For many people, the idea of retiring to Hawaii would be a dream come true. It’s a quintessential destination for your golden years, offering up beautiful landscapes, breathtaking beaches, and plenty of activities. However, choosing the right destination means looking deeper. Retiring well in some areas is trickier than others, especially if the cost of living is high and access to certain amenities may be limited. If you’re wondering how to retire well in Hawaii, here’s everything you need to know.
Cost of Living
Before you settle on a retirement destination, it’s crucial to spend a little time looking at the state’s cost of living scores. These handy metrics help you gauge a region’s affordability, allowing you to estimate how far your money would go in one state when you compare it to others.
When you’re looking at cost of living scores, it’s helpful to keep in mind that the national average is always, and will forever be, 100. States that have scores higher than 100 are more expensive than the national average, while states with lower marks qualify as more affordable.
Overall, Hawaii has the highest cost of living scores in the entire country. The Ahola State’s overall score is 199.1, which is 39.1 points higher than second-place Washington D.C.
Additionally, Hawaii doesn’t have a single category score below 100. For groceries and utilities, the Aloha State comes in at 168.9 and 198.5, respectively. Transportation is a starting 142.4, while the state’s lowest score, which is in the healthcare category, is 115.2.
While those scores may seem incredibly high, they don’t hold a candle to Hawaii’s housing score. That comes in at 339.2, showcasing just how expensive housing can be on the islands. That score is 63.4 points higher than Washington D.C.’s housing score, and 140.8 points above New York’s.
That point is reinforced by the state’s average home value of $673,344. That’s $407,240 above the national average, which sits at $266,104.
While you might assume that means Hawaii’s homes are of a higher quality, that isn’t necessarily the case. Instead, two comparable houses – one located in Hawaii and another in an area that aligns with the national average – simply cost different amounts because of where they are located.
When you are selecting a retirement destination, it’s smart to look beyond the cost of living and pay special attention to tax rates. How much you’ll need to spend to cover your taxes has a substantial impact on your retirement. Higher tax rates means more of your savings has to go to covering that expense, while lower rates allow budgets to stretch further.
Hawaii does have a state income tax. Like the federal government, the Aloha State uses a bracketed system, with rates ranging from 1.40 percent to 11 percent, depending on a person’s income level.
Luckily, retirees don’t have to pay income taxes on Social Security. Additionally, public pension income isn’t subject to taxation.
All other types of retirement income are typically taxable. This includes private pensions, 401(k)s, IRAs, and other retirement vehicles. For taxable retirement income, the traditional state income tax rates apply. However, seniors do qualify for a larger income tax exemption, lowering the burden slightly.
Hawaii doesn’t have a state sales tax. However, the Aloha State does have a general excise tax (GET) that does impact consumers. The GET reaches as high as 4 percent, depending on the purchase category. There can be additional surcharges as well, pushing the effective tax rate a bit higher in many areas.
However, even with the surcharges, the tax rates are relatively low compared to many other states. Typically, you won’t see a rate above 5 percent no matter where you shop in Hawaii.
For property taxes, seniors do qualify for some exemptions that reduce their financial burden. The exact amount can vary depending on the homeowner’s age and the county where the home is located. For example, in Kauai County, seniors can receive additional exemptions worth up to $200,000.
Part-Time Job Opportunities
Retirement doesn’t always mean calling it quits on the workforce as a whole. Instead, many seniors simply pivot, embracing part-time jobs that can supplement their income, keep them active, and more. This helps many seniors to retire well in Hawaii.
While, for some seniors, a part-time job may mostly be about staying social and engaged, for others, having one is a financial necessity. That’s why understanding the job market in the state you want to retire to is so crucial.
When it comes to part-time jobs in Hawaii, they are traditionally fairly available. Pre-COVID (March 2020), Hawaii’s unemployment rate was a mere 2.4 percent, a full 2 percentage points below the national average at that time (4.4 percent).
However, when COVID struck, Hawaii was hit hard. The unemployment rate in the Aloha State skyrocketed to 23.8 percent in April 2020, while the national average for that month was 14.8 percent.
While it’s true that the situation has calmed, unemployment is still a far cry from pre-COVID levels. As of December 2020, Hawaii was sitting at 9.3 percent, which is 2.6 percentage points above the national average for that period (6.7 percent).
Overall, part-time job opportunities may be harder to come by in Hawaii for a while. Much of the economy is dependent on tourism, an industry that ground to a halt during the pandemic. While states are moving toward recovery, it may take time for the travel industry to recover. Until then, it may be best to assume that part-time positions aren’t as readily available and to plan to live on savings until the situation improves.
Best Cities for Retirees in Hawaii
When you’re retiring, the city you choose as your new home plays a big role in your quality of life. Not only may it impact your budget, as different areas can have different costs of living, but it affects your access to amenities and your overall lifestyle. After all, each town will have a unique vibe, and some may better suit your needs than others.
For retirees who want to be close to a big city without living in one, Kaneohe, Oahu could be a perfect option. It’s near Honolulu, as well as being close to the Koolau Mountains, beaches, and more. The nearby bay is a favorite among locals and tourists alike, offering up a range of recreational activities to those who like being outdoors.
If you want to spend your retirement golfing, try Kailua-Kona, Big Island. Along with several fantastic golf courses, the town is oceanside, with a fun downtown area that’s great for shopping or strolls. Plus, it’s near Kaloko-Honokohau National Park, which is excellent if you want to stretch your legs outdoors.
Additional Places to Retire in Hawaii
Another Big Island option is Hilo. It’s got a lower cost of living than many other Hawaiian cities, which could be a boon for budget-conscious seniors. Plus, it has an amazing zoo and botanical gardens, and is near Rainbow Falls.
To retire well in Hawaii, retirees who have their sights set on Maui, consider Paia. The town is a bit tucked away, so it isn’t overrun with tourists. Plus, it’s full of quirky art galleries, quaint shops, and outstanding restaurants, all while staying within walking distance of the beach.
Kahului is another option on Maui. It’s the island’s largest city, offering up great amenities, beaches, parks, and more. Plus, comparatively speaking, Kahului is fairly affordable.
If you prefer a country feel, Lihue, Kauai may be your best bet. It offers a small-town feel and a relaxing atmosphere while also being a great option for anyone who loves the outdoors thanks to its proximity to hiking trails.
How to Retire Well in Hawaii-Financial Requirement
With Hawaii being the highest cost state in the country, you’ll need more money available if you’re going to retire well in Hawaii. While the city you choose can have an impact, generally speaking, you’ll need $125,259 in annual income to be comfortable. That will allow you to handle your needs, as well as some wants, ensuring you can enjoy your retirement instead of merely surviving it.
What are your tips on how to retire well in Hawaii? Share your thoughts in the comments below.
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