When should farmers retire?


Retirement from a farm business may not mean moving away or giving up on mentoring the next generation, but it does entail transferring management decisions to someone else. It can be a gradual or sudden process. It may be driven by long-term goals, by sudden health issues, or events outside your family.

When should farmers retire? The answer is related to choices and goals, and can happen at any time. While many can’t imagine doing anything else except farming, their families may have other ideas and want to share more time with them. Discussions with your family can help design the retirement process.

Allan Nation, of Stockman Grassfarmer magazine, observed that a farmer or rancher is at his peak combination of labor, innovation, and management skills at age 50.

To maintain or grow the farm business after 50 can require an additional infusion of labor and maybe of innovation. That often means a young partner with energy and new ideas. Such a partnership process can greatly improve the income of the business, which may be the means to fund retirement savings after a lifetime of investing in farm assets.

A farmer can look for someone to work into the business at any time, but a planned process will take several years of testing the relationship, training to the uniqueness of the business, and a gradual shifting of management. A five-year time frame can work well to ensure a smooth transition and to demonstrate steady progress to the new farmer. Add ample time for readying the business framework and selecting the best candidate.

Working in a farm successor as part of a retirement plan

Are you one of the many farmers without an identified farm successor? Purdue University says that’s around 75 percent, and about half expect non-family members to take over. A gradual shift of responsibilities and ownership, plus an extended mentoring period, can help ensure the continued success of the farm business.

After checking out a candidate’s experience and references, a short trial period with paid labor can be a good step. This probationary period can help both of you assess how well you work together, how your daily priorities match up, and how you deal with setbacks.

A phased transition plan can follow, based on the goals and capabilities of you and your successor. Responsibilities for farm decisions and management can be shifted gradually or by specific enterprises. Critical elements may be held for later, while new enterprises conceived by the new farmer could be her or his full responsibility and ownership right away.

A written transition plan can ensure that timing and responsibilities are clear. A five-year plan for major progress will tell you if it’s working.

A new farmer will benefit from your knowledge of your land and from your experience in the business. Remaining a minority partner or a mentor gives access to your valuable advice. However, there are no guarantees of the farm business surviving the transfer, or indeed, from any year to the next under your control. You have gained skills and have built a business to withstand financial, weather, and market risks. But your successor will be operating in a world with a market and regulatory climate that differs from when you farmed. You have to be prepared to accept that decisions will be made that would not match yours.

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THEIR VIEW

By Wyatt Fraas

wyattf@cfra.org

Established in 1973, the Center for Rural Affairs is a private, non-profit organization working to strengthen small businesses, family farms and ranches, and rural communities through action oriented programs addressing social, economic, and environmental issues.