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mvp farms
Veteran Contributor

Investing as a young farmer.

Well I consider myself young 33 been running the farm since 1999 I only farm owned land 1/2 mine 1/2 to be inherited from my parents with a 1/3 of my land paid off.  My equipment is 3/4 owned and adequate for my acres for many years.  I am now at a place where I feel investing in me is more important than investing in the farm or at least I feel comfortable investing other places.  I have a cousin who is a representative for Northwestern Mutual and we have talked about different things, she suggests making investments and paying the tax now since you know what the tax rate will be and I tend to agree with her on that part. 

 

I'd just like to hear from others what has been successful.

 

Thanks

Mark

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20 Replies

Re: Investing as a young farmer.

   Insurance agents, especially ones new to the field are encouraged to sell to family first.  You really don't give enough info. but I suggest you talk to other investment people also.  Remember, farmland has been hard to beat as an investment the last 10 years.  If you think a 401K is gonna make you wealthy you're starting 10 years too late, actually 20.

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Red Steele
Veteran Advisor

Re: Investing as a young farmer.

Northwestern Mutual is a highly rated insurance company with great internal rates of return on older life insurance policies. I am not sure what the newer ones will yield, but my NW policy has done very well over the last two decades. If you have a farm where you know you will have to come up with a payout to other family members at some time in the future, funding the payout with a life insurance policy on the parent(s) whose death will cause the event is good financial planning. The thing about structuring the payout this way is that the buildup in equity is all done tax free except for the original premiums. That is what makes life insurance really pay off....the tax free rate of return. I think my policy has yielded about 7% internally since inception....to get that type of return on CD money, I would have to have a rate of 10% or so. And this is on all dollars, without assuming any of the money is for the actual insurance, the risk of an untimely death.Again, with the right insurance product, Life Insurance can be a good investment. Obviously, 10% doesn not compete with the run up in land prices of the last decade. But I have lived through a similar inflationary run before in my life, and what goes up very fast, falls even faster.

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Kay/NC
Honored Advisor

Re: Investing as a young farmer.

I would suggest you get a broader base of investment advice. I have yet to figure out a much better tool than a Roth IRA.  Wish this had been available to us at your age. 

 

Everyone I have ever talked to says this is the best place to start...you can pick different investment instruments within the funds you dedicate to it.  The taxes are already paid, you get the growth free of taxation.  I woudl start with thet maximum Roth controcution each year, as a beginning. 

 

If you have kids, 529 education pans offer similar tax free earnings, if the plan is spent for formal, post-HS training.  Basically, any institution that can accept federal financial aid can be funded with a 529 plan. 

 

Consider a HSA account and high-deducitble health insurance plan.  Lets you fund healthcare a lot with pre-taxed dollars, and the money differential for the monthly premium is startling.  The money in the HSA can be invested in various ways, after you biuld a basic level of funds in it, too.

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Blacksandfarmer
Esteemed Advisor

Re: Investing as a young farmer.

MVP I set up a Roth IRA while I was in high school. I was joining the Army so I knew I didn't need that money for at least 3 years. When I got out my Roth had paid fairly well. A Roth is a taxed 1st investment making everything you make later tax free and it carries no risk..... I may look to set one up in the near future but for now spare money goes to the farm...... And for the time being the farm investments are paying better than the bank anyway.

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kraft-t
Senior Advisor

Re: Investing as a young farmer.

It depends on whether you want capital appreciation or return on investment.. Retiring debt on machinery or mortgage is saving money as well. What would be wrong with having the farm 1/2 paid for aor all paid for?

 

Working capital is important as well. Self financing the operation is also a good goal. If I were you I would invest in myself and my business. Your dollars may as well as produce a return for you and make you business more viable as well.

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Re: Investing as a young farmer.

At this point, you are young and it's a good time to do something, so consult at least two credible advisors to settle on a preferred plan, activate the plan and begin an investment strategy.  It's not as important how much you invest right now as it is to begin investing.  Allow for options to increase &/or balance your investing as time and financial abilities change.  Get used to commiting to a disciplined, regular program that doesn't allow for easy withdrawals when you think you need the money for something else.  Then stick with it over the long haul.  A little money invested regularly grows through compounding. 

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cowfarmer
Senior Contributor

Re: Investing as a young farmer.

I'll put it to you simple, I've made investments, so many investments I couldn't even list them, but only one has made me good money and that's land. To me it is the safest at this point. I don't see land values going down in the future. So my opinion put your name on more dirt. I had tough times trying to get land paid for but it was worth all the struggle.

mvp farms
Veteran Contributor

Re: Investing as a young farmer.

Don't get me wrong I'm on the hunt for land.  What I'm looking for is something to throw a hundred bucks a month at and be diversified just a little.  I know I'll never be rich doing that and I know that I'm starting too late for that.  I am doing some more research into an HSA account.  BTW no wife no kids, 2 snowmobiles one named child support and one named allimonySmiley LOL

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Kay/NC
Honored Advisor

Re: Investing as a young farmer.

At the level of investment he's described, the $100 a month or so won't make any additional land purchases pop.  I don't think he wanted to stay in the same general line of investments - land and eqiuipment - but wanted ways to diversify. 

 

That is smart.  All the eggs in one basket is not wise. 

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