John Barnard, of Statesville, is one of two appointed directors on the Carolina Farm Credit Board of Directors, and he is also a certified public accountant who has worked with numerous clients over his 40-year career. Many of his clients are from the agricultural sector and he has seen just about every scenario you can think of when it comes to the challenges farmers face in planning for retirement.
Whether you’re just starting out or need to review where you stand when it comes to retirement planning, John shares this helpful advice.
- Sooner is better. The younger you are the more time you have to accumulate and the better off you’ll be. When you start working in your early 20s, set something aside every pay day or every year.
- Use strategies that keep you on track. While farming enterprises vary and some may see a regular monthly income, others may see income over a period of a few months. The key is to set aside a percentage of your income on a regular basis. One of the most effective tools is to set up automatic drafts from your checking account into a retirement account or fund every month.
- Take advantage of any off-farm employment retirement vehicles. If you or your spouse has off-farm income with the opportunity to set aside retirement funds through an employer, tap into this valuable option. The key is to use what is available. Try to max out the retirement plan in your spouse’s or your own off-farm income. At the very least, contribute enough to get the match that some employers offer.
- Small, regular contributions add up. Get in the habit of setting aside a percentage of your income every paycheck or every month. A little bit all along is easier than doing a whole big chunk at one time. Saving $50 or $100 a paycheck is easier than putting away $1000 or $5,000 at one time at the end of the year.
- As your income increases, increase the amount you set aside. Every time you have a pay increase, automatically take part of that increase and put it toward retirement. If you set it aside before you get used to having the extra money in your pocket, you won’t miss it. Gradually increase the percentage you are setting aside until you get to the amount you are satisfied with.
- Consider useful tools. Many farmers have everything tied up in the farm and that is where retirement planning can get difficult. Your income will dictate whether some tools such as traditional and ROTH IRAs or a Simplified Employee Pension Plan (SEP) are available to you. A solo-401k, an option for small-business owners who don’t have employees, may be a consideration. Different tools may be available depending on whether you are an incorporated entity versus self-employed. Some of these tools require a profit to invest. Others can be helpful as part of a tax strategy.
- Look at your total picture. If you are married to a spouse who has off-farm income and your farm enterprise experiences a loss, you may still qualify to invest in a traditional or ROTH IRA. That’s why looking at the total income picture of your family is important.
- Form a team of helpful advisors. Planning for retirement and sifting through the many tools available is important from both an investment and a tax strategy standpoint. You need trusted professionals such as a certified public accountant, investment or financial advisor, an insurance agent, and your banker or lender. They each play important roles. When putting together a team, talk with friends, other farmers, and your Farm Credit lender about who they have found helpful. Your team should be focused on your best interests and your goals rather than on trying to sell a financial product.
In part 2 of “Never Too Early to Plan for Retirement” John Barnard, owner of John M. Barnard, CPA, PA, a certified public accounting firm in Statesville, and one of two appointed directors on the Carolina Farm Credit Board of Directors, shares more considerations including succession planning.
By Leah Chester-Davis