How long will $2 million last in retirement in Hawaii?

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If you're looking to move away for retirement, Hawaii is literally as far away as it can get.

According to Hawaiian Airlines, the island chain is home to the most isolated population center in the world. Its residents live more than 2,400 miles from the nearest landmass, the mainland United States. In fact, it's so far away from everything else that it has its own time zone.

Find out: Here is the salary a single person needs to live comfortably in Hawaii

Read more: 4 Brilliant Things All Wealthy People Do With Their Money

But even if you don't crave distance, you may have fallen in love with Hawaii's pristine beaches, sparkling waters, ancient heritage, majestic volcanoes or lush tropical forests. You and everyone else.

Daily life in the world's most remote paradise is so expensive that most people will never vacation there, let alone retire – but what if you had $2 million to get by? In much of America, a nest egg of $2 million can keep even the longest retirement running smoothly.

Here's what to buy in Hawaii.

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In Hawaii, the average person pays the bills – and not much else

The average earner in Hawaii earns well, but not particularly much. According to Forbes, the average salary in the Aloha State is $61,420, or $23.35 per hour, putting it behind 16 other states whose average workers earn more.

Conventional retirement planning suggests that retirees should expect to spend about 80% of their annual pre-retirement income after their working years are behind them.

But 80% of $61,420 is $49,136, and that's not enough in Hilo or Honolulu because when it comes to cost of living, Hawaii doesn't have 16 states ahead of it. It has none.

Forbes reports that Hawaii is the most expensive state in America, with an average annual cost of living of $55,491. If the edition were the Olympics, Hawaii would take gold or silver in most of the top categories:

  • Most expensive transport: $7,458 per year

  • Highest real estate costs: $837,324 median home price, $5,004 monthly mortgage payment

  • Highest rent: $2,423 per month

  • Highest Average Income Taxes: $7,850 per year

  • Second most expensive monthly housing costs: $2,059

  • Second Most Expensive Annual Grocery Cost: $5,886

Learn more: These 8 Expenses Can Ruin Your Retirement – ​​Should You Give Them Up ASAP?

At $80,000 you would be on par with other expensive states

Because of the dynamics of personal finance in Hawaii—expenses that are extraordinary and income that is not—many residents are strapped for cash. The state's average salary minus its average cost of living leaves less than $6,000 a year not spent on necessities — $5,929, to be exact, or around $494 a month.

Forbes reports that no other state has a lower average disposable income.

By comparison, earners in the four most expensive states — Massachusetts, California, New York and New Jersey — all have more than $20,000 in annual disposable income to play with after the bills are paid.

Since 80% of the average salary in Hawaii doesn't even cover basic necessities, and the full average salary leaves you scrimping on pennies every month, the question arises: How much annual income would a retiree need to live comfortably there?

Retirees earning $80,000 a year were left with $24,509 after paying off Hawaii's average annual expenses of $55,491, putting them roughly in line with the average earner in high-wage states like New York and New York in terms of disposable income Washington would catch up.

$80,000 is 4% of $2 million. The 4% rule says 30 years – right?

The above calculation allows for a clean calculation based on the gold standard of retirement planning. The 4% rule states that you can withdraw 4% of your savings in the first year of retirement and then adjust it for inflation each year to create a nest egg that will last you 30 years.

Since $80,000 is exactly 4% of $2 million, that should be enough to comfortably retire for three decades with an average lifestyle, right?

Maybe in the Lower 48.

“In Hawaii, you can expect the life expectancy of a $2 million nest egg to be significantly different than on the mainland due to the higher cost of living,” said David Blain, CFA, CEO of BlueSky Wealth Advisors.

Probably more like 20 years – maybe 25

It's likely that someone with a $2 million nest egg in a higher tax bracket and looking for an above-average lifestyle will enter this high-tax state. Additionally, retirees face rising health care costs and the possibility of expensive long-term care, which is well above average in the 50th state.

That — and all the other retirement cost considerations that are inflated in Hawaii — means either larger or more frequent withdrawals, both of which lead to a shorter timeline for your nest egg to sink.

So if $2 million isn't enough for 30 years in paradise, how long will it last?

“Based on the calculations of our models at BlueSky, which take into account a full range of expenses including healthcare, housing and taxes, this amount can last for around 20 to 25 years of retirement at a well-adjusted annual withdrawal rate of around 4%. Blain said.

“However, this is a general estimate and the actual duration may vary depending on individual lifestyles and unforeseen costs. In states like Texas or Tennessee, where the cost of living and taxes are significantly lower, that same $2 million could potentially stretch over 30 years. It is important to adapt financial strategies to take these fluctuations into account.”

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This article originally appeared on How $2 Million Will Last in Retirement in Hawaii

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