Editor’s note: This article is the latest in our series on various regional comparisons for retirement. See end of article for links to other regions in this series. We welcome ideas for future comparisons.
December 10, 2014 — The area that we will call the mid-south is an under-estimated and often misunderstood place for baby boomer retirement. All of these states are relatively favorable for taxes, cost of living, and climate compared to many others. Yet so far they definitely take a back seat in terms of popularity compared to the Carolinas, Florida, and Arizona. In this comparison we will evaluate various factors for these states that affect retirement, letting our readers draw their own conclusions from the facts. As always, please remember that areas and neighborhoods within a state, even a Metro, can be very different – so generalizations are tricky. Reader input is extremely important too. We encourage you to use the Comments section below to tell your stories and express your preferences with your fellow members.
Population and area (Data from American Fact Finder-U.S. Census Bureau).
These states do not have big demographic differences among them, except for Georgia, which has twice as many people as AL and KY. All of the states are about the same size geographically, ranging from 39,000 sq.miles (KY) to 57,500 (GA).
Pop. 65+ (US=14.1%)
Economics and Home Prices
One reason why theses states make good places to retire is their lower cost of living. The cost of living in Tennessee is the 2nd lowest in the country (after Miss.) and all of the other states are low as well. (Source: Missouri Bureau Economic Research Center). Real estate tends to be inexpensive as well; all have significantly lower home prices than the U.S. median value of $176,000 (Source = USA Quick Facts 2009-2013).
Cost of Living Rank
$ Med. Home Val
% Below Poverty
Climate and Geography
As you move south the states get warmer, so Kentucky has the coldest winters and Alabama and Georgia the warmest. Mountain locations within the same state at elevation will be cooler. Clingsman Dome in TN’s Great Smoky Mountains is the highest point in the region at 6,643′, while Black Mountain in KY stands at 4,784′. Alabama’s Chea Mountain has an elevation of 2,407′. Alabama enjoys a coastline on the Gulf of Mexico while Georgia has some islands and beaches on the Atlantic. All of the states have some mountainous areas, forests, and many lakes that make for great places to retire. Here are the average Jan. and Jul. temperatures for these states (Source: NOAA).
Avg Jan low
Avg Jul high
Political and Social
All of these states are considered “Red” (Republican and conservative), with Alabama being the “Reddest”. Larger cities and college towns are generally more likely to be “Blue” (Democratic) than rural areas and small towns. Boomers who are from the South will probably find it easier to fit in the social scene in these states than someone who is from the Northeast. As many Topretirements members have noted, if you are from the North and want to fit in here it is best to not try to impose your values and attitudes on your new neighbors. Just as if someone from here moved to New England, it works best to realize you are in a new environment and need to be open to new ways and ideas without being judgmental.
Tax Burden and Property Tax
According to the Tax FoundationTennessee is the state in this group with the lowest 2011 tax burden – it ranked 45th out of the 50 states. Alabama’s was next at 41st, Georgia was 35th, and Kentucky had the highest at 23rd.
A major reason why baby boomers choose these states for retirement is their often ultra-low property taxes. Alabama has the 2nd lowest median property taxes in the nation. It should be noted that part of the reason for this region’s low property taxes is that real estate is less expensive here. The most expensive state in the region for property tax is Georgia, which has the 33rd lowest rate in the country. (Source: Tax-Rates.org)
Tax Burden Rank
$ Med. Prop. Tax
Some states offer various property tax exemptions to people over 65, those with low incomes, veterans, or disabilities. Alabama, Georgia and Kentucky have Homestead Programs to help with these taxes. Check our State Guides for more on this.
These states generally all have fairly low income tax rates. Tennessee has no income tax, although it does tax interest and dividends at 6% (low income folks are exempt from those). AL and GA taxes start at a very low marginal rate but the highest rates kick in at very low income levels – $3,000 and $7,000. Source for these rates is Federation of Tax Administrators.
