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Advisor

Taxes, bills, and retirement...

Just heard from our CPA, and made the final decision of when to take the hit for rolling over traditional IRAs into Roths last year.  Can live with the tax load for one more year, and keep going. 

She will e-mail the vouchers and e-file for us, which saves me a day in the road and $100 in mileage on Monday.  They will Fed Ex the paper returns for us to sign and send, our file copies, and return my binder that I carry for our annual meeting,  with all the different entities and their 1099s and such in it. 

Tax time makes me kick off a round of inquiries about cutting bills each year.  I ask Mike to look at what's costing us and why, and we figure out a few places we can save a bit.  He located a couple of small electric space heaters and a tractor block heater that were jacking up one electric bill unnecessarily.  Just things he plugs in when it turns cold, and then forgets about when we get above freezing.  We need to be more vigilant about things like that. 

I sat down and called the phone company yesterday, got some better rates on one bill, which will save us about $300 a year for the alarm line alone.  If you don't ask, you never get a better deal.   They are offering great package deals for DSL and DirecTV, with local and long distance use unlimited...but not here,"yet."   Maybe next year, or next decade.... 

Do any of you do routine bill reviews, or call and ask for better rates?  I haev alwasy foudn tha **bleep** saves us money, so is well worth the time it takes to ask. 

One of the books I ordered this week, and which arrived yesterday from amazon, is on retirement.  We've both been contributing since we were pups, but you never feel like it's going to be enough. 

Mike is vested in Railroad Retirement, which means we can elect that or Social Security.  I know which one pays better....  We've saved, paid off property, kept the hog facilities up so they can continue to earn, and basically feel pretty good about where we are; but, I do wonder sometimes about how things will be twenty or thirty years from now.   

As I said to the CPA on the phone just now:  In investments, the things that are seem to be doing okay are being offset a lot by the things that are not.  We've diversified a bit this past year, and have some segments that are returning relatively well, but money in the bank at current rates of interest on savings is losing ground hard against inflation right now. 

 

I do not want to put everything at risk in the stock market, for sure.  Once burned....

There are some decent timber stands on two of the farms.  Trees have historically paid better than money in the bank, and are taxed as capital gains.   I hope they will provide a bonus for our children, if we don't need them. 

I could calculate a lot of improved net worth due to farmland prices going up, but capitalizing  a real property  asset assumes liquidating land, which we hope not to have to do.  We plan to leave the kids the farms, but Mike says it's all for sale if it's needed to provide for our welfare and care as we age, and I cannot disagree with that. 

Maybe being so sick lately has made me feel vulnerable.  Doing the annual reconciliation, on top of all the inflationary news of late, is probably making me feel even worse.  

Am I the only one who feels/hates this aspect of tax season? 

 

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Senior Contributor

Re: Taxes, bills, and retirement...

This is the time of the year when we get to see the totals of all the bills and income at one time. For some the amounts can be overwhelming. Some people can't farm because they can't grasp that the amount of money that will be used to put a crop in the ground is more than their house value in town. It is really all relative. We farmers and most people in business work with bigger numbers than the super majority of the citizens in this country. Can we handle the stress that comes with larger numbers? With the uncertainty of the economy, everyone with a sizeable investment is on edge.

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Advisor

Re: Taxes, bills, and retirement...

You are SO right.  I hadn't really thought of it that way before, but I handle more money in a week now than I used to earn in a year of teaching school, and that seemed like a lot to me then!

 

I think I worry, too, when I see the sums it takes for our kids to get going in life, to have traction.  When a kid has to carry hundreds of thousands if dollars in insurance coverage to run a small business, when a decent vehicle costs as much or more than our first 3-bedroom brick house, when the monthly  health insurance premium for one healthy youg adult is higher than our house payment used to be, it is daunting. 

Mike laughed one day not long ago, when he mentioned that he started on the railroad for a little over four bucks an hour.  That was such 'big money,' he felt it was sufficient for us to get married and I agreed with him. 

