How is Hawaii for retirement?

Beyond being a haven for vacationers, Hawaii has quietly emerged as an attractive retirement destination for seniors seeking an active retirement. The state is known for its cultural diversity, rich history, a wealth of recreational opportunities, and senior-friendly amenities. But, is Hawaii a good state for retirement?

Hawaii is ranked among the best states for retirement due to its retiree-friendly tax laws, good healthcare systems, a diverse range of outdoor activities, and the welcoming nature of the local community. Retirees are exempted from state income taxes on Social Security and public pension incomes; however, private pension incomes and retirement plan distributions are subject to state income taxes.

Is Hawaii tax-friendly for retirement?

Most retirees find Hawaii's income tax system reasonable since it exempts most retirement incomes from state income taxes. The state does not tax Social Security benefits and public pensions from federal, state, and local governments, as well as military pensions. However, private pensions and retirement savings plan withdrawals are considered taxable incomes.

While Hawaii does not technically have a sales tax, the state levies a General Excise Tax (GET) on physical goods and some services. This tax is charged on all business activities and passed on to consumers. You can expect to pay a statewide GET of 4%, while the countries levy a GET of 0.5%; the total state and county GET totals 4.5%. Prescription drugs are exempted from GET, but groceries are subject to GET.

How much are property taxes in Hawaii?

Hawaii has an effective property tax rate of 0.27%, one of the lowest in the United States. However, property prices are generally high, and this increases the average property taxes paid by homeowners in Hawaii. The median property tax in Hawaii is $1,971.

The state has a home exemption program for homeowners who use their property as their primary residence. This program helps reduce the property tax burden and encourage home ownership. The home exemption reduces the assessed property value when calculating property taxes.

Homeowners 65 years and older qualify for an exemption of up to $140,000. Beginning the tax year 2024 to 2025, the home exemption for homeowners 65 years or older increases to $160,000. Homeowners younger than 65 and those without a birthdate on file will be eligible for home exemption of up to $120,000.

How much do you need to retire in Hawaii?

Hawaii is one of the most expensive states in America, and you will need more money to retire comfortably in the state. The median household income in Honolulu is $88,000 as of December 2022, and this means you will need an annual retirement income of about $88,000, but it could be higher depending on your expenses and retirement lifestyle.

If you plan to buy a home in Hawaii, you will generally pay more than in most states. The median price of homes in Hawaii is $800,000. On the other hand, if you plan to rent, you will pay about $1,490 for a studio and $1,640 for a one-bedroom. This is above the national average of $1,080 for a studio and $1,180 for a one-bedroom.

Pros of retiring in Hawaii

Good weather

Hawaii boasts a pleasant weather throughout the year; it is rarely too hot or too cold. The temperatures rarely drop below 70 degrees Fahrenheit or above 85 degrees Fahrenheit. The good weather allows retirees to live an active lifestyle, and explore outdoor activities year-round.

Aloha spirit

Hawaiian culture is embedded in the spirit of Aloha, which emphasizes kindness, respect, and care for each other. When you retire in Hawaii, you will find the local community to be warm and friendly, and you will feel welcome and at home. The Aloha spirit is one of the reasons why Hawaii has been named the healthiest and happiest state in the Gallup National Health and Well-Being Index.

Cultural diversity

Hawaii’s population is made up of a mix of different cultures and ethnicities, and this creates a vibrant cultural landscape. In the latest Census, 24% of the population claimed multi-ethnic background with two or more races, the highest compared to other states.

The racial composition includes Asians (38%), White (25%), multi-ethnic (24%), Native Hawaiian/Pacific Islander (10%), Black (1.83%), other races (1.23%), and Native Americans (0.26%). Retirees can enjoy a mix of their various cultures, including traditional cuisines.

