A Guide to Your Dream Destination Retirement
Many people dream of retiring in a beautiful location that would feel like a vacation—for the rest of their lives! (And isn’t that what retirement should feel like?) Even if you’re not worried about having enough… not only money to retire in Hawaii, but money to retire in general… You might wonder if you need a particular amount of money to comfortably retire in your chosen locale.
Hawaii is one of the most popular (usually in the top five) dream retirement destinations. Year-round gorgeous weather, natural beauty from beaches to mountains, culture, a lush local food scene, and the rugged independence that comes from its physical distance from the mainland appeals to many. It also boasts excellent healthcare as well as healthy lifestyles.
Health care company Sharecare ranked Hawaii second in terms of happiness and well-being in a 2021 study. The United Health Foundation also ranks Hawaii as the third healthiest state in the country. And Hawaii took the top spot in U.S. News’ list of Best States for Health Care,.
The cost of living is notoriously higher in Hawaii compared to much of the mainland U.S., however. This is due to many factors, including the fact that most goods need to be shipped overseas. Therefore, it’s important to consider whether your situation would allow you to move to Hawaii in retirement.
Could you retire in Hawaii? What does it take? Do you have the money to retire in Hawaii? What are some of the limitations you may face? Let’s find out.
HAWAII’S COST OF LIVING
When you begin planning for retirement in Hawaii, you need to consider the cost of living in Hawaii. Unless you’ve accumulated a certain level of wealth, it may be challenging to have the money to retire in Hawaii without modifying your lifestyle significantly.
According to a study by the Missouri Economic Research and Information Center in 2019, Hawaii has the highest cost of living in the nation, with a cost of living index of 191.8. The national average cost of living index was set at 100. (The next in line was the District of Columbia at 159.)
Most estimates say you’ll need at least $80,000 to $100,000 for a single person and around $125,000 to $150,000 for a family per year. Some say that on average you’ll need about $120,000 per year to live comfortably in Hawaii. The median household income in Honolulu County is $88,000.
However, this does depend on your exact location and your lifestyle. Your needs will depend on where you’d like to live, your standard of living, your health, your life expectancy, and your expected income.
Assuming you need about $120,000 a year, if your retirement age is 65 and you expect to live to Hawaii’s average life expectancy of 86, you’d need to have 21 years of cushion tucked away. This would amount to about $2.5 million in retirements savings not factoring in inflation.
However, if you factor in inflation, you may only be able to withdraw $88,000 from your assets each year, and you’d still need about $2.2 million in retirement investments for 21 years.
Not everyone has a $2.2 – $2.5 million retirement best egg squirreled away. Can you make it work with less? It is still possible with the money you have to retire in Hawaii.
Here are some ideas to consider.
CHOOSE A MODEST HOME
Retiring in Hawaii means finding an affordable place to live. The average home price in Hawaii is $830,000. As of June 2023, the median single-family home price in Honolulu was $1,050,000. The median price for a condo on Oahu was $510,000. Homes in parts of Maui, Kauai, Oahu and the Big Island can cost upwards of $1.4 million to $1.7 million.
If you want to retire in Hawaii on a smaller nest egg, you might consider buying a small condo or townhome, or even renting, rather than buying a single-family home. The average rent for a 600-square-foot apartment in Hawaii is about $2,100 a month.
KEEP GROCERY AND GASOLINE BILLS LOW
Eat less? Drive less? You definitely need to eat, but keeping tabs on these expenses can mitigate some of Hawaii’s biggest price tags.
Hawaii’s grocery prices are some of the highest in the nation. Groceries in Hawaii cost about 15-30% more compared to the national average. For a family of four, expect to spend $1,200-$1,500 per month on groceries. Buying local and fresh will help, and eating out is even more expensive than groceries.
Hawaii also has unusually high gas prices. As of December 2023, the statewide average price for a gallon of regular unleaded gas in Hawaii was $5.31, among the highest in the nation. Gas prices had been as high as $5.50 per gallon in early 2023. This is well above the national average of $3.30 per gallon.
Can you modify this factor? Yes, if you find ways to enjoy your retirement without taking a lot of road trips. Living close to a downtown area with public transportation can help save money on gas. The island of Oahu is the best Hawaiian island to be without a car. You can easily get around without a car in Honolulu. The islands of Maui, Oahu, and Kauai do have their own bus systems. But public transportation in Hawaii is limited overall.
CONSIDER SPECIFIC LOWER-COST LOCALES
Also, consider some of these specific Hawaiian Island locations that are known to be more budget-friendly:
Hilo.
