Are you dreaming of leaving the workforce before the traditional retirement age? The Volunteer State might be your perfect destination. Learning how to retire early in Tennessee can transform your financial future thanks to significant tax advantages and affordable living costs that make your retirement dollars stretch further.
Tennessee has emerged as one of the top early retirement destinations in the United States, offering a combination of natural beauty, mild climate, and financial benefits that make creating an effective early retirement plan more achievable than in many other states.
Why Tennessee Stands Out for Early Retirees
Tennessee offers unique advantages that make it particularly attractive for those looking to retire ahead of schedule. Understanding these benefits is crucial when developing your early retirement plan.
The state consistently ranks among the most tax-friendly states for retirees. Since 2021, Tennessee has completely eliminated its income tax, which means your retirement income—including Social Security benefits, pension payments, and withdrawals from retirement accounts—remains untaxed at the state level.
Beyond tax benefits, Tennessee boasts a cost of living that’s approximately 10% below the national average. Housing costs in particular run about 30% lower than the U.S. average in many areas, allowing early retirees to significantly reduce their expenses while maintaining a high quality of life.
Creating Your Early Retirement Financial Strategy for Tennessee
To successfully retire early anywhere requires careful planning, but Tennessee’s unique advantages can accelerate your timeline. Here’s how to develop an early retirement plan specifically tailored to Tennessee:
Calculate Your Tennessee Retirement Number
Determining exactly how much you’ll need to retire early in Tennessee starts with understanding your expected expenses. The good news is that your retirement savings target may be lower here than in many other states.
A couple planning to retire early in Tennessee might need approximately $45,000-$60,000 annually for a comfortable lifestyle—significantly less than what would be required in coastal states or major metropolitan areas. This reduced cost of living can shave years off your working life.
For example, if you’re following the 4% withdrawal rule (a common retirement planning guideline), you might need $1.1-1.5 million in retirement savings to generate $45,000-$60,000 in annual income. This is substantially less than what would be required in higher-cost locations.
Leverage Tennessee’s Tax Advantages
One of the most powerful strategies when planning how to retire early in Tennessee involves maximizing the state’s favorable tax environment:
No state income tax means your retirement distributions from 401(k)s, IRAs, and other retirement accounts are only subject to federal income tax. This can save you thousands of dollars annually compared to states with high income taxes.
Tennessee also doesn’t tax Social Security benefits, further increasing your retirement income. While early retirees typically can’t claim Social Security until 62, this becomes an important benefit in the later phase of your early retirement.
Property taxes in Tennessee average around 0.64% of home value, significantly below the national average of approximately 1.1%. For a $300,000 home, this difference could save you over $1,400 annually—money that can support your early retirement lifestyle.
Sales tax is Tennessee’s primary revenue source, with rates ranging from 8.5% to 9.75% depending on the county. While this is higher than some states, the absence of income tax generally more than offsets this expense for retirees.
Best Tennessee Locations for Early Retirees
When selecting where to retire early in Tennessee, consider these popular early retirement destinations based on affordability, amenities, and quality of life:
Nashville and Surrounding Areas
While Nashville itself has become more expensive, surrounding communities like Hendersonville, Mt. Juliet, and Murfreesboro offer more affordable housing options while still providing access to Nashville’s cultural amenities and healthcare facilities.
Lebanon, located about 30 minutes east of Nashville, offers a small-town feel with median home prices around $300,000, making it attractive for early retirees seeking proximity to a major city without the high costs.
Knoxville Region
Knoxville offers an excellent balance of affordability and amenities. The cost of living runs about 18% below the national average, with housing costs nearly 30% lower.
The university presence (University of Tennessee) provides cultural and educational opportunities, while the proximity to the Great Smoky Mountains offers abundant recreational options—important factors for those who retire early in Tennessee and have more active years ahead.
Chattanooga Area
Chattanooga has transformed into an outdoor enthusiast’s paradise with exceptional internet infrastructure. The cost of living remains approximately 12% below the national average.
The revitalized riverfront, mountain views, and outdoor activities make this an increasingly popular choice for active early retirees. The city’s innovation district and gigabit internet also make it ideal for those planning a semi-retirement with remote work.
Crossville and the Cumberland Plateau
For those seeking an even more affordable option, Crossville offers an extremely low cost of living (nearly 25% below the national average) with home prices averaging under $250,000.
The Cumberland Plateau location provides a slightly cooler climate than other parts of Tennessee, along with numerous golf courses, lakes, and natural areas—perfect for active retirees.
Healthcare Considerations for Early Retirement in Tennessee
Healthcare planning is critical when developing your early retirement plan, especially if you’ll retire before Medicare eligibility at 65. Tennessee offers several advantages in this area:
Tennessee has competitive health insurance premiums on the ACA marketplace compared to many states, which is crucial for early retirees managing the “coverage gap” before Medicare eligibility.
Major healthcare systems like Vanderbilt, University of Tennessee Medical Center, and HCA Healthcare provide excellent medical care in the state’s larger cities.
For those considering a semi-retirement strategy, part-time work with healthcare benefits can bridge the gap until Medicare eligibility while still enjoying the benefits of having retired from a full-time career.
Financial Strategies to Accelerate Your Path to Early Retirement
Implementing these financial strategies can help you retire early in Tennessee sooner than you might think possible:
Geographic Arbitrage
If you’re currently living in a high-cost area, selling your home and relocating to Tennessee can potentially free up hundreds of thousands of dollars in home equity that can be added to your retirement investments.
For example, selling a $600,000 home in a coastal state and purchasing a comparable or better home in Tennessee for $300,000 immediately adds $300,000 to your retirement portfolio (minus transaction costs).
Semi-Retirement Options
Tennessee’s growing economy offers numerous opportunities for part-time or flexible work that can ease the transition into full retirement. This “slow transition” approach allows your investments more time to grow while reducing early withdrawals.
The state’s tourism industry, healthcare sector, and growing remote work opportunities provide options for early retirees looking to supplement their income.
Real Estate Investment
Tennessee’s relatively low property prices and strong rental markets in growing areas make real estate an attractive component of an early retirement plan. Rental properties can provide steady income to supplement other retirement funds.
Areas near universities (Knoxville, Nashville, Chattanooga) offer particularly stable rental markets with consistent demand.
Preparing for the Non-Financial Aspects of Early Retirement
While much of retiring early focuses on finances, preparing for the lifestyle adjustment is equally important:
Tennessee’s diverse geography—from mountains to lakes to vibrant cities—provides endless opportunities for developing new hobbies and interests that make early retirement fulfilling.
The state’s strong community ties and Southern hospitality make it easier to build new social connections, which research shows is crucial for retirement satisfaction.
Tennessee’s growing communities of early retirees, particularly in areas like Crossville’s retirement communities, provide ready-made social networks of like-minded individuals.
Conclusion: Your Path to Early Retirement in Tennessee
Knowing how to retire early in Tennessee puts you on a path toward financial independence that might be years ahead of what would be possible elsewhere. The combination of no state income tax, low property taxes, affordable housing, and reasonable healthcare costs creates a unique opportunity for aspiring early retirees.
Whether you’re attracted to the music scene of Nashville, the outdoor paradise of Chattanooga, or the peaceful plateau of Crossville, Tennessee offers diverse early retirement destinations to match any lifestyle preference—all while stretching your retirement dollars further.
By leveraging Tennessee’s financial advantages and following a well-designed early retirement plan, you can turn the dream of leaving the workforce early into your personal reality. The Volunteer State is ready to welcome you to a more affordable, enjoyable, and earlier retirement than you might have thought possible.