Do you know any farmers who seem like they might never retire? Maybe they talk about wanting to move toward retirement, yet aren't taking steps to make that a reality. Maybe it's one of your relatives, or it's you.
If you've farmed for decades, you love the life of farming. Working outdoors, staying closely connected with the land and livestock, and the lifestyle that comes with being a farmer are just some of the perks. As we get closer to retirement or semi-retirement, we want to make sure those benefits will continue to be part of our lives.
But there can be another side to the story when farmers continue to work well into their senior years – one that doesn't have to do with the benefits of farming. Many farmers feel that they cannot retire due to the tax burden they would face upon retirement. So they continue working – some even well into their 80s!
Finding the path
One farmer was hoping to retire within the next few years. He asked his CPA to figure out what his tax burden would be, and was blown away by the amount. He began to think he would have to continue working on the farm for the rest of his life. He felt he just couldn't afford to retire.
Soon after that, he visited with a new tax advisor and a legacy advisor. The tax advisor explained how they could set up a proactive tax plan to help manage his tax burden upon retirement. They could set up an initial plan with his desired retirement date in mind, and then meet regularly to ensure the plan was on track.
The farmer was excited because he could see the path to how he would be able to retire. The tax advisor asked him about his current CPA. The farmer explained that he was worried because his CPA was nearing retirement himself, and he hadn't heard whether someone else was going to take over his practice. He now wondered if that was why his CPA hadn't worked with him on any retirement tax planning.
What's your strategy?
The farmer decided to start working right away with the new tax advisor and legacy advisor to put together his retirement tax planning strategy, as well as a legacy plan to transition the farm to his two sons. With his advisors, he put plans in place that put him on track to retire in four years, when he had hoped to, but without the high tax burden his CPA had projected.
What's your retirement tax strategy? Do you have a forward-looking plan that will help you manage any tax burdens? Has your tax advisor or CPA helped you put that plan together? Are you getting proactive advice to help you plan ahead for retirement?
Also, if your CPA is nearing retirement, what's their succession plan for their practice? Have they informed you of their plan?
Get more information about farm business planning and ideas for today's farm leader in our quarterly publication, Smart Series. This issue features excerpts from a panel discussion with Dr. Mike Boehlje, Dr. David Kohl, Jolene Brown and Dr. Danny Klinefelter.
The opinions of Darren Frye are not necessarily those of Farm Futures or the Penton Farm Progress Group.