In the year In 2012, at the age of 34, I quit my investment banking job and retired with $3 million. I currently live in San Francisco with my husband and two young children.
But since 1977, I have been traveling regularly to Hawaii, where my parents have been retired for 15 years. With a modest budget, they live a simple life off retirement savings and government pensions – thanks to three decades in the US Foreign Service.
Seeing my parents live their dreams, we want to follow the same path. Our plan is to move to Hawaii in 2025. Between my parents’ experience and my own, I’ve learned a lot about retiring in Hawaii.
Our consensus is that the beach is the perfect place to retire – although there are still a few downsides to consider.
How much money do you need to retire in Hawaii?
Many financial experts recommend maintaining a 4% withdrawal rate to ensure your investments last throughout retirement.
The median household income in Honolulu County, for example, is $88,000. If someone wants to withdraw that $88,000 from their property each year, they would need to invest about $2,200,000 to withdraw it at a rate of 4%.
But that’s just one example. How much money you need depends on where you want to live, your standard of living and your expected income.
If you can live comfortably on $42,500 a year, have a pension, or can contribute to Social Security, you may have low-cost, low-income investments early in your retirement journey.
The downsides of retiring in Hawaii
Before starting your offshore retirement plan, beware of these three biggest pitfalls.
1. High cost of housing
As of June 2022, the median single-family home price in Honolulu is $1,050,000. Meanwhile, the median price for a condo on Oahu, considered a budget-friendly place to retire, is currently $535,000 — up 16 percent from June 2021.
If you want to retire in Hawaii, consider buying a small condo or rental instead of buying a single family home. According to RentCafe, the average rent for a 594-square-foot apartment is approximately $2,042.
2. Expensive groceries and gas
According to a 2021 report by the Missouri Center for Economic Research and Information, Hawaii’s grocery prices are the highest in the nation.
For example, I paid $8.99 for a gallon of whole milk in Oahu, but $6 in San Francisco. And while mangoes grown in Hawaii are delicious, they can cost $6 each!
Plus, if you want to drive, Hawaii has unusually high gas prices. The average price of a gallon in the state today is $5.41 and continues to rise, while the national average is $4.03, according to AAA.
3. You may feel claustrophobic
It takes just four hours to drive around the 597 square miles of Oahu. Even though the island holds nearly a million people, in my experience, it can still feel small.
And as the pandemic continues to make air and cruise travel unpleasant, you may feel a little stuck without your options at times.
Benefits of Retiring in Hawaii
Yes, it is expensive. But if you want to know what retirement in Hawaii can be like, here are some amazing benefits
1. Less stress and higher health care
Hawaii ranks second in Hassett and Safety. 2021 study from healthcare company Sharecare.
My parents worked in Washington DC, Paris, Guangzhou, Kobe, Taipei and other big cities before retiring in Honolulu. Compared to other cities they’ve lived in, they find their Hawaiian lifestyle surprisingly relaxing.
2. Top rated health care
The United Health Foundation also ranks Hawaii as the third healthiest state in the nation. And according to US News’ list of the best states for health care, Hawaii ranks first.
I’m not surprised. Hawaii has beautiful year-round weather, public beaches and parks, a variety of locally grown and raised foods, and great access to preventive medicine and dental care.
If you’re looking for a more healthy and active lifestyle, you can definitely find it in Hawaii.
3. ‘Ohana’ means family.
An important part of Hawaiian culture is the care and nurturing of family and friends, or “ohana.” Almost everywhere you go, whether it’s a restaurant or a shopping mall, I see that things are set up to be family-friendly.
Also, it’s not uncommon to have multiple generations under one roof in Hawaii.. My wife, kids, and I probably won’t live in my parents’ house, we’re hoping to rent or buy nearby.
4. A lot of diversity
According to data from the U.S. Census Bureau, Hawaii ranks as the nation’s most diverse state, ahead of California and Nevada.
5. Good tax benefits
Hawaii has one of the lowest property tax rates in the country, averaging just 0.28%. If you have a federal pension, it is exempt from state income tax. And the sales tax rate is reasonable at 4% to 4.5%, as opposed to 7.25% to 8.25% in California.
However, Hawaii has one of the highest state income tax rates at 11% if you earn over $200,000. If you make between $48,001 and $150,000, you’ll pay a state income tax rate of 8.25 percent.
Why do I want to retire in Honolulu?
For my family, moving to Honolulu saves us money. of The median home price in San Francisco is about $1,633,650, much higher than in Honolulu.
If we move, we will sell our house here and pay cash for a 40% cheaper property in Honolulu. We reinvest the home savings into real estate stocks, stocks, and REITs to grow our retirement income.
$150,000 to $200,000 in Honolulu is probably more than $300,000 a year in real investment income to support the lifestyle we want.
But more than that, with my parents in their 70s, I want to spend as much time with them as possible. Hawaii feels like home.
Sam Dogan He worked in investment banking for 13 years before starting his career. Financial SamuraiHis personal finance website. His new book “Buy That, Not This: How to Pave Your Way to Wealth and Financial Freedom.” It’s out now. Follow him on Twitter. @financialsamura.
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