Family farmers face elevated retirement risks

Family farmers at a crossroads

The largest exchange of wealth in world history is occurring as the aging make final decisions about their legacy. But, with the possible return of the death tax and the changing future of farming in California, which road should be taken? Ag Alert® delves more deeply into this important and timely topic:

America's farmers face a higher risk of declining living standards at retirement than those in other occupations. A new study sponsored by the American Corn Growers Association and the business coalition Americans for Secure Retirement found more needs to be done to protect the nation's retiring farmers.

With 77 million baby boomers preparing to retire, a new and serious challenge is emerging. Americans are living longer and facing the challenge of managing their retirement savings on their own--for 20, 30 or more years.

Experts say providing a secure retirement for farmers goes beyond Social Security benefits. Researchers conclude that measures must be implemented to help turn farmers' assets into funds that will provide steady income for life.

The study further details how farm and ranch operators and their workers face significant and unique obstacles in planning and providing for retirement.

"With less access to employer-based pensions and volatile business risks, farmers often face a more difficult retirement path than the average American," said Larry Mitchell, chief executive officer of the Washington, D.C.-based American Corn Growers Association.

Key findings of the report include:

Farming as a business is far more volatile than most businesses, which makes saving for retirement more difficult. Everything from weather and biological risks to global economic conditions to policies can cause significant variation in farm income. These factors combined illustrate why the variability of farm household income far exceeds all U.S. households.
Retirement creates a ripple effect in rural communities. Of the country's 386 counties with persistent poverty, 340 are rural. Retired farmers and farm wives who outlive their savings add to the demands that strained local governments are facing to provide health, transportation and other social services to the poor and elderly.
Farm wives are particularly vulnerable to declining standards of living in retirement because they often live longer than their spouses.

Today, an average 65-year-old woman can expect to live about 20 more years, and there is about a one-in-three chance that she will live to age 90. Because women live longer than men and spend more time in retirement, farm wives are especially at risk for drastic declines in their standard of living in retirement.

According to the U.S. Department of Agriculture, two-thirds of rural persons age 60 or above earning less than $10,000 are women. By age 85, the statistic jumps to 80 percent.

"Many farmers are woefully unprepared for life's prolonged second half," said financial planning expert Kevin Spafford, author of "Legacy by Design: Succession Planning for Agribusiness Owners."

"But, expanded life expectancy gives people moving into their middle years a bit more time to chart a solid course toward retirement years."

Spafford said comprehensive financial planning, which includes a detailed retirement plan for agribusiness owners, is essential because it's the cornerstone of a family farming business, giving strength and flexibility to succession plans for future generations.

For more information on retirement issues and planning, go to www.paycheckforlife.org.