pocket, not Sacramento or Washington. (No gimmicks. Just smart asset arrangement, sequencing and timing.)
Here’s where to Get Started with IFG!
Jim
