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Advisor

Retirement plans

Need some input on choosing some additional qualified retirement planning tools.  We've concentrated on building and paying for farms, paying for college and helping kids start businesses, and  have a few more years left between us and formal retirement.  We've used IRAs,Roth IRAs and an HSA, and Mike is vested in RR retirement, since he put in over 20 years on the train. 

Of course, I have some Social Security coming, or may elect Mike's RRR spousal bebefits for myself, but I do not consider that a sure thing. 

Some good stands of growing timber here, although that can be a volatile market, so we will treat that as icing on the cake in years to come.  Residential rental properties do not earn all that much, but a bit.  Hog business is good now, and with facilities in decent shape, we do not see problems with that continuing. 

iI will be honest: other than the above, I have not paid enough attention to putting aside for retirement.  We've saved some money over the years, but we are 56, and with a 10-12 year probable working lifetime ahead, will need to focus harder now on sheltering some additional funds for our Golden Years. 

Need your best input on qualified retirement plans for the self-employed. 

Have to sit with CPA soon  on this question, but would like some farmer perspective on the problem.  What retirement tools do you recommend and why? 

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31 Replies
Senior Contributor

Re: Retirement plans

I can't offer much help.  One thing to keep in mind is that IRAs are useful for tax planning in the present, but imply an intent to withdraw the money when the income will be reduced and the tax bracket thus lower.  As I get closer to retirement, I'm not so sure that always holds true.  My income after farming may be about as much as it is now.  You'll have to make your own assumptions to see if IRAs really help reduce taxes all that much.

 

If one is going to consider long term care insurance, I've heard it's better to start looking at it sooner rather than later.  I have no personal experience in that.

 

Are you ever going to really retire?  I don't know if I will actually retire, even if I quit working the farm.

 

 

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Advisor

Re: Retirement plans

I am okay with Roths, and we've converted the traditional ones to Roths now.  I am trying to figure out if there is a Keough or Simple plan, perhaps, that will meet our needs for the next decade or so... 

I understand the LTC sales pitch, but I think it is a scam in many ways...let's just say I do not trust insurance companies to be there to pay out.  Perhaps that is naive, or jaded, but I have no faith that the likes of the companies that almost bankrupted this country two years ago would do anything honorable like pay us what they will owe us if it gets to costing them too much. 

It is one part of risk management that I simply do not buy into. I spent way too much time visiting my grandfather in a nursing home as a child...I'd rathertake a long walk on a short pier. 

That is a large part of the driving force of my decision to attend nursing school, to help avoid the need for anyone else to render us skilled care for as long as possible.   None of our parents have needed LTC.  Mike's mom is 96, still going strong. 

We will probably always work on the farm, but at some point, you have to pass the bulk of the work and a comensurate portion of the reward to the next generation.  I'd just like to find a nice way to expand our nestegg a bit more while we can. 

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Senior Advisor

Re: Retirement plans

Good observation Jim. In this case the tax avoidance is merely tax postponement and sometimes your income is higher at retirement age than when you make the contributions.

 

Due to poor returns on my IRA I cashed it all in a bought land.  I wonder how many farmers invested in IRAs for tax avoidance reasons and diminished their own working capital. I know it was easier accumulating downstroke money for real estate after I cashed in the IRA. 

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Senior Advisor

Re: Retirement plans

Pretty tough decision to find a good vehicle for investment at this time. I have a little money at this time and there are few no risk options out there. 

 

I am an advocate for nursing home insurance. Nothing can gobble up assets quicker than long term care. My son in laws grandparents were both in LTC at the same time. $10 k per month for the two of them. My mother is now 95 and has been in forever a decade. She has insurance and rent proceeds from a small farm.

 

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Advisor

Re: Retirement plans

Warren Buffet, the master of investing says to invest in what you know.  Shortly I will be 591/2 and I plan on pulling funds from retirement vehicles and buying another farm.  I made and lost good money in the 90's in stocks when you could do the "dartboard" method of stock picking.  Wall street is just too risky for me.  The boss here says we need to look at LTC insurance before making more large purchases.  A friend and landlord passed away this year.  The nursing home was 8K a month.  I would think an estate planning lawyer would be more helpful than a CPA.  Or maybe, meet with both at the same time.   Late thought:  Goldman sachs bought a computer system that picks up electroic trades going into the NYSE and can make split second counter trades.  How can the average Joe or Kay compete with that?

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Senior Contributor

Re: Retirement plans

LTC is a mixed bag.  A landlord did not have it for himself, due to prior health problems.  His wife did, and it paid out fairly well, at least it took a chunk of the monthly costs, however, it never took care of everything.  I am in your camp when you are suspicious of the reliability and character of LTC companies.

 

Rather than invest more in off farm funds, would you consider gifting assets to children for estate purposes but keep a lifetime hold on a share of the income?  Surely, with the mix of businesses you have would indicate the kids are productive and would not suffer from that kind of arrangement.  To me, land and ag returns are better resources to rely on than the stock market which has not historically been superior to land investments.

 

Also, keep in mind a recent survey that suggests baby boomers begin retiring on Jan. 1st and will be retiring for the next decade or so.  59 percent indicate they are willing to look at pushing the retirement age up, rather than face drastic cuts in medicare support. 

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fanney p
Senior Reader

Re: Retirement plans

Nursing home insurance from a reputable Insurance agent and company is  to me  the same an investment. I have seen my stepdad's  farm that he  had to sell to pay for his nursing home care  completely used up,  due to  nursing home monthly bills. .  

 

We took our first long-term  care policy out when we were younger and the premiums reflect  the age that we bought the policy, then later years  we added  additional  guarantee amount of dollars per day, the premium for the  second policy costs per month nearly as much as our first policy that we invested in, because we were  older when buying the second smaller policy.  The younger we were the cheaper the premiums remain.  Taking out a nursing home policy to me  is  an investment, and  it could save your farm  or any other  assets  that you may have.  Our premiums never go up-- probably that option is a thing of the past.  I am not saying we will never have to pay out of the pocket for nursing home care, but our guarantee o $'1s   per day will sure help out when paying the homes.  If you are lucky enough to never  have the need to pay for nursing or rehab facilities, you at least have some peace of mind.

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Highlighted
Veteran Advisor

Re: Retirement plans

Granddad said after the 30's he wouldn't invest in anything over 20 miles from home---he lived 160 miles from Buffet same as myself which has little effect on me or my $$$ security --seems to me their both right--protect yourself and hang around what one knows best ---some of the highest priced advice doesn't guarantee any return--read the disclaimer and it will scare the heck out of you ! !   He went from 0 to 640 acres from 1930 to 1997 and split it between 4 children----his 20k in stocks was worth about 25k after 17 years???? Youdo the math---

Advisor

Re: Retirement plans

Yes, you know how it is going to someone elses playground!

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