The people of Los Angeles face many  Retirement Challenges. Face it LA folk are facing an uphill battle to retire comfortably. Saving for retirement is hard enough anywhere in the US. Living paycheck to paycheck is a challenge for many people in the LA area.  Angelenos, How do you feel you are doing financially? Financial Planner LA is here to help you have a happier, healthier and wealthier Los Angeles retirement. 

The Four Biggest Disadvantages for L.A. Residents and Retirement Planning.

Who knew that residency in the City of Angels could be so tough for your financial future?  From the high Los Angeles cost of living to keeping up with those insufferable Fabulous Joneses next door, or worse Keeping Up with the Kardashians,  living in Los Angeles spells even more of a challenge when it comes to saving up for a California retirement. It isn’t surprising that many people LA have trouble saving for retirement. Some have literally nothing saved at all. 

Don’t get me wrong, I LOVE L.A.  So when I saw the article in the May 24^th, 2016 Los Angeles Times, “Retirement Plans Scarce in L.A.” I cast a wary eye. But I have to say the piece made some excellent points to which I want to add my two cents here.  Sad but true, people in the Southland are specifically disadvantaged when it comes to saving for retirement.

The four biggest reasons why Los Angeles Retirement Planning is a Challenge:

• Limited access to retirement plans at work

Saving for retirement in California is hard enough but L.A. folks have it even harder. According to the Pew Charitable Trust, three out of four workers here in the Southland don’t have access to a workplace retirement plan whether it be 401(K) plan, profit sharing, pensions or other similar retirement accounts. This puts Los Angeles among the least retirement plan-friendly cities in the country.   PS, this also means many in Los Angeles are paying more income taxes than they should be, partly because of the loss of the valuable retirement plan contributions tax deduction. 

Across the country, the participation rates in workplace retirement plans are remarkably poor.  Even those who are saving into them often aren’t saving enough. But if you don’t even have a workplace plan at all, that road is closed to you completely and you’re saving absolutely NADA, ZILCH, ZERO, NOTHING. For many, figuring out what to do and how to do it on their own is right up there with getting a root canal.  So they just ignore it for as long as they can until the pain gets to be too much before finally taking steps to figure it out.

• Sky-high cost of living in Southern California – Los Angeles, Beverly Hills, West Hollywood and beyond. 

No two ways about it, living in L.A. ain’t cheap. The higher the cost of living, the more trouble many will set aside enough money to get on track for financial independence in the future.

In a previous posting “How Much Do You Really Need to Afford the Cost of Living “Comfortably” in Los Angeles?” I wrote that you needed to make around $75,000 to be “comfortable” in L.A. (that is, if you’re comfortable with just getting by and not living particularly well.) The problem is the average Angelino only makes around $50,000 per annum.  That $25,000 gap means that too many people have skipped saving for the future completely.  This is just getting by let alone being able to afford a home purchase in Los Angeles. Or save for a down payment.

• The LA-LA Land Fabulous Factor- is another Los Angeles Retirement Challenge

There is the basic cost of living in L.A., which is nothing compared to the temptation of being fabulous here in the City of Angeles.  The ball busting budget issues get worse in the more posh parts of town like West Hollywood, Beverly Hills or by the beach Santa Monica.  The average rent in West Hollywood is over $2500 per month.   That translates into the desired income of about $120,000 to hit the ideal 25% or less of income going to housing.  The average income in West Hollywood is nowhere near that high.

We all know parking can be a nightmare here, but you still may be tempted to break the bank leasing some schmancy ultimate driving machine. Clothing, Botox, food, drinks at the Mondrian all add up. Even those hipster neckbeards in Silverlake who look like they’re homeless spend a lot of money to get their grungy look just right.  (Paging Dolly Parton who said, “It costs a lot of money to look this cheap.”)

While it may seem glamorous to live the fab life, there is nothing sexy about being broke. Or worse, in debt up to your perfectly tanned ears. Unfortunately, millions of my fellow Los Angeles Retirement Savers haven’t gotten the memo.

• Many people are Self Employed or work at Small Businesses. Another Los Angeles Retirement challenge.

If you are self-employed or a small business owner, figuring out how to save for retirement is your responsibility.  The good news is you may have some better options to put even more money away per year than normal working stiffs and get the potentially huge tax benefits that can come with larger contributions.  Things like SEP IRA’s, Solo 401(K)’s and even Defined Benefit plans may be available to you.   If maintaining your quality of life in retirement isn’t enough motivation, many of these plans will help you lower your tax bill.

While I don’t disagree with any of the four assertions above, don’t let them be excuses that keep you from reaching your personal financial goals. If the thought of figuring this out on your own is too overwhelming, contact a fiduciary financial planner.  They can help to determine the right steps for you and your future.

Whatever you do, know that procrastination is your worst enemy, and the time to get something going now.  The clock is ticking and time flies . . . even in sunny L.A.

Until next time, be fiscally fabulous, and remember your money matters.

Related: Can I afford a House in Los Angeles?

DAVID RAE, CFP®, AIF® is a West Hollywood Financial Planner. President of  DRM Wealth Management. He lives in the Beverly Grove neighborhood with his 2 Chihuahuas and my handsome husband.  He is also a regular contributor to Forbes.com. Also the Advocate Magazine, Investopedia and Huffington Post. For more information out Financial Planner LA David Rae and his services visit his website at www.davidraefp.com.

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