Top-quality healthcare

Hawaii is ranked among the best states for healthcare, and this could explain the high life expectancy in the state. Hawaii has the highest life expectancy in the United States at 86.5 years, and it also has one of the lowest poverty rates in the country. Some of the best healthcare facilities in Hawaii include Queen’s Medical Center, Kaiser Permanente Moanalua Medical Center, and Straub Medical Center.

Outdoor recreation

With good weather year-round, you will always find something to do in Hawaii. You can decide to go fishing, boating, surfing, or enjoy the sandy beaches. You can also play golf, or explore the state's parks, forests, and mountains.

Cons of retiring in Hawaii

High cost of living

Retiring in the most beautiful state in America comes at a cost. You can expect to pay some of the highest costs for housing and groceries, which can quickly drain your retirement savings. The median cost of a single-family home is $1,050,000, while the median household income is about $88,000. You will need to have a big nest egg or a huge investment income to afford the cost of living in Hawaii.

Too many tourists

Vacationers from within the US and overseas often flock to Hawaii during spring break and summer, and some areas can become too crowded and hectic for residents. If you live in the main islands like Honolulu, you will have to deal with an influx of tourists, which can disrupt your peaceful retirement. If you are looking for tranquility, you may want to settle in the smaller, non-crowded islands.

Traffic

The urban areas of Hawaii have a fairly high population, and you should expect significant traffic and long commute times on the major highways. It can get worse during the peak season when tourists flock to the big cities. The traffic congestion and increased air pollution can affect the quality of life for retirees.

Natural disasters

While Hawaii has fairly good weather, it has its share of potential threats. The state is prone to extreme weather, and you should watch out for hurricanes and tsunamis. Be prepared for any threats, and understand the state's emergency preparedness measures. You should also watch out for volcanic eruptions from Kilauea, the most active mountain in Hawaii.

Island fever

Unless you have family members or friends living in Hawaii, you are likely to feel isolated from the US mainland. You won’t have companionship as often as you would like, and it will be more difficult for family members to visit often. Also, the cost of airfare and long flights will prevent you from seeing your grandkids as often as you would like. 

Best places to retire in Hawaii

Honolulu, Oahu

Honolulu is the capital city of Hawaii, and it offers a mix of big-city amenities and outdoor recreation opportunities. You can visit the city's parks and green spaces, or explore the various historical and cultural attractions, including Bishop Museum, Pearl Harbor, and Lolani Palace. Honolulu is home to many popular retirement communities such as Waikiki and Kahala.

Hilo, Big Island

Hilo offers a small-town living environment but will access to big city amenities. It has a lower cost of living and housing than Honolulu, and you can stretch your retirement income further. You can buy fresh farm produce and crafts at the Hilo Farmers Market. Some of the places you can explore in the city include the Panaewa Rainforest Zoo, Liliuokalani Gardens, and the Rainbow Falls.

You can find more than 80 animal species at the Panaewa Rainforest Zoo. Additionally, the Rainbow Falls is a state treasure, and it is 80 meters tall, the Wailuku River runs through its pool; it is common for rainbows to appear on sunny days as the waterfall flows overtop a natural cave.

Lihue, Kauai

Lihue is the county seat of Kauai, and it offers a small-town atmosphere and is perfect for retirees looking for a laid-back lifestyle. This island is known for its natural beauty, hiking trails, waterfalls, and lush landscapes, and it is a perfect choice for retirees seeking a nature-oriented retirement lifestyle. If you enjoy being outdoors, you can hike at the Sleeping Main Mountain, Waimea Canyon Hike, and Kalapaki Cliffs. The city has many small towns and neighborhoods that are walkable and diverse.

Paia, Maui

If you want to avoid tourist-crowded islands, Maui is a perfect choice. This charming town rarely gets overrun by tourists, you will find plenty of outdoor recreation opportunities, including hiking, golfing, and snorkeling. You can enjoy the stunning beaches, rainforests, and golf courses. You can also expect to find many great restaurants with good food, shops, art galleries, and museums.