“In about five years.” That’s the standard answer for many of today’s veteran farmers when asked, “When do you plan to retire?” Yet, with challenging financial times and eager young family members, farmers may be looking to put a real timeline to that 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 says. “Leaving a business can be a really big headache—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. Since farmers do different tasks every day, they tend to have few hobbies, Hund says. “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, interests or roles. 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.”
Many times, a retirement path can include contributions to the farm. The key, Hund says, is to 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,” Hund says. “You can’t start too early. We look at 5-year plans. What do we want it to look like in 5 years? Then we determine the steps.”
The Exit Process
Are you ready to retire? What steps should you take? As you explore your options, consider these important phases of retirement process, says Lance Woodbury, a farm management consultant.
- Reflect on your personal goals and mindset. What are your principles, concerns, blind spots? Are you and your spouse on the same page?
- Assess the key stakeholders. Who needs to be involved at what level? What are your stakeholders’ sources of power, positions and concerns?
- Evaluate your advisors. Have they completed similar plans and can they work collaboratively?
- Commit to a communication process that manages conflicts. Ensure the right people are around the table.
- Discuss goals with your family and key stakeholders.
- Determine potential financial and legal strategies.
- If working in the business, determine areas for gradual transitions of control.
- Set timetables for anticipated transition milestones.
- Check in on progress.