We do not lay out the large sums to plant a crop and tend it every year, but we did commit to what was to us a huge debt at once to buy and build this place in 1994.  I remember teh first lot of baby pigs that walked off the truck, I turned th Mike and said, "If we think these tiny babies will carry off this much debt, we are nuts."  But, if you raise enough of them they do. 

We've seen and paid interest rates triple of what they are today, though, so the present is not worse in all ways for people in business.  Fot farmers in particular, the land we own has grown so much in value, we are richer than our wildest dreams now, aren't we? 

I had an article around the house once that showed the net worth of Americans and its geographic distribution.  I'd like to see an updated version.  Economic sand finance are intriguing subjects. 

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Senior Contributor

Re: Taxes, bills, and retirement...

Real estate owners can only get their present value of the property if it is sold. Otherwise, we pay taxes and maintain improvements based on the current prices. Is that what we call the price of doing what we want and getting what we've gotten? American citizens seem to complain about taxes, yet we expect so much from the government too. The nation has gotten used to having the cake and eating it too.

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Re: Taxes, bills, and retirement...

Hate, hate, hate, it. I heard from my CPA yesterday. Not good at all. I was so busy with my Dad I did not sell beans as I should have. I carried them over and forgot to split the income on 2 years. Yike, in 35 years of farming I really screwed up. I just had so much on my mind, and was not thinking. Anyway, I will pay attention this year. It really made me feel good when my CPA said, If he had to farm, he would jump off the highest mountain. THis CPA has been doing my taxes for 35 years, and is with a group that specialize in farmers. He said he had seen so many people work so hard, have so many assets, but no cash. Then when they die, taxes get them again. I guess the world really has no clue what we sacrifice, but in the end its the best way to live.

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Re: Taxes, bills, and retirement...

We chatted with an old farmer in his 80's who sold farmland he'd bought YEARS ago to the ethanol plant.  He said by the time he paid the capital gains tax on it, he was practically back to his original price.  I'm sure he exagerated but---.  He was kind of pushed into it as they needed his parcel to make the whole thing work and there were a lot of "fish in the pond" who really wanted it to be built here.  Some of the original investors aren't even in it now though.

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Advisor

Re: Taxes, bills, and retirement...

Honestly think he's exaggerating, since he really did not want to  sell, it sounds like.  Capital gains will top out at a percentage that leaves plenty of room for return. 

Look at your own land there. If it's gone up more than 20$ in the same number of years - and I am quite certain it has - then you would come out ahead.  Midwestern farmland is reputedly rising in double digits of value every year in some places, isn't it? 

These porposals usually start with some locals involved, and rearely end with many of them still in teh thing. They get used as the politically-correct local, friendly front faces for global companies.  

 I think that it is often the case, too, that an economic development proposal will disenfranchise or displace a handful of families, in order to advance the interests of many more.  That certainly happened to my place with the mining. 

It is a shame when land and./or property rights get trampled for a bunch of strangers to get rich. 

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Re: Taxes, bills, and retirement...

It all depends on what the capital gains tax was when he sold the property. One thing is for certain, the tax rates and rules constantly are in flux.

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Re: Taxes, bills, and retirement...

Found this on capital gains...http://en.wikipedia.org/wiki/Capital_gains_tax_in_the_United_States

The most it looks like he could be paying on land held long term (more than one year) is 15%.  I am certain that if he's had it for anything over a year, it has probably multiplied itself in value several times over. 

If it is decent Midwest farmland, it's most likely appreciated that much in the past year alone. Our land assessments are 3-4 times what they were when we bought this place in the mid-1900s, and this is not prime farmland by a long shot. 

Use an example of buying for $1000 an acre, selling for $4000, which is not nealry what I am reading on Farm Business.  He'd pay on the $3000 per acre gain, at 15%, $450 per acre.  Still leaves him a net of $3550 per acre, so NOT losing any money, and not nearly the same as what he paid, either.  If this was a hundred-acre parcel, for example, his profit after taxes is well over a quarter million  dollars. 

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