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Financial planning for farmers and ranchers

According to U.S. census data, the average age of a farmer is 57. While few are planning to retire at that time, farmers and ranchers should begin thinking about how they would like to live in retirement and how that can be achieved.

Financial planning can be intimidating, so here are some things to consider as you begin to think about the retirement in your future and what that means to your farm.

Knowing how much money is enough. Considering the rising cost of living, increased health care costs and possible decreases in Social Security benefits, farmers and ranchers can see a lower standard of living in retirement. Realistic and effective financial planning can help solve for these issues and lead to a more secure lifestyle in retirement and peace of mind. Keep these principles in mind: spend less than you make, budget to save at least 10% of your net income, manage credit wisely, pay yourself first and avoid procrastination.

Plans and portfolio. One of the best and most efficient ways of acquiring wealth is to take advantage of retirement plans established under IRS regulations for the self-employed. They include IRAs, Keogh Plans and Simplified Employee Pensions (SEPs). Beyond a single plan, consider creating a diverse portfolio of investment assets. The key is to start early and invest continuously at a level of risk that is appropriate to your situation.

Land and equipment. Determine your plan for your land and equipment. Farmers and ranchers may want to sell these assets in order to generate income or they may go to the next generation of owner/operator. Each option has many considerations including taxes and more planning in the form of business succession planning.

Renting or selling out. If you consider renting your land and operation you should create a plan to transition from an operating farm or ranch to an income-producing investment. This also comes with additional considerations like determining how much rental income will be needed to fund retirement and estate planning for the extended future of your business and assets. When selling, the best way to determine the farm or ranch’s value may be to get an appraisal based on the amount of acreage, the value of machinery or equipment in the operation and the crop or livestock the farm is able to send to market. The appraiser might help pinpoint problems that could negatively affect the property’s value and may suggest changes to improve the operation and its overall value. Be sure to keep your files in good order, such as tax returns, licenses, permits and employee records.

Lastly, it’s important to enlist the help of qualified professionals who don’t have a stake in final decisions. Qualified professionals may include your banker, your accountant, your personal attorney or a financial or estate planner. If you would like to help in finding a qualified professional to speak with, contact your local CHS location or contact Kathy Swenseth at chsinsurancelayl@chsinc.com or call 651-355-8551.

Learn more about the Nationwide Land As Your Legacy program at chs-nationwide.com

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