When asked about retirement plans, many of today’s farmers answer, “In about five years.” Yet, with challenging financial times and eager young family members, farmers might be looking to put a real timeline to the rolling five-year plan.
The decision to retire requires financial analysis, goal setting, transition planning and conflict resolution, says Duane Hund, a succession planning facilitator with Kansas State University. Plus, numerous tough questions, such as: Will I be useful if I retire? What will I do? Can I afford to retire?
Many times, Hund says, the fear around retiring has much more to do with self-worth issues than financial ones. “How many of know someone who sold the farm, moved to town and died within a year?” asks Hund, who also works with the Kansas Agricultural Mediation Services.
Address The Issue. For farmers, talking about retirement is intimidating, says Lance Woodbury, a farm management consultant in Garden City, Kan. A few reasons you might avoid an exit discussion include: you love your work, you are not ready to deal with mortality, you aren’t sure you can afford to step away, you feel the business depends on you, your marriage might suffer or you have strong loyalty to long-term non-family employees and landowners.
“These are all normal concerns, but most families don’t have a process to get these kinds of issues on the table,” Woodbury explains. “Leaving a business can be a really big headache. Understand that it takes planning and time.”
When discussing retirement, financial needs are normally top of mind, Woodbury says. But issues around the health and stability of the business if the matriarch or patriarch steps away are usually not addressed. Neither is how the outgoing generation will spend his or her time.
“You have to set personal goals first before we start talking legal and accounting strategies,” he says.
Visualize Golden Years. Because farmers are busy with various daily tasks, they tend to have few hobbies, Hund explains. “Consequently, when you stop farming, you don’t have hobbies to do,” he says.
To envision your ideal retirement, Hund suggests writing down three or four paths, opportunities, roles or personal interests. This could include spending time with family, a side business, travel or mission work. “Without a plan, we feel our value is lost,” he says. “We have to have worth to our community, family and creator.”
“You know what you are retiring from, but what do you want to retire to?” asks Cynthia Crawford, a University of Missouri Extension financial planning specialist.
“To sum up my own plan,” Crawford says, “I want compelling reasons to get out of bed in the morning and enough money to sleep well at night.”
Continue contributing to the farm in any way you see fit, but transition from being a boss to being a mentor so you don’t limit the leadership development of the successor. “Set timelines to keep things moving,” Hund advises. “Seek outside experts and facilitators.”
Don’t feel pressured to fast-track your retirement plan, instead take it slow. “A good retirement plan takes time,” he says. “You can’t start too early. We look at five-year plans. What do we want it to look like in five years? Then we determine the steps.”
It’s OK to feel overwhelmed, Crawford says. Focus on the exciting elements of retirement and get started.
“The best time to start planning for retirement is on your first day of work,” she says. “But the second best time is right now.”
The Exit Process
Are you ready to retire? What steps should you take? As you explore your options, consider these important phases of the retirement process. Lance Woodbury, a farm management consultant, and Cynthia Crawford, a University of Missouri Extension financial planning specialist, offer key steps as you start your retirement journey.
- Reflect on your personal goals and mindset. What are your principles, concerns and blind spots? Are you and your spouse on the same page with your goals?
- What brings you joy? Look back on the past 12 months and identify moments that made you happy and accomplishments that were meaningful. How can you incorporate those things into your retirement?
- Assess the key stakeholders. Who needs to be involved and at what level throughout the process? What are your stakeholders’ sources of power, positions and concerns?
- Share goals with your family and key stakeholders.
- Commit to a communication process that manages conflicts. Ensure the right people are around the table.
- Evaluate your advisers. Have they completed similar plans, and can they work collaboratively?
- Determine potential financial and legal strategies. You don’t want your plans to be limited by cash flow. Share your goals with professionals so you can use all the right tools.
- If working in the business, determine areas for gradual transitions of control.
- Set timetables for anticipated transition milestones. This is really important—both for you and the next generation.
- Check in on progress. Set regular meetings on the calendar to talk through how the transition is going. Use this time to update and modify your retirement plan.
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