Defined Benefit Plans in Agriculture

Published on: 10:06AM Jul 13, 2010
Farmers who need to create a retirement plan may have some options.

A "defined benefit plan" is great for someone who wants to begin funding retirement later in life. Or for a 50-60 year old who is considering transitioning out of the business.

In those years close to retirement, a farmer may have income putting them in a high tax bracket. A defined benefit plan can be contributed into a trust account with tax deductions for those contributions.

While a potential downside is expense in maintaining the plan for multiple employees, most often a five-year minimum commitment (with annual contributions as high as $200,000) can make a real difference in an operation.

A producer can also use the plan for tax deductions. Many purchase extra inputs at the end of the tax year to reduce income; with a defined benefit plan in place the producer can earn a tax deduction by setting money aside into a trust to be used at a later date.

Jesse McCurry writes from the firm's Wichita office. Reach him at [email protected]