Retiring in Hawaii: weighing the pros and cons
Discover if Hawaii is the right retirement location for you. Learn more about the cost of retiring to the Aloha state, including the cost of living and taxes.
Hawaii had a population of approximately 1.4 million people, with over 21% of the population over the age of 65.
Hawaii's cost of living is generally higher than the national average, which could be a concern for retirees on a fixed income.
Retiring in Honolulu is a popular choice due to its mix of urban amenities and natural beauty.
How to retire in Hawaii?
Americans can retire and live in any state.
However, like any state on the US mainland, to officially retire in Hawaii, you need to establish residency on the islands for tax purposes. To do this, you typically need to spend a certain number of days there and change your address and other legal documents.
On top of that, you also need to find the right place to retire to and ensure you can cover the cost of moving and living in Hawaii.
How much does it cost to retire in Hawaii?
Retiring in Hawaii is not cheap; if you want to retire in the state, you need to have a lot of retirement savings.
According to CNBC, you will need about $2 million to retire comfortably in Hawaii. This is about $1 million more than the average amount Americans say they need.
These calculations are based on the median household income in Honolulu County, which stands at $88,000, and the recommended 4% withdrawal rate in retirement.
In addition to having enough income to support yourself, Hawaii also has a high cost of housing, which is another expense you need to factor in.
According to Zillow, the average Hawaii home value is $856,644.
All of these factors mean Hawaii is one of the more expensive states in which to retire.
Is Hawaii a good place to retire?
Hawaii offers a unique retirement experience that attracts many retirees every year.
According to data from the U.S. Census Bureau in 2020, Hawaii had a population of approximately 1.4 million people, with over 19% of the population over the age of 65.
According to the Hawaii government, almost one in five people are aged 65 or older, with more than a third of all households having at least one person aged 65 or older.
While Hawaii has a lot to tempt potential retirees with its scenery and tropical climate, also be mindful of its isolated location and cost of living.
It's important to seek expert financial advice to weigh up all of the costs associated with retiring in Hawaii, including property taxes, insurance, and living expenses, in order to make an informed decision about whether the state is the right choice for your retirement.
Where is the best place to retire in Hawaii?
If Hawaii is your chosen retirement state, here are some of the best places to retire:
Retiring in Honolulu: As the capital city of Hawaii, Honolulu offers a mix of urban amenities and natural beauty. Retirees can enjoy exploring the city's many historical and cultural attractions, such as Pearl Harbor, Iolani Palace, and the Bishop Museum. The city also has many parks and green spaces, including Kapiolani Park, which offers walking paths and views of Diamond Head. Honolulu is also home to many senior-friendly communities and services, including assisted living facilities and transportation services.
Retiring in Maui: With its stunning beaches, scenic drives, and lush rainforests, Maui is a popular retirement destination. The island offers a range of recreational activities, such as hiking, golfing, and snorkeling. Maui is also known for its vibrant arts and culture scene, with many galleries and museums to explore. The island has a number of senior-friendly communities and services, including healthcare facilities and senior centers.
Retiring in Kauai: Often referred to as the "Garden Isle," Kauai is known for its natural beauty, including its stunning beaches, waterfalls, and scenic hiking trails. The island also has a laid-back and peaceful atmosphere, making it an ideal retirement destination. Kauai has a range of senior-friendly communities and services, including healthcare facilities and senior centers.
Retiring in Big Island: The largest of the Hawaiian Islands, the Big Island offers a diverse range of landscapes, from lush rainforests to snow-capped mountains. The island is home to several national parks, including Hawaii Volcanoes National Park, which offers hiking trails and views of active volcanoes. The Big Island also has a number of senior-friendly communities and services, including healthcare facilities and senior centers.
Retiring in Oahu's North Shore: Located on the north shore of Oahu, this area is known for its stunning beaches and laid-back lifestyle. Retirees can enjoy activities such as surfing, snorkeling, and hiking and can explore the area's unique cultural heritage at sites like the Polynesian Cultural Center. The North Shore also has several senior-friendly communities and services, including healthcare facilities and senior centers.
What are the pros and cons of retiring in Hawaii?
Like any location, there are both advantages and drawbacks to retiring in Hawaii.
Here are some of the pros and cons to look out for:
The pros of retiring in Hawaii:
Beautiful environment: Hawaii is known for its natural beauty, from its stunning beaches to its lush forests. Retirees can enjoy living in a beautiful environment that offers plenty of opportunities for exploration and outdoor activities.
Tropical climate: Hawaii has a warm tropical climate year-round, making it an attractive destination for retirees who want to avoid harsh weather conditions.
Outdoor activities: Hawaii is home to numerous national parks, beaches, and hiking trails, providing ample opportunities for hiking, snorkeling, and surfing.
Cultural scene: Hawaii has a rich cultural scene, with numerous museums, galleries, and performing arts venues. The state hosts several festivals and events throughout the year, including the Merrie Monarch Festival, the Hawaii International Film Festival, and the Honolulu Festival.
The cons of retiring in Hawaii:
Cost of living: Hawaii's cost of living is generally higher than the national average, which could be a concern for retirees on a fixed income. Housing and healthcare costs, in particular, are higher than in many other states.
Isolation: Hawaii is a group of islands that can make retirees feel isolated from the mainland United States.
Natural disasters: Hawaii is prone to natural disasters such as hurricanes, volcanic eruptions, and tsunamis, which could be a concern for retirees living in certain areas.
Does Hawaii tax retirement income?
In Hawaii, Social Security, military, and government benefits are tax-exempt, as are private pensions and Tier 1 Railroad Retirement benefits.
However, other retirement plan distributions or contributions, including income from your 401(k), IRA, and other retirement savings accounts, may be taxed in Hawaii.
As well as paying state income tax, you may also need to pay federal income tax.
What is the retirement age in Hawaii?
Like many states, Hawaii has no specific retirement age that is mandated by law.
However, there are some age-related benefits and considerations for retirees in Hawaii:
Social Security benefits: The earliest age at which you can begin receiving Social Security benefits is 62, but if you delay taking benefits, your monthly payments will increase. Full retirement age (FRA) is between 66 and 67, depending on your birth year. Delaying benefits until after FRA can result in even higher monthly payments.
Medicare eligibility: Medicare eligibility begins at age 65, regardless of retirement status. However, if you choose to retire before age 65, you will need to find alternative healthcare coverage until you become eligible for Medicare.
Retirement savings: Regardless of retirement age, you should start saving for retirement as early as possible. Many financial experts recommend saving at least 15% of your income for retirement.
Get expert retirement advice
If you’re considering spending your retirement in Hawaii, it’s wise to consider your finances and speak with an expert.
A financial advisor can review your unique situation and help you create a retirement plan. Find your SEC-regulated financial advisor here.
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Kate has written for leading publications and blue chip companies over the last 20 years.