Tennessee was admitted to the Union as the 16th state on June 1, 1796. It is the 36th largest state in the nation, and the 17th most populous. It is also one of the best kept secrets in the retirement world. Here are our 10 favorite reasons why:
1) Income tax is only collected on dividends and interest. There are only seven states in America that don’t collect income tax: Alaska, Florida, Nevada, South Dakota, Texas, Washington and Wyoming. Two states only collect income tax on dividend and interest income: New Hampshire and Tennessee. Furthermore, if you and your spouse have an investment portfolio less than $3 million*, you cannot find a state with a lower income tax rate than Tennessee. This is because . . .
2) In Tennessee people over 65 with total income less than $33,000 (single filer) or $59,000 (joint filer) are exempt from taxes on dividends and income.
3) Property taxes are well below the national average- Once you get out of Memphis or Nashville, Tennessee has relatively low property taxes. According to taxfoundation.org, Tennessee has the 36th lowest effective tax rate on owner occupied housing in the US. This is the average amount of residential property tax actually paid, expressed as a percentage of home value. Furthermore, White County (which is where The River Club is located) has the 14th lowest property taxes in Tennessee.
4) TN has 6th lowest cost of living of any state in the US. According to the Missouri Economic Research and Information Center, in the first quarter of 2015 Tennessee had a combined cost of living index of 90.4, which was the sixth lowest in the United States. The lowest was Mississippi, with an index of 83.7, while Hawaii was the highest with an index of 170.8.
5) Mild weather. Tennessee has some of the mildest weather in the country- not too hot but not too cold. In fact, the average annual temperature across the state is 55-60 degrees. That’s the same as California!
6) Centrally located. Situated east of the Mississippi River, and a bit to the south, Tennessee is an easy flight from both the east and the west coasts. It is also easily accessible to Florida and Chicago, and a comfortable driving distance from cities such as Louisville (2.5 hours from Nashville), Atlanta (3 hours, 45 minutes from Nashville), St. Louis (4 hours from Nashville), Charlotte (6 hours from Nashville) and even New Orleans (7.5 hours).
7) Relatively low property prices. According to the National Association of Realtors, the median existing single-family home value in the US in 2015 was $229,000.00. The median value in the Memphis area was $154,000.00. The Knoxville median value was $161,200.00 and the Chattanooga median value was $163,700.00. All of these are well below the 2015 national average. According to Trulia, the median listing price for homes in White County (where The River Club is located) is $119,900.00.
8) Great outdoor activities. With its mild climate, Tennessee is ideal for outdoor activities. The Tennessee Golf Trail, some of the best golf in Tennessee, consisting of 8 Traditional golf courses and 4 Bear Trace golf courses, has its epicenter in Crossville. There is amazing hiking in the State and National Parks (including the most popular National Park of all: Great Smoky Mountain National Park), boating on the state’s plentiful lakes, plus ample hunting and fishing.
9) Fourth lowest health insurance costs in the nation. In an environment where health care costs are spiraling out of control, this is a compelling reason to retire in Tennessee- especially if you’re in the 55+ market and won’t be eligible for Medicare for a number of years.
10) Great culture. Tennessee has some amazing culture. Nashville is the heart of the country-music scene. Memphis, in the far southwest, is the home of Elvis Presley’s Graceland and the blues clubs of Beale Street. There are amazing curated galleries and exhibition places in Nashville and vibrant local art communities throughout the state. Sparta, TN (home of The River Club) is the Bluegrass Capital of the USA.
*We arrived at this number by assuming a $3 million portfolio is invested in an S&P index. If this is the case, with an average dividend yield of 2%, you’d earn roughly $60,000 a year in dividend income.