The way to retire
Especially on the farm, planning for a happy retirement really does a make a difference
Monday, January 9, 2023

Section: Wills, Estates, Wealth Transfer

The right team of advisors

Retirement planning also requires the right team of advisors, including an accountant to help manage tax liabilities and a certified financial planner to help determine how much you’ll need to manage income streams and to leverage tools like insurance.
By Jeanine Moyer, Country Guide, Dec. 27, 2022

Here’s an unpopular question. When are you going to retire from the farm? This is often a taboo topic because it’s hard to know when you’ll be ready, and just as hard, if not harder, to know what it means to retire.

To a farmer, retirement could read like a death sentence. Or does it mean continuing to work 60-hour weeks during the growing season and travelling south for the winter.

If you’re thinking about retirement, or if maybe someone else is suggesting you should, where do you start?

It’s likely not as easy as it was a generation ago, and it’s certainly more complicated.

“The first question I ask farmers is: ‘What are you retiring to’?” says David Harris, certified financial planner with Green Private Wealth and Harbourfront Wealth Management. “You never really retire from the farm, so the focus needs to be on understanding, how you want to spend your time, and in some cases, who you want to spend your time with.”

Harris, based in Woodstock, Ont., has a strong track record of helping farmers through the financial side of the retirement process. Yet while financial security is an important part of the planning process, he notes that building a plan also requires lifestyle considerations.

In his experience, Harris says he rarely sees farmers fully retire because most don’t want to leave the farming life. What they often want is more flexibility to do things like step back from the day-to-day work, maybe to travel.

How do you know you’re ready to retire? Danielle Wildfong, of DMW Consulting, a family business advisor in Saskatoon, says knowing whether you are ready to retire is harder for entrepreneurs and farmers than any other profession.

“If you’re feeling pushed out rather than ready to make the decision on your own, that’s a clear sign there’s a lack of communication and trust within the enterprise,” says Wildfong.

One of the best self-indicators that the answer may be “Yes, I guess I am ready” is when you find yourself wanting to step back from controlling the biggest decisions on the farm. “You may never be prepared to fully step away from the farm, but a defining retirement decision can start by taking a hands-off approach,” Wildfong says.

A farmer herself, Wildfong says what’s most difficult for farmers is that they often don’t know how to identify themselves without their connection to the land or their family farm.

“The ability to separate one’s feelings from their worth or farming legacy is a challenge,” says Wildfong. “That’s when I remind farmers that you can retire from a lot of things, but you never retire from your purpose.” 

Still, you do have to ask yourself how you want to fill your days, and what will be fulfilling for you.

Harris says some farmers want to continue to be useful to their family and farm, but in a different way, like using their farming and life experiences in an advisory role to help their children be successful. “And some farmers just want to retire to a tractor cab and spend their time helping in the fields,” he says.

Wildfong reminds her clients that if they are driven to work, as most farmers are, that doesn’t mean it has to be the same type of work or the same number of hours. She encourages farmers to consider applying their identified purpose or interests to other opportunities outside the farm, like helping a neighbouring farmer with seasonal work or volunteering their financial literacy skills to a community group.

“Personal growth never retires either,” notes Wildfong, who also recommends farmers hone their skills, learn something new or take up a new hobby to expand their purpose and identities.

Of course, there’s another cluster of questions too. How much money do you need to retire? Understanding how you want to spend your time and your new lifestyle requirements is essential to determining what you’ll need to live on. And that involves financial planning.

Advisor David Harris recommends farmers begin planning at least 10 years ahead of retirement, starting by separating some farm profits into personal accounts, like RRSPs, Tax Free Savings Accounts and investments. He says allocating retirement funds early and at a lower tax rate allows farmers to build their own non-farm assets so they don’t have to rely on the farm for 100 per cent of their retirement income.

Retirement planning also requires the right team of advisors, including an accountant to help manage tax liabilities and a certified financial planner to help determine how much you’ll need to manage income streams and to leverage tools like insurance.

Advisors say that navigating tax sheltering tools like life insurance can be confusing, and that’s where professionals can really help. Understanding sources of net income in the retirement stage, like Old Age Security and Canada Pension Plan, can also be baffling, especially if retirees continue to draw income from the farm or take a new job.

Harris also reminds farmers that managing risks with proper health, disability and critical illness insurance is another important consideration, even in retirement.

Plus, once you know how much income you’ll need, it’s essential to take the next step, asking how much of that income will have to come from the farm.

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