Located on the Big Island, Hilo offers an unusually small-town atmosphere (population of 43,000) in a big city. It’s walkable, and the cost of properties in Hilo is quite a bit lower than in Honolulu. Median home prices in Hilo are $393,000 to $484,000, depending on sources. Though goods and services may be more expensive, the housing costs compensate. Oahu is an hour’s flight away. The city has a strong retiree presence, and household incomes are far lower here than Hawaii’s average. Despite the lower cost of living in the area, Hilo is the second largest community on the island of Hawaii and has markets, parks, and good medical care all within walking distance of most neighborhoods.
The Big Island overall offers Hawaii’s lowest average cost of living, lowest rents, and lowest typical annual expenses.
North Shore (Oahu).
The North Shore of Oahu is dotted with sleepy historic towns and offers serene, nearly rural living. World-famous for its great surf, the North Shore offers a lower cost of living yet is still within an hour’s drive (and a 90 minute bus ride) of Waikiki and Honolulu.
There are numerous retirement communities here, as well as smaller, eclectic homes in safe neighborhoods. Homes here $50,000 to $200,000 less than the median cost of homes elsewhere on the island.
Kauai.
Though goods and services cost more on Kauai, property values are lower here too. Kauai has an even smaller-town atmosphere than the Big Island. It’s a slower pace, and genuinely rural. Median household incomes are $88,869 in 2022.
Many small towns and neighborhoods here are walkable and diverse. Many services are within walking distance from many condo and retirement communities. Everywhere on Kauai is within a 30-minute drive, and the outdoor life here legendary; it’s especially renowned for its hiking.
WORK PART-TIME
Although you may want to retire completely and just enjoy recreation in your beautiful new paradise home, a small side hustle can help make up the increase in expenses that comes with Hawaiian living. Ride-share driving or Airbnb-ing part of your home can bring in modest extra income while not requiring the commitment that your full-time job did before retirement. It may be worth it if it allows you to live comfortably in one of the most coveted retirement locales in the U.S.
What else do you need to know about having the money to retire in Hawaii?
TAXES
Hawaii has one of the lowest property tax rates in the country, at an average of only .27%. Plus, if you happen to have a federal pension, it’s exempt from state income tax.
The sales tax rate is also reasonable at 4% to 4.5%, compared with the 7% to 8% rate of many U.S. states.
On the other hand, Hawaii has one of the highest state income tax rates. Hawaii collects income taxes from its residents using 12 brackets, ranging from 1.4% to 11%. If you earn over $200,000 a year, your tax rate is that whopping 11%. A more modest income of between $48,001 and $150,000 lands you in a tax bracket of 8.25%.
Qualifying employer-funded pension plans are exempt from state income tax. Pensions from the federal government or military aren’t taxable in Hawaii. So if you have one of these, Hawaii is a good place to be.
ISOLATION AND WEATHER
Locals call it “island fever,” or “rock fever.” Hawaii is beautiful but isolated. Many people feel claustrophobic when they can’t get anywhere else in the U.S. without taking a long flight. This is a big commitment, so we recommend trying on for size the reality of living in Hawaii, perhaps with an extended vacation or sabbatical, before you make the leap.
Also be aware that while Hawaii makes most of us think of beautiful weather, it also carries the risk of weather extremes due to the ocean’s proximity. There are hurricanes and active volcanoes. Make sure you learn about the weather patterns in the area you’re looking to retire in, as weather events could result in catastrophic losses.
Still overwhelmed by the challenges of having enough money to retire in Hawaii? Speaking to a financial advisor who can assist you in assessing your finances, developing a solid plan, and building your investments is always a good idea.
ABOUT CALAMITA WEALTH MANAGEMENT
Todd Calamita is the founder and managing principal of Calamita Wealth Management, an independent, fee-only wealth management company located in Charlotte, NC. Calamita Wealth Management serves people locally and across the country, providing wealth management solutions to affluent individuals over age 50 and their families, with a special focus and expertise supporting Wells Fargo employees.
Todd has more than 25 years of experience in the financial services industry. He’s passionate about helping people create a better life by designing and implementing customized financial plans that bring clarity and confidence. Todd is a CERTIFIED FINANCIAL PLANNER™(CFP®) and CERTIFIED DIVORCE FINANCIAL ANALYST® (CDFA®). He holds a Bachelor of Business Administration from Ohio University and a Master of Business Administration from the Weatherhead School of Management at Case Western Reserve University.
Todd has authored a book, Plan Smart: Conquering 10 Common Money Traps, as well as numerous articles on wide-ranging personal finance topics, from taxes to retirement accounts. He has also been featured in a Financial Boot Camp TV series as a volunteer showing people how to make smart decisions with their money. When he’s not working, you can find Todd spending time with his wife, Teresa, and their two sons, Colin and Cameron. He enjoys rock climbing, swimming, and traveling, and he has a black belt in Tang Soo Do, a Korean martial art. To learn more about Todd, connect with him on LinkedIn.
