You devoted time in managing and operating your Arizona agriculture business. When you no longer want to operate your business or reach a retirement stage, are you prepared? What are you going to do when you are no longer operating your agriculture business? One large factor in retirement planning is fear of retirement. Do you have interests outside of agriculture or farming? Can you visualize yourself retired? Do you have confidence that you can fund a retired lifestyle?
Transition
You may want to use a phased retirement approach. Maybe, you can transition from being a full-time farmer to ownership of the land; meaning releasing managing operations.
If you did not have any geographical, health, or financial limitations, what is your ideal retirement? Do you see it as a time of opportunity or uncertainty? Would there be roles you want to assume, such as providing leadership to groups once you are free of time constraints?
The default phased retirement may work for many operators, including bringing in family or nonfamily members to continue as a viable business.
Preparation and Financial Groundwork
Farming and agriculture families may be perceived as having a lower cost of living than nonfarm families. Your farm home may be mortgaged through a land note paid by the farm business. Meaning, rent or purchase of a new home needs to be built into the budget if you and your family plan to move off the farm in retirement. Home utilities may have been heavily mingled with farm utility expenses, making accurate estimates a challenge. Your health insurance may have been covered by the business. Medicare components and supplemental insurance needs to be budgeted.
Recognize that a simple monthly or annual ballpark estimate of costs of living allocated across a 25-to-30-year period is too simplistic, but worth figuring out.
Financial Planning and Monthly Cost of Living
A second step is to budget non-monthly costs, such as trips. Consider the variations of income production from different sources. Some streams, such as Social Security, have incentives to delay the beginning of income. Others, such as withdrawals from a 401(k), have penalties related to early withdrawal. There also are assets that can result in rental income, such as land, while others such as stocks have valuation risks that may be unwelcome in retirement. Estimating the impact of inflation on retirement living expenses and incomes is unpredictable, as life expediencies increase and impact of inflation remains a variable.
Seek Professional Guidance
Agriculture and farming is capital-intensive and, as land is leased or sold, financial returns may just turn out to be your primary source of retirement income. Meet with and take advice from financial professionals. There are factors such as depreciation recapture and capital gains taxes that can act to diminish the returns from the outright sale of assets.
Obtaining guidance is essential. Contact Mark R. Dreher, CPA or Michelle Flynn, CPA for advice about your situation.