simple girl said:
I was really surprised to hear that Hawaii is tax-friendly. We have always said we'd love to retire there, but felt it was too expensive. We vacationed in Maui in 2005. We absolutely loved the weather and all the outdoor activities. However, the real estate prices and prices for food, etc. (milk was ~ $7/gallon, if I remember right) were astronomical. Do you live there now? Any tips on how to retire there without having to spend an excessive amount of $$??
Let me emphasize that Hawaii is tax-friendly for
retirees. State taxes aren't too bad for W-2 income-- about 4-8%-- but our kid has paid more tax here than we have. Investments are still subject to dividends/cap gains taxes but I believe that IRA RMDs are not taxed (I'm not certain). I know that federal pensions are not subject to tax and that might also apply to civil service pensions.
Maui's a tough place to make comparisons from. We're on Oahu (JB lives on Maui) and when we vacation on Maui we actually haul some of our own meats & sodas. So we think Maui is a bit pricey, too, but I think they have a Costco now to add to the Wal-Mart competition.
Hawaii real estate, renting or buying, is the biggest challenge. Right now there are remote parts of the Big Island that may be "affordable" but I doubt we could buy our place again. Median single family homes are about $625K and median condo prices are about $325K. However the market has peaked and things should come down over the next 5-10 years. If you can solve this challenge then the rest is pretty straightforward.
Other than real estate, the "Paradise Tax" is widely proclaimed to be about 30% but no one should try to duplicate their Mainland habits here so I think it's realistically 10-15%. I know that it's cheaper than CA! Here's what we spent last year:
http://early-retirement.org/forums/index.php?topic=5430.msg96578#msg96578
For example, gas just dropped below $3/gal at Costco but I drive less than 3000 miles a year (and less than 6000 when I was working) so I've spent plenty more gas money on Mainland commutes & trips. Milk is $3.50-$4/gal but I don't drink it much. Brand-name cereal is $3-4/box but generics are $1.50 and Ralston oatmeal is even cheaper. Mainland eggs are ~$1.25/dozen but local eggs are ~$1.50/doz (unless your country neighbor raises chickens). Potatoes/fries are expensive but rice is very cheap. Kona coffee is incredibly cheap from this year's harvest. Apples, strawberries, and cantaloupe are expensive. Rasberries & blueberries are so costly that they'd be cheaper if they were made from 24K gold. Papaya, mango, lychee, tangerines, coconuts, bananas, and macadamia nuts are free off our backyard trees-- and we occasionally have two crops/year. Fish is extremely cheap (it's free if you know a friend with a boat). Beef & pork can be expensive but if you eat an Asian diet (tofu, fish, poultry) then the cost is probably about the same as the Mainland. People buy in bulk at Costco or shop at farmer's markets. Safeway & Foodland are pricey unless you join their "clubs" and shop hard with coupons. Our family of three spent $6000 at the military commissary last year on groceries & toiletries, including a teenager who absolutely inhales expensive snack/convenience foods, so you could probably feed two adults on under $4000/year.
Although the land is very expensive, houses are cheaper to build-- no insulation and no double-paned thermal-glazed windows necessary. Because we have a photovoltaic array our biggest utility bill is sewer followed by water (about $40/mo & $20/mo). Without our photovoltaic array our utility bills would be about $175/mo (including CATV & newspaper) and we don't use A/C or heat. Solar water heaters are in 35% of the homes and their installation cost has dropped below $800.
Clothing is much cheaper-- workers dress less formally and my standard retiree uniform is shorts, t-shirt & rubber slippers. I buy a pair of sneakers every 2-3 years but my long pants are all older than my teenager. I haven't bought a pair of jeans since the 1980s. (Next month I'm going to have to start looking for my sweatshirt, just in case, and I'll have to make sure I know how to close all the windows.) We barely spend a couple hundred dollars on clothing a year, including shoes. If you buy the right materials you don't even have drycleaning expenses.
Cars last much longer (despite the salt air) and houses need less maintenance. Our biggest car repair expense is usually replacing the air conditioner's compressor or evaporator core every 7-10 years. We spend less than $400/year on car insurance for each car with USAA (minimum coverage, high deductibles, no collision or comprehensive). Our home insurance is under $1000/year with a $2500 deductible and a similar hurricane deductible. Our property taxes have darn near doubled in the last five years but we'll still only pay $2600 this year.
We dine out (local dives like Thai Kitchen & Zippy's) for about $25/couple or $150/month, and that's including the kid's school meals. More formal restaurants run about $40-$75/couple. Entertainment is mostly the beach! Movie matinees are $6.25 and our kid seems to spend about $5 for a Jamba Juice.
What you spend more on in some budget categories you'll make up in others. I haven't "winterized" anything in nearly two decades.
Let me know if you have a specific cost area or question...
