Preplan & Avoid Retirement Crisis
By Carol Goetsch, U.S. Bank Wealth Management, Head of Advisory Consulting Services
Working the land with its constant change is both tough and risky, but equally rewarding.
Farmers consistently multi tasks by being a mechanic, an engineer, a scientist and meteorologist. They also must understand debt, negotiate contracts, work with suppliers and employees, is a bookkeeper and handle the taxes.
However, new challenges and considerations now loom; with the average farmer near 60 years of age (1) and 70 percent of U.S. farmland to change hands in the next 20 years (2), farmers need to consider their financial retirement security.
Key issues farmers should consider:
• Does the balance sheet consist of both short and longer-term debt?
• Is wealth concentrated in land, buildings and/or equipment?
• What level of participation have you had with Social Security or other types of retirement plans?
You may be attached to your land and generally expect the sale of equipment to fund retirement, yet selling land could also create the income you need. That can mean transferring the farm to the next generation or selling it to other farmers.
One of the major challenges for succeeding generations is affording and securing farmland. These types of decisions can be emotional and difficult, as the land may have been in the family for generations.
A supportive financial professional team can help facilitate a smooth transition to retirement, managing the challenges and complexities presented by retirement today.
A strong succession plan can triumph over dire statistics: only 30 percent of first generation operations successfully transition to the second generation, while only 10 percent of the second-generation operations make it to the third generation (3).
Farming is still an industry of family-owned businesses, which accounts for 98 percent of all U.S. farms and 86 percent of our total agricultural output (3).
Succession from one generation to the next is often the dream of most farmers. To increase your chances of achieving success in this dream, you should consider developing a retirement plan at least 10 years before you want the actual transition to occur.