Last month, the first in a two-part series on retirement focused on how to plan for protecting the farm and your family in retirement. In this second part, we’ll cover financial planning before and during retirement, and how the practice can help you achieve your overall farm succession plan and prevent you from running out of liquid assets during retirement or when you need more care.

What is a financial plan? In basic terms, it’s a comprehensive evaluation of a person’s current and future financial state. As we discussed last month, many farm families are so busy farming that they may start contemplating retirement later than anticipated. We all know that the earlier you plan for a significant life event, such as retirement, the better your overall chances of achieving your goals.

From a legal standpoint, a sound financial plan going into retirement is critically important to achieving a successful farm business transition. Many families spend time talking about a farm succession plan, but financial planning is a critical component that may be lost when focusing on passing assets to the next generation. There are many benefits of going through the financial planning process with an experienced financial adviser:

Set goals. The process helps you define your goals and objectives in writing, and make informed decisions based upon those goals. Also, the process creates a baseline plan for the family to review for years to come.

Maximize income in retirement. Income could come from Social Security or other government benefits. Having other liquid assets available may help fund those “extra” things that you haven’t had the ability to do during your working life, such as charitable or family gifting, vacations, and money set aside for unforeseen life events like long-term care.

Also, gaining clarity on where income would come from when you do decide to reduce active farming activities gives you greater flexibility.  

Identify need for insurance and other financial products. This strategy also complements succession planning and helping the next generation continue the business of farming.

Keep reviewing plan

Remember, it is important to monitor your plan and remind yourself of your goals and objectives on an annual basis. Most financial planners recommend reviewing a plan annually or more often, especially in times of market volatility like we are experiencing now.

Look at long-term goals and assess your risk tolerance with your adviser. Everyone has a different risk tolerance when investing for retirement or in accumulating wealth. There are many investment approaches and strategies, which are too numerous to discuss here.

The bottom line is that you must remind yourself of your goals and objectives, and overall plan in times of uncertainty. Most advisers recommend you don’t make decisions based upon short-term economic conditions. Go through a risk tolerance analysis annually, or at least periodically, reviewing and reminding yourself of your goals and objectives.

Plus for advisers

It takes a team to make progress on your plan. As an attorney, I have seen firsthand the benefit for all involved when farm families have engaged their financial adviser in planning for retirement as part of an overall goal-setting process for the farm succession plan.

For practical reasons, reviewing your plan allows your attorney to understand what is important to you, to know what your net worth is for purposes of tax planning and for understanding the financial assets you have.

Another important piece of information an attorney will ask for from a financial planner is what liquidity the family has in retirement. This helps the attorney analyze what legal tools and strategies will protect the operation going forward.

Protect your land

One of the most common questions my clients ask is how to protect the biggest asset they have — their land — if they need long-term care. The best answer I have is to investigate long-term care insurance or investment products as early as you can.

What if there simply isn’t cash available and not enough income to cover long-term care expenses? That is difficult predicament. You should consult an attorney that can advise you on planning for elder care. They will know the rules you need to understand and provide your family with advice on how to keep what you have worked for together. At the end of the day, the best approach is to plan early and often.

Herbold-Swalwell is with Parker & Geadelmann PLLC. Email her at [email protected].