When many people think of retirement plans, they think of a variety of IRAs, 401ks or pension plans. Usually, they are thinking of a retirement plan for themselves.
If you are not on the farm, hopefully people look at what they are setting aside from each paycheck for their own retirement planning. They have likely looked at some type of calculator to determine what they will have based on their current age, how much they are saving, and when they plan to retire.
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On the other hand, for farm families, retirement planning is usually related to the income that their farm generates. Their retirement plan could be a combination of land rent, machinery leases or sales, plus the last year of crop sales. With some strategies, the combination of the income from those assets becomes a farmer’s retirement plan.
At this point, I probably haven’t explained anything new to you, however I am starting to observe that more off-farm heirs are viewing the farm as major part or all part of their retirement plan.
They are saving little, if any, money on their own because they are spending everything they earn as they go. Their expectation is that their “entitlement” from their parents is not just their parents’ retirement plan but also their retirement plan. The translation is that apparently, they believe that dad’s and mom’s previous sacrifices are not only supposed to fund their own retirement, but also the retirement plans for three, four or five of their children. What are people thinking? Is that a sustainable situation?
Two specific situations come to my mind. One of them was a 38-year-old grandchild who called me after he had been made aware that I had done the planning for his grandmother. The grandchild, who I did not know and had never met, randomly called me and wanted to know how much he would be receiving from his grandmother and when he would be receiving it. He was wondering specifically if he needed to save anything in his own retirement plan, and, even more specifically, if he should be looking for a new job since he was “in between jobs.” He knew that his grandmother’s health was not that good and thought maybe he wouldn’t even have to get a new job based on what he would receive from his grandmother. What? What? What? Needless to say, I shared nothing with him because that is confidential information. However I was in shock and irritated with him thinking that someone that young would even have the guts to ask or think that.
The second and more common situation is when a farm couple lived beyond their life expectancy, and as a result, their children were over 60 when their parents passed away. Several off-farm children had received a very large inheritance but were unhappy with the amount and commented this would be “all they have” because they had never saved for their own retirement. Hmm, they worked off the farm but they want full benefits of the farm retirement plan.
The point is that it is a challenge for farm parents to try to figure out the most appropriate way to distribute farm assets with inflated values. For some, the inheritance being passed on is not just looked at as an “add on” gift, but as a “sole” retirement plan! Is it really the responsibility for the older generation of farm parents — and the farm heir — to provide a full retirement plan for all of their children or siblings?
Amazingly in some situations, that can be the case, but that is not the intent, nor is it sustainable. The irony is that when the generation who saved nothing and expects everything from their parents then gets the assets, they turn around and spend it all and leave zero for their children. This selfish attitude is completely contradicting to me.
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Of course, this is not a one-size-fits-all all problem or attitude, but when I see it, it is sickening and irritating. How will your kids view what you give to them? Will they see it as the gift that it is and appreciate whatever they get, or are they expecting that you fully fund their retirement plan?
Myron Friesen is the co-owner of Farm Financial Strategies Inc. in Osage, Iowa. He can be contacted at 866-524-3636 or friesen@farmestate.com.