How retirement planning can help agricultural families |

How retirement planning can help agricultural families


Ranch families oftentimes have little money in retirement plans when they reach their golden years. Furthermore, their Social Security benefits are not large enough to live on. This situation wouldn’t necessarily be a problem if they plan to sell some or all of their property in order to provide income during their later years. However, doing so precludes the possibility of passing property to heirs, which many agricultural families would like to do.

A primary reason that agricultural families have little money in retirement accounts and small Social Security benefits when they reach their 60s is that they typically invest most of the profit from their farm or ranch back into their business. It’s tempting for them to spend money on the purchase of a piece of equipment or machinery because doing so produces an income tax deduction. However, buying new machinery or equipment instead of making a contribution to a retirement can have negative consequences.

It’s a lot more fun to spend money on new machinery and equipment than it is to invest money in a retirement plan. However, unless buying that machinery or equipment will increase the profitability of the business, and allow you to save more money for retirement, it may be smarter to invest that money in a retirement plan.

Don’t get me wrong. I’m not telling you not to invest in your business. I’m simply pointing out you shouldn’t base your investment decisions simply on tax savings. Rather, you should base them on what will help you achieve your financial goals.

Depreciating and Appreciating Assets

Appreciating assets are those items that increase in value over time. Depreciating assets, on the other hand, go down in value. You often have to spend more money on depreciating assets just to keep them functioning.

Reducing taxes are certainly an important part of retirement planning. But you shouldn’t be so focused on saving taxes that you fail to invest in assets that will increase in value.

For example, if you purchase a new tractor for $50,000, it could depreciate to near zero in 20 years. But if you invested the same $50,000 in the same year in a growth mutual fund, or perhaps a rental property, that same investment might be worth $200,000 or more at the end of the same 20-year period.

Qualified Retirement Plans

Regulations governing qualified retirement plans, such as individual 401(k)’s and SEP and Simple IRA’s, offer tax deductions for contributions. These tax breaks, if taken, should be incorporated into any financial plan. A qualified retirement plan could be an excellent choice if you don’t want to sell real property to fund your nest egg, especially if you contribute the maximum allowable amount to the account each year. Alternatively, assets that can generate a stream of income, such as a rental property, could also be a wise choice.

Be sure to seek the assistance of an experienced retirement advisor to help you take full advantage of all the financial benefits available to you. An investment professional who is compensated on a fee-only schedule may be a better choice than someone who is paid by selling commissionable products. Fee-only compensation is designed to ensure the advice you receive is objective and in your own interest.

— Nolt is a fee-only financial advisor. He owns Solid Rock Wealth Management, Inc. and Solid Rock Realty Advisors, LLC, sister companies dedicated to working with families around the country who are selling a farm or ranch and transitioning into retirement. He can be reached at (800) 517-1031. For more information, visit: and


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