Farmers’ retirement: Crisis ahead?

Financial expert says planning ahead is key for farmers

By Gary Brock -


XENIA — Four years ago when the U.S. Department of Agriculture did its Census of Agriculture, it found that nationally, the average American farmer was 58 years old. This means the average farmer today is 62 and looking at retirement along with many others in the “Baby Boomer” generation.

Carol Goetsch of U.S. Bank Wealth Management, believes this impending retirement will create a “looming crisis” and many challenges for farmers.

Goetsch, head of advisory consulting services for U.S. Bank Wealth Management, recently wrote an in-depth paper on farming and retirement that has been published by U.S. Bancorp Investments. It is called “Retirement Realities for Farm and Ranch Owners.”

In an interview with Rural Life Today, she was asked why she called retirement for farmers a “looming crisis.”

“When looking at farmers and retirement, generally a retirement plan has not been put in place,” she said. “So when the farmer moves to retirement, the challenge is how does the owner of that farm transition into an operating farm, to an equity producing farm? This typically requires a succession plan.”

She said that when we look at the crisis itself, farmers are emotionally tied to their land. Do they want to sell the land? “They have to decide not just how much money they will need to retire but where the money is coming from.”

In her report, she pointed out that:

• 70 percent of all U.S. farmland will change hands in the next 20 years.

• 70 percent of first generation operations do not successfully transition to the next generation; 90 percent of second-generation operations do not make it to the third generation; and 96 percent of third-generation operations do not survive to a fourth generation.

• Nearly 60 percent of farmers do not have an up-to-date estate plan … and nearly 89 percent do not have a farm transfer plan.

What does she recommend for farmers?

“For farmers, there is such an emotional tie to the land. Getting them to understand what their goals, dreams and aspirations are regarding retirement is the idea, and what options they have. They need to understand their options and then they can make the decisions.”

She said that first, they need to decide when they want to retire. What is the cost of retiring? Do they have a list of their expenses written down and understand what those costs will be? She said one of the nice things about her U.S. Bank plan is that it has the necessary tools to help farmers so they can give some of these areas thought and consideration.

“The second part is emotional,” she said. “Are they ready to give up control? The potential of the next generation stepping in and possibly making changes. The farmers need to sit down and look at all their options on what they want to do in the future.”

She is seeing farmers looking at retirement at about the same time that many people in the business community are looking at it, as well. “But for farmers, the challenge is how are they going to fund that retirement?” she said. Will the farmer rent their land to someone else? Will it generate the same level of income as it has before? “One thing farmers can do is that as they grow older, they can transition the responsibilities down to the next generation,” she recommended.

Does she recommend a gradual transition or a clean break for farmers? “That is such a personal decision they have to make. They need to ask themselves questions like: Are there other family members ready and capable of stepping in? If so, they can begin to relinquish that control and phase through it. Also, can they work side by side with that next generation? If so, they can slowly step out of it.”

Also, she asked, can the farmer realistically support all the family members working on the farm? “There are so many dynamics facing farmers as they make these decisions.”

For farmers who may read all this and seem overwhelmed by all the choices and information, Goetsch pointed out that there is plenty of help available for them from farming organizations and institutions like U.S. Bank.

Goetsch was asked how farmers are different from other Baby Boomers preparing to retire.

“Farmers put a lot of their profits back into their business, the farm. Some of the challenges these farmers face is that their income level is not as high as someone who is working for a corporation, in the private sector. That impacts their Social Security since this is based on earning and how much you have paid in,” Goetsch pointed out.

She said estate planning — protection of the farm — is key for farmers. She said retirement is typically the first step in the conversation. The first part is the non-negotiable expenses, the daily cost of living, health care expenses and the potential of long-term health care.

Is there a fear of losing the farm in the event of catastrophic illness? “If there is no plan in place, the government is not going to step in and provide support until there is that spend down. There needs to be a plan in place. Farmers need to look at long-term care planning. The family needs to decide how that long-term care is provided,” she cautioned.

What do farmers need to do now to prepare for retirement?

“First, they need to understand what cash flow is going to look like, their income and budget, so they can know what their retirement will look like. Then, if there are gaps there, they have to look at the impact of liquidating certain access,” she said.

Then they need to work with a professional income advisor or wealth management advisor. They can look at utilizing a strategy, put a plan in place to transition the farm to the next generation, she said. “There are services available that could help them drive that farm to an equity producing business.”

What about the involvement of a farmer’s children in the retirement process? “My experience is that farmers tend to be very private people. We encourage farm owners, when they develop plans, to have what we call a ‘family conversation’ so they know how these decisions were made and why. Clearly communicate why the plans were made.”

One of the questions about the farm is – should it be gifted; should it be sold? “Questions of estate taxes come into play when there are 750, 1,000 acres for the farm that could be valued at more than 10 million dollars. How do you split up the assets?

She said one significant issue a farm and ranch land valuation. “We know that these valuations peaked in about 2013, and we are starting to see a bit of a decline. That is all the more reason for people to sit down and look at their finances and income. Their retirement could be compromised by a reduced value.”

Goetsch was asked why she prepared this retirement report. “Personal experience with family members. I’ve lived it. I’ve seen it. I’ve seen what has happened to a family when someone dies with no plan in place. There can be problems that people never thought existed,” she said.

Gary Brock is the editor of Rural Life Today. He can be reached at 937-556-5759 or by Twitter @GBrock4.

Financial expert says planning ahead is key for farmers

By Gary Brock