Wealth

Hawaii is the ‘perfect place to retire by the beach,’ says millionaire—but there are 3 big downsides

In 2012, the average age of 34-year-olds was I quit my job as an investment banker and retired before the clock with a net worth $3 million. I currently reside in San Francisco with my spouse and two young children.

Since 1977, I’ve been traveling back and forth to Hawaii with my parents, who have been retired for 15+ years. They have a simple life with a modest budget, living off retirement savings and a government pension — thanks to the three decades they spent working in the U.S. Foreign Service.

We want to live the dream like my parents. Our plan is for us to move to Hawaii by 2025. I have learned a lot from my parents and my own experience about retiring in Hawaii.

Our consensus is that it’s the perfect place to retire by the beach — although there are still a few downsides to keep in mind.

How much money will you need to retire in Hawaii

Hawaii was ranked ranked in the top five statesIt is the place Americans want to retire. It also has the highest cost of livingIn the U.S.

Many financial experts recommend that you keep a steady income. 4% withdrawal rateYou can make sure your investments last until retirement.

The median household income in Honolulu CountyFor example, $88,000 is the minimum amount. If someone wanted to withdraw that $88,000 from their assets each year, they’d need about $2,200,000 in investments to withdraw at a rate of 4%.

But that’s only one example. The amount you need to live comfortably depends on your lifestyle, your income expectations, and where you are planning to go.

You can live comfortably on $42,500 per year, have a pension, or file for Social Security. This will allow you to have a lower net wealth and less income-generating investments when you start your retirement journey.

Retire in Hawaii: What are the downsides?

These are the three biggest downfalls to consider before you begin your beach retirement plan.

1. Housing at a high price

The median single-family home in Honolulu was purchased for $1,022 as of June 2022 $1,050,000. The median price of a condo in Oahu is a great place to retire on a budget, is currently $535,000 — up 16% from June 2021.

Consider renting a condo or small apartment in Hawaii if you are looking to retire. The average rent for a 594 square foot apartment is roughly $2,042, according to RentCafe

2. Expensive groceries, gas and other expenses

According to a 2021 report by the Missouri Economic Research and Information CenterHawaii’s grocery prices are among the highest in the country.

For example, I paid $8.99 for a gallon Oahu whole milk, while in San FranciscoIt’s approximately $6. Although Hawaiian-grown mangos taste great, they can also be eaten raw. cost about $6 each!

You will also find that the gas prices in Hawaii are unusually high if you drive. The average price per gallon in the state today is $5.41 and is continuing to rise, according to AAA, while the national average is $4.03.

3. You may feel claustrophobic.

It takes only four hours to drive around the 597-square-miles of Oahu. Although the island holds approximately one million people it can still feel small to me.

With the pandemic making air and sea travel increasingly unappealing, it is possible to feel a little stuck at times without these options.

The benefits of retiring to Hawaii

Yes, it’s expensive. These are some of the surprising perks that you might enjoy if you decide to retire in Hawaii.

1. Top health care and less stress

Hawaii ranked second for happiness and well being in a survey. 2021 studySharecare is a health care company.

My parents worked in Washington D.C. Paris, Guangzhou Kobe, Taipei, Taipei, and other major cities before they retired in Honolulu. They find the Hawaiian lifestyle to be extremely relaxing compared with all the other places they’ve lived.

2. Top-rated healthcare

The United Health Foundation also ranksHawaii is the third-healthiest state in the United States. According to U.S. News’ list of Best States for Health CareHawaii is the top-ranked country.

I’m not surprised. You will find beautiful weather in Hawaii almost year round, parks and public beaches, as well as a wide variety of locally grown and raised foods and easy access to preventive and dental care.

Hawaii offers a healthy and active lifestyle that you will love.

3. “Ohana” means family

Family and friends are an important part Hawaiian culture. It’s a family-friendly environment almost everywhere I’ve been, even to the mall.

It’s not unusual to have it. multiple generations under one roof in Hawaii.Although my wife, children, and me won’t likely live in my parents home, we hope to rent out or buy nearby.

4. Tremendous diversity

According to Census, Hawaii was the top state with the largest population. This is ahead of California, Nevada and California. data from the U.S. Census Bureau.

5. Decent tax advantages

Hawaii ranks as having one of the lowest property tax rates in the country, at an average of only 0.28%. Federal pensions are exempted from state income tax. The sales tax rate is reasonable at 4% to 4.5% compared to 7.25%-8.25% in California. 

Hawaii has the highest income tax rate in the state, at 11% for those who earn more than $200,000. A state income tax rate is 8.25% if you earn between $48,001- $150,000. 

Why I want to retire at Honolulu

My family will save money by moving to Honolulu. The median San Francisco home priceIt is approximately $1,633,650 higher than in Honolulu.

If we move, we would sell our house here and buy a property for cash in Honolulu around 40% less. We’d then reinvest the house savings into real estate crowdfunding, dividend stocks and REITs to boost our passive income for retirement. 

Instead of being dependent $300,000 a year in passive investment income to fund the the lifestyle we desire, $150,000 to $200,000 is probably plenty in Honolulu. 

My parents are now in their 70s so I would love to spend as much time with them. Hawaii feels like home.

Sam Dogen worked in investing banking for 13 years before starting Financial SamuraiHis personal finance website is. His new book “Buy This, Not That: How to Spend Your Way to Wealth and Financial Freedom” is out now. Follow him on Twitter @financialsamura.

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Source: CNBC

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