Low Inc.Tax %
High Marg. Tax %
Social Security and Income Tax Exemptions for Seniors
All of these states are generous when it comes to giving seniors tax breaks. None tax Social Security payments. Tennessee doesn’t because it has no income tax. Alabama exempts most retirement income including defined benefit pensions. Kentucky exempts retirement income up to $41,110. Georgia has generous adjustments to retirement income of all types – in 2012 it was up to $65,000 for couples aged 65 or more ($35,000 for those 62-64).
The sales tax in KY is 6%. AL and GA each have 4% sales tax rates. The TN sales tax is 7%. Most of these states permit localities to add on to that tax.
Estate and Inheritance Taxes
Kentucky has an inheritance tax, but spouses, parents, children, grandchildren and siblings are all exempt. KY uses the federal exclusion for estate taxes. There are no estate or inheritance taxes in Alabama. Georgia has a very limited estate tax which is basically a credit against the federal tax. Tennessee has an inheritance tax.
Note: Taxes are complicated and the laws change quickly. Consult state Department of Revenue Guides and/or your tax professional before making important decisions.
Places to Live and Retirement Popularity
All 4 states have cities and interesting towns that make for great places to retire, although not as many as states like Florida and the Carolinas. The 4 states all have college towns, such as Bowling Green in Kentucky, which is also the place sacred to Corvette sports car fans. There are many mid-sized cities and a few large ones, such as sprawling Atlanta. In the Topretirements database we have reviewed 11 towns in AL, 37 in GA, 11 in KY, and and 25 in Tennessee. Eleven towns in these 4 states made the Topretirements’ list of 100 Best Retirement Towns: Tennessee had 5, Georgia had 4, and Alabama and Kentucky each had one: (Fairhope (AL) and Murray (KY).)
The most popular town in these states is Paris (TN) – #12, a rural area which is set near the very popular Land Between the Lakes recreational area. Knoxville (TN) was #17, Maryville (TN) was #20, and Savannah (GA) hit the #26 spot. But beyond the very popular towns that everyone is familiar with there are many others that should not be overlooked as great places to retire. Those include bustling Huntsville in northern Alabama, and the old gold mining town of Dahlonega in Georgia.
Here is the full list of our most popular 100 best retirement towns.
Choice of Active Communities
Georgia in particular is loaded with active adult communities – at Topretirements we count over 90 communities in our Georgia Directory of Active Communities. In the Tennessee Directory of Active Communities you can choose from 47 different active or retirement communities, 12 of which made our 2014 list of the most popular active communities. There are over 20 active adult communities in Alabama, while there only 10 to choose from in Kentucky.
The bottom line
The 4 states examined here share numerous similarities in addition to a similar climate and topography (except that Georgia and Alabama have coastlines). The price of housing is under the national median in all.
Looking for differences, it is pretty clear from our web analytics at Topretirements that Tennessee and Georgia are more popular places to retire than Alabama and Kentucky, and they also have more towns and active communities to choose from. Tennessee wins for lowest tax burden and cost of living, while Alabama wins the lowest property tax sweepstakes.
So which state is the best place to retire? If you are attracted to this region and its warm weather and low costs, we recommend that you visit cities and towns in all of these states and see if you can’t find the place of your dreams. Fortunately, the states are contiguous- in a few trips you should be able to get a good idea of the places that could offer you a happy retirement experience.
Arizona vs. Florida Retirement
Dueling Retirement States: NJ vs. DE vs. MD vs. VA
Dueling Carolinas: NC vs. SC for Retirement
How North Carolina Climbed over Florida as #1 Retirement State
Best States for Retirement
State Retirement Guides
California Retirement 101
Florida Retirement 101
Comparison: Retirement in Arizona, New Mexico, and Utah
What state do you prefer? Let us know in the Comments section below about the places you have lived in or visited in these states, along with your impressions about what it is like to retire there.