This is a multi column series for farmers cons ider ing ret i rement . Considerations for farmers in their mid-fifties are of utmost importance. Decisions made ahead of time can add up to hundreds of thousands of dollars on the balance sheet. Yes, really. In addition to the financial impact, relationship and family issues can have impacts that cannot be measured in financial terms.
The first decision for the retiring farmer is whether this is strictly a retirement or if they are passing on the farm. If they are bringing in another generation to run the farm, the process is much different and more elaborate than if they are selling assets, managing tax and retiring.
The retirement goals must be very clear to the incoming generation. Is the first priority to provide for the parents’ retirement at the expense of the farm? Or is setting up the next generation the priority and retirement income can be used if needed to assist in this goal? This decision can’t be taken lightly, and you will undoubtedly revisit this decision as a guide through every other step in the process.
Let’s look at Pierre Passiton as an example. Passiton is determined that his dairy operation will continue; that is the first priority. This is in contrast to Henry and Ima Workenomor. Henry and Ima have worked extremely hard all their lives on the farm, dreaming about golfing and travelling in their retirement. Their priority is bringing their retirement dreams to reality. This is not to say they are opposed to having their son farm and helping him, but not at the expense of their life-long dream. There are two very different philosophies, neither of which are wrong. The only wrong approach is one that waivers back and forth between the two, creating an environment of uncertainty in which no business planning can take place. Not having a clear priority generally results in someone either losing interest or losing their mind.
FACT-BASED DECISION MAKING
From the next generation’s perspective it seems only fair that they are allowed to make their decision regarding farming based on facts and certainties around which their opportunities may or may not exist. All too often we run into a younger generation attempting to manage risk based on the assumption that the business will have to incur significant debt to purchase family-owned assets. This results in missed opportunities for growth, unnecessary stress and an increased workload. If goals are laid out clearly in the beginning this allows for the operation to be managed as a business. The pool of equity that has been built up continues to grow and provide for generations into the future.
Sadly, if communication doesn’t take place and succeeding generations
make decisions based on the support of the previous generation which never materializes disaster strikes. Not only is there risk of financial ruin, there is the risk that family relationships are destroyed. Father is upset because the farm is lost and he blames his son. The son is upset because he spent the majority of his working life building no equity, he has no career, no pension and must start over and blames his parents. Mother is upset because family relationships are destroyed.
This is the importance of setting goals and taking the time to understand your own priorities. Taking time to do some honest soul searching when setting these goals is critical. Remember the only wrong answer regarding goals is no answer.
AndrewDeRuyckandMarkSloanemanage twofarmingoperationsinsouthern ManitobaandarepartnersinRightChoice ManagementConsulting.Withover25years ofcumulativeexperience,theyoffersupport infarmmanagement,financialmanagement, strategicplanningandmediationservices. Theycanbereachedat [email protected] and [email protected] or204-825- 7392and204-825-8443
Retirement goals must be very clear to the incoming generation