Should You Have A Retirement Plan?


by Darrell Dunteman, Farm Journal Columnist


It’s not common for farmers and ranchers to be interested in retirement. Most producers view their investment in their operation as their retirement plan. They could be right.  However, depending on your circumstances you might find a retirement plan to be just what the doctor ordered for your financial future.

Advantage points. Let’s take a look at the benefits of a retirement plan. First, it allows you to put away money for your future and get a current year tax deduction. Then, when you retire, you are hopefully taxed at a lower rate. While you will pay federal income tax on the proceeds, many states do not tax the proceeds from a retirement account. The problem is that some farmers and ranchers might find that, due to their success, their tax bracket might be even higher than during their working years.

Liquidity is another major advantage of a retirement plan.

Using your farm or ranch as a retirement plan might well be a great idea, but what happens if you need cash? You might be forced to liquidate your business, or at least take a loan against your agricultural assets if you have a serious illness or end up in a nursing home.

Another use of a retirement plan might come at your death. Most families have farming and ranching heirs and non-farming and ranching heirs.  A retirement plan can provide trading cards at your demise. Farming and ranching heirs get business assets.  The non-farm heirs get cash, and everyone lives happily ever after.

It’s your choice. What type of retirement plan should you have? There are numerous choices ranging from a simple IRA to a Roth 401K plan. Contributions run from $5,500 to more than $57,500 for 2014, depending on the type of plan, your age and your earned income. The larger contributions require more complex plans and might require you to make contributions on behalf of certain employees.

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Source:  Farm Journal Legacy Project


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