California doesn’t tax Social Security, but it generally taxes annuity income beyond the return of your principal. We compare annuity options and how each one fits a San Diego retiree’s income and tax picture.
Tell us about your savings and income goals, and a licensed agent will follow up by phone or video.
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Different income sources are taxed differently in California. Here’s a general view to discuss with your tax professional.
| Income source | California tax treatment | What it means for planning |
|---|---|---|
| Social Security | Not taxed by California | Federal tax may still apply |
| Annuity income | Generally taxed, excluding return of principal | Non-qualified annuities spread principal across payments |
| Most employer pensions | Generally taxed as regular income | Annuity income adds to the same tax bracket |
We lay out Social Security, pensions, and savings side by side.
We compare fixed, fixed indexed, and income annuities.
We coordinate with your tax professional on the details.
Generally, yes. California taxes annuity income as regular income, excluding the portion that’s a return of your principal, while it doesn’t tax Social Security benefits. Federal tax applies too. A tax professional can confirm how your specific annuity and other income would be taxed.
A qualified annuity is funded with pre-tax retirement money, like an IRA rollover, so payments are generally fully taxable. A non-qualified annuity is bought with after-tax savings, so part of each payment is an untaxed return of principal. The difference affects how much of your income is taxed.
A fixed indexed annuity credits interest based partly on a market index, with limits like caps or participation rates, while protecting your principal from market losses. It’s not invested directly in the market. Crediting methods vary by product, so we compare them side by side.
Most deferred annuities have a surrender period, often several years, during which withdrawals above the allowed annual withdrawal amount carry a charge that declines over time. Knowing the schedule before you buy helps you keep enough money accessible elsewhere for emergencies and planned expenses.
Yes. An immediate income annuity starts payments within a year of purchase, and some deferred annuities offer income riders you can turn on later. The right timing depends on when your other income sources start and what you want to keep flexible.
Tell us about your savings and income goals, and a licensed agent will lay out options by phone or video.
Annuities are insurance products, not bank deposits, and are not FDIC insured. Guarantees are backed by the financial strength and claims-paying ability of the issuing insurer. Guarantee association coverage is subject to limits and conditions. Surrender charges may apply. We do not provide tax or legal advice.
