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Retired Farmer: Is There Such a Thing? Joy Kirkpatrick Outreach Specialist Center for Dairy Profitability.

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Presentation on theme: "Retired Farmer: Is There Such a Thing? Joy Kirkpatrick Outreach Specialist Center for Dairy Profitability."— Presentation transcript:

1 Retired Farmer: Is There Such a Thing? Joy Kirkpatrick Outreach Specialist Center for Dairy Profitability

2 In this hour ► Research on farmer retirement ► Teaching ideas, exercises, resources ► Discussion


4 Farm Operators Are Older ► 25% of farmers & about ½ of landlords are over age 65 ► Older aged farmers & landlords control over 1/3 of all farm assets ► 3% of overall labor force are over age 65 ► Non-farmers are more dependent on Social Security, during retirement than are farming households (Mishra, Durst and El-Osta, 2005)

5 Farm Operators Are Older ► Farm operators 65+ is the fastest growing group of farmers with a 22% increase over 2002 Ag Census Data (2007 US Ag Census) ► New Zealand farmer average age is steadily increasing (Fairweather and Mulet-Marquis, 2009)

6 Farmtransfers Questionnaire ► Errington, Baker, Lobley ► Used since 1991 in several countries and states ► Retirement plans, retirement income, successors & succession plans, inheritance preferences ► In 2006, Baker & Epley clarified definition of retirement

7 Farmer Retirement & Succession Survey

8 Foskey (2002) ► Retirement in farming ► Retirement from farming ► Retirement to farming ► Similar patterns in the US ► Implications for collecting data and for beginning famers

9 Why farmers delay retirement ► New production technologies ► Improved heath and longer life?  Swedish longitudinal cohort study to substantiate theory (Thelin and Holmberg, 2010)  Concluded these had little effect and that social, financial or cultural factors have greater influence

10 Early Retirement Schemes ► Examples of ERS in several European countries ► Greece, Ireland and France have highest rates of participation ► ERS encourage farmers between 55 and 66 to retire and transfer land to younger farmer and receiver retirement benefits and incentives

11 Early Retirement Schemes ► Bika (2007)  Assisted a number of elderly farmers to retire with dignity  ERS didn’t lower the average age of farmers  Didn’t increase retirement rates  Didn’t facilitate transfers outside family lines  Most successful in stabilizing rural population rather than its intended objective of improving competitiveness

12 Early Retirement Schemes ► Ryan (1995)  Contends ERS had only marginal success in resource transfer  Low benefits  Restrictive requirements  Cultural resistance to leave farming

13 Early Retirement Schemes - Finland ► Benefits were farmer specific and connected to the level of pension insurance purchased by farmer while actively farming ► Likelihood of farmers using the ERS decreases as the farmer ages and the highest probability for voluntarily leaving farming is immediately after reaching eligibility age 55. (Pietola, Väre and Lansink,2003)

14 Retirement Income Sources ► Three legged stool of retirement income ► Social Security accounts for more than half of the total income fore about 60% of SS recipients (All, not just farmers) ► SS is the sole source of income for about 20% of recipients ► SS is on average only about 13% of income for farmers receiving SS benefits (Mishra et al., 2005)

15 Iowa Farmers Retirement Income Sources ► Social Security most common source identified (50%) ► Income from the farm (41%) ► Income from private retirement plan (37%) ► Income from other investments (29%) ► Sale of land, livestock and other farm assets were among lowest categories

16 Retirement Income Sources Australian Farmers ► Income from Farm: 40% ► Sale of Land: 35% ► Other Sources: 30% (Barclay et al., 2005) Wisconsin Farmers ► Income from Farm: 15% ► Sale of Farm Assets: 38% ► Social Security: 17% (Wisconsin Farm Transfer Survey, 2006)

17 Emotional Ties to Farming ► “I will miss the solitude of the place, the views, the company of animals, the night sky and the privacy.” (Barclay et al., 2005) ► “Gratification of watching my crops grow, seeing my herd improve, in general, being the caretaker of the land.” (Wisconsin Farm Transfer Survey, 2006)

18 Emotional Ties to Farming ► “Fencing. When[I was]younger and was able to fence, I loved that because what else can a man do, that if you put all posts and wire (4 or 5 barbs) in new that you can forget about for about 30 years, unless a tree falls over it or something runs through it. I have a fence here that I put in new in 1965 and it’s not in too bad a shape now. That will be 41 years this September. Cattle have been against it all these years.”

19 So, how do you motivate and teach retirement planning? ► Topics ► Exercises ► Resources

20 Retirement Fantasy

21 Which Farmer Are You? ► A. “Here are the keys and the farm checkbook kids. We’ll call you from Florida.” ► B. “We’re ready for a break from the labor….but we’re not quite ready to retire, we’d like to get to full retirement to maximize social security, but that won’t be enough.” ► C.“We’d like the on-farm child to be able to continue, but what realistically can the farm financially do when we need retirement income as well?” ► D. “The kids can have it when they pry my cold, dead hands off the tractor steering wheel!”

22 What is Your Vision? Five Years from now --- Ten Years from now --- Where will you live? What will you do? How are your living expenses paid? What does the business do? Who is managing it? How much ownership do you have in it?

23 Establishing Goals…….. ► Preservation of the family farm ► Financial viability of the family farm ► Farm as a retirement package Research by Ron Stover, Mary Kay Helling, South Dakota State University, 1997.

24 ► Maintaining the long term viability of the farm for future generations ► Provide for the financial security of the older generation ► Farm and/or farmland remain in the family Establishing Goals…….. Research by James Janke, David Trechter, Shelly Hadley, UW-River Falls Survey Research Center Report, March, 2009.

25 Business Life Cycle IntroductionGrowth MaturityDecline Business Phase Strategic Effort Penetrate & Grow Protect & Defend New Opportunities Divest Time Source: Dave Goeller, University of Nebraska - Lincoln

26 Business Life Cycle Introduction Growth Maturity Decline Time Introduction Growth Maturity Decline Source: Dave Goeller, University of Nebraska - Lincoln

27 Retirement Planning ► The Planning Horizon  Present age  Retirement dates  Number of years in retirement ► Living Costs  Now  1 st Year of retirement and beyond ► Income Resources: SS, IRA, farm resources

28 Retirement Estimator

29 Managing the Overall Business, Part II, Business Mgmt for Farmers ► Chapter 8, Mid-career check of retirement and estate plans ► John & Kelly Smith case study

30 Three Sessions (!!) ► Lifestyle ► Gathering the data ► Worry-Free Retirement worksheets ► Business calculator ► Investment vehicles ► Risk Tolerance levels ► Investment strategies ► Evaluations indicated participants saved an average $128/month more as a result

31 Next phase ► Multiple session workshop series ► Financial – but focus only on farmers ► Emotional issues ► Follow up with fact sheets and coaching

32 Discussion, Questions Joy Kirkpatrick Center for Dairy Profitability 608-263-3485

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