In 2023, I said the most important thing for your farm business is build your transition plan. Recently, we’ve focused on knowing your numbers, and now it’s time for cost of living and budgeting for retirement.
When I work on transition planning with family farms and businesses, I often start by asking whether or not the senior or junior partners have met with a certified financial planner. Usually, but not always, the answer is no. But almost every time, the senior partner needs a clearer picture of their needs in the next chapter of transition or retirement. They think they will be OK, but until it is put on paper, there is still this massive fear about the unknown. Thankfully, it’s easy to navigate.
Anticipate Your Lifestyle
The first step is understanding what your cost of living looks like in retirement. Yes, this means budgeting and anticipating expenses.
I put together a one-page, farm-centric worksheet so you can easily calculate your budgetary outlook. This includes expenses such as healthcare, vacation, groceries, basic needs, and even that new fishing boat you want to buy. I don’t care what your budget is, but you should. You need to have an excellent idea of what that number is. In fact, it is one of the most respectful things you can take the time to calculate for you, your spouse and your transitioning partner.
Put It On Paper
The next and final step (I’m a simple man) is mapping out the long-term business needs and other specifics for your long-term income and expenses. For most of you, the income will include farming for a while, including grain sales, equipment sales and then cash rent and other income such as social security, investments and diversified income from other sources or businesses you work in. The expenses include land, equipment and housing notes, primarily.
The important part is physically putting the numbers in to see what the next 10, 20 and 30 years look like on paper. The worksheet calculates the income and expenses you input and allows you to select your ‘crystal ball’ inflation rate, investment return and anticipated tax implications.
I want peace of mind in your retirement and transition planning. I want you to know where you stand and what your needs are. I want you to feel comfortable with the hardest thing you have to do once in your life. And I’d like your transitioning partner, whether family or not, to know your needs and expectations as you navigate these next steps.
Do yourself a favor and take an hour or two to put on paper what you might have been putting off for too long or have yet to take the time to think about.
Shay Foulk
shay@agviewsolutions.com
