Can You Retire to Key West at 62 on $1.6 Million? The Numbers Tell a Story That’s Both Tempting and Tricky
For anyone in their late fifties who has spent one too many Februs in snow, the idea of retiring to Key West at 62 sounds almost too good. A $1.6 million portfolio, a desire to never feel cold again, and a quick calculation that suggests it might work. But the reality on the ground—and in the balance sheets—is far more layered.
Florida’s statewide cost-of-living index sits about 3.4% above the national average, but that figure is almost meaningless for Key West. Monroe County operates as its own economic island. Single-family homes routinely clear seven figures. A modest two-bedroom condo in a walkable neighborhood can run $700,000 to $900,000. Buying with cash would eat roughly half of that $1.6 million before the air conditioning even kicks on.
Carrying costs are steep and climbing. Wind insurance through Citizens, a separate National Flood Insurance Program policy, and standard HO-3 coverage can total $8,000 to $15,000 annually for a modest island condo. Those premiums have been rising in double digits each year, far outpacing the broader CPI, which itself sits near the 90th percentile of its historical range. Property taxes with homestead exemption add another $5,000 to $7,000. Condo association fees, often $700 to $1,200 a month, reflect the constant battle against saltwater corrosion. And electricity for air conditioning running ten months a year is a serious line item.
Renting, however, flips the math. A one-bedroom in a decent Key West building goes for $3,500 to $4,500 monthly—roughly $48,000 a year. Add groceries, health insurance, transportation, and incidentals, and a single person is looking at approximately $90,000 annually.
Read: A Retirement Habit That Doubles Savings—Data Shows It Works
Most Americans drastically underestimate how much they need to retire and overestimate how prepared they are. But recent data reveals that people with one specific habit have more than double the savings of those who don’t.
Social Security claimed at 62 comes with a 30% reduction from the full retirement age benefit for anyone born after 1959. The average retired-worker benefit at full retirement age is about $1,950 monthly, so claiming at 62 yields roughly $1,400 a month, or $16,800 a year. The 2026 COLA of 2.8% will nudge that up, but COLAs only preserve purchasing power—they don’t close structural gaps.
That means the portfolio needs to cover roughly $73,000 per year. That’s a withdrawal rate of about 4.6% on $1.6 million—too high for a 62-year-old planning a 30-plus-year horizon. A defensible early-retirement rate is closer to 3.5%, which yields roughly $56,000 annually. Shortfall: about $17,000.
Three realistic ways to close that gap exist, but each comes with trade-offs: work part-time in Key West for a few years, delay Social Security until 67 or 70 to boost lifetime income, or reduce annual spending by moving slightly off the island or to a less expensive part of Florida. Generic retirement calculators miss a critical wildcard: Key West’s insurance premiums. Wind and flood policies in Monroe County have risen at double-digit rates for years, well ahead of Social Security’s COLA. Over a 30-year retirement, a $12,000 insurance bill compounding at 8% becomes north of $120,000 annually by your 90s, while COLA-adjusted benefits barely double. This is the silent budget killer in every Florida coastal retirement, and the strongest argument for renting. When you rent, the landlord absorbs the insurance spiral. When you own, you face that volatility for life.
Florida’s lack of a state income tax is a headline reason retirees move here. But that advantage only matters if you manage portfolio withdrawals tax-efficiently. To qualify for meaningful ACA subsidies between ages 62 and 65, you need low modified adjusted gross income. That means leaning on Roth IRA basis or taxable-account cost basis during the bridge years and deferring traditional IRA withdrawals. Get that sequence wrong, and you lose $6,000 to $10,000 annually in subsidies—exactly the amount that can break this scenario.
To retire to Key West at 62 on $1.6 million, the recipe is narrow but workable: rent rather than buy; keep annual spend at or under $80,000 in a one-bedroom on the island or a modest two-bedroom just off it; hold a 3.5% to 3.75% withdrawal rate against a portfolio weighted toward index funds and a Treasury ladder yielding roughly the current 10-year rate of 4.46%; claim Social Security at 62 only if you have a specific reason to do so; and sequence withdrawals from Roth and basis first to preserve ACA subsidies through age 64. Done that way, $1.6 million works—but barely. Arrive with $1.9 million and you stop worrying. The insurance spiral is the variable that decides whether year 25 feels like the brochure or like a trap.
Most Americans drastically underestimate how much they need to retire and overestimate how prepared they are. But data shows that people with one habit have more than double the savings of those who don’t. And no, it’s got nothing to do with increasing income, clipping coupons, or cutting back on lifestyle. It’s much more straightforward—and powerful—than any of that. Frankly, it’s shocking more people don’t adopt the habit given how easy it is.