6 U.S. Cities Where It’s Possible to Retire by 40

Man relaxing in a hammock
Photo by Mila Supinskaya Glashchenko / Shutterstock.com

If you want to live in a city that will boost your odds of retiring early, grab a pineapple, slip on a lei and book a flight to Honolulu.

The state capital of Hawaii tops the list of cities that are ideal places to live for top-earning workers who save aggressively in hopes of retiring early, according to a Redfin analysis.

Real estate company Redfin focused on places “where you can earn a high income, rather than simply a place with really cheap living expenses,” Redfin chief economist Daryl Fairweather says in a blog post.

In compiling its list, Redfin looked at typical workers who live in certain U.S. metropolitan areas and:

  • Earn a household income in the 75th percentile.
  • Start working at age 22.
  • Live in a median-priced two-bedroom condo.
  • Have annual nonhousing expenditures that rank as “average” and who save the rest of their cash.
  • Plan to maintain a stable cost of living and live on compounded savings and investment accounts from ages 40 to 85.

Honolulu might seem like a strange choice to top a list of cities for people who want to retire early.

It’s notoriously expensive to live in Hawaii, and early retirees — even those who earned big bucks during their working lives — typically have to pinch pennies to keep from running out of cash during an extended retirement.

However, Redfin agent Ali Ban says this little piece of paradise offers perks to today’s workers that will help them generate the wealth necessary to quit working early in life:

“Honolulu historically offers a great rate of home value appreciation, and there are many investment opportunities. If you are able to afford to retire here, you can’t beat the sunny weather and year-round beach and hiking. The amazing natural beauty draws many people to stay permanently, and Honolulu offers plenty of shops and restaurants.”

Other pluses include that Hawaii offers homeowners the lowest effective real-estate tax rate of any state, and Honolulu is one of the best U.S. cities for public transportation, as we have reported.

The top six U.S. cities for top-earning, aggressively saving workers who seek to retire early are:

  • Honolulu: An estimated yearly savings of $77,806 is needed to retire by 40
  • Boston: $82,104
  • Washington, D.C.: $91,494
  • Chicago: $68,222
  • Tampa, Florida: $52,522
  • Baltimore: $73,673

Remember, Redfin’s ranking is based on more than just the annual savings necessary to retire by 40. That’s why Tampa is No. 5 rather than No. 1.

How you can retire early, too

Do you hope to leave the rat race early? Doing so requires a lot of planning and self-discipline. And your odds of retiring early increase exponentially if you start saving at a young age.

As we explain in “18 Moves That Will Help You Retire Early and in Style“:

“Let’s say you’re 20 years old and can manage to put away $100 a month into your retirement fund. Assuming you average 8% returns — possible with good investments — you’ll have somewhere in the neighborhood of a half-million dollars by age 65. Even better, over that 45-year period, you’ll only have invested $54,000 of your money to get all that cash in return.”

All of this talk about saving truckloads of money simply in hopes of retiring early probably might bring the FIRE movement to mind. But Money Talks News founder Stacy Johnson says there are things about FIRE (“Financial Independence, Retire Early”) that leave him a little cold.

He explains why in “The FIRE Movement — Awesome or Awful?

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