Rutgers New Jersey Agricultural Experiment Station [Later Life Farming]

Module 2a: Are You Ready to Retire?

What exactly is your definition of retirement? Studies have found that retirement plans are often very different for farm families than for those who work for an employer. Two sets of focus groups conducted with farmers during the summer of 2008 confirmed that many farmers don't see themselves retiring in the traditional sense (e.g., ending work to live a life of leisure). Rather, farming is viewed as a lifestyle as well as an occupation.

One farmer noted "retiring means selling half your herd." Another said "I just think of scaling back, not ever really stopping what I'm doing." A third farmer stated "There is no such thing as retirement for farmers. Semi-retirement means he'll stop renting extra land. He will farm until he drops." Fortunately, improved health and longevity, and technological advances in farm equipment enable many farmers to perform the physical tasks necessary to operate a farm much longer than was true for previous generations.

Many non-farmers also express a desire to continue working well into later life. For some, the reason is financial (e.g., lack of savings or severe stock market declines that reduce the size of retirement funds) while, for others, there is a desire for the daily structure, sense or purpose, and/or social interaction provided through employment. Financial planners also report seeing clients who continue to work primarily because they haven't figured out what they'd like to do next. Regardless of the reason, continuing to work provides many financial advantages including the opportunity to postpone or reduce withdrawals from retirement assets and to increase savings and Social Security benefits. For those with off-farm income, work can provide continued access to employer benefits.

Retirement plans aren't one-size-fits-all, and there is no "right" time to retire, if ever. If working on a farm (or anywhere else) makes you happy, as well as more financially secure, there is absolutely no reason, other than perhaps poor health, to stop. Several focus group members talked about farming being "in their blood." One noted "retirement for me is being able to continue doing exactly what I'm doing now and, most importantly, enjoy it."

Financial planners often stress the financial benefits of working longer, including a reduction in the number of years that retirement savings need to last. Another benefit is that continued income can reduce the amount farmers need to save. For example, $20,000 of annual income from work is the equivalent of withdrawing 4% from a $500,000 nest egg.

When people don't have the time to save large sums, working longer can provide a nice "Plan B." In addition, working in later life is increasingly viewed as something people want to do. For example, AARP found that, like farmers, a large majority of baby boomers (over 3 in 4) say they expect to work, at least part-time, during retirement.

The only caution about working in later life is to be realistic about how long you will be physically able to farm when making retirement savings calculations. The activities that someone is able to do at age 85 are likely to be very different from what they can do at age 65 or 70. In addition, the annual Retirement Confidence Survey from the Employee Benefit Research Institute consistently shows a disconnect between the percentage of workers who say they plan to work in retirement and the percentage of current retirees who actually do. For many, poor health is the reason they stop working.

So, are you ready to retire? The choice is up to you. If you decide to keep working, at least for a while, you will have lots of company. During the past decade, the typical age of retirement by U.S. workers increased two years from 60 to 62 and predictions are for this trend to continue. The financial benefits of working longer are considerable. According to a study by the investment company T. Rowe Price, every year that you work past age 62 can increase your expected retirement income from Social Security and investments by at least 6.4%. For many people, work is also a big source of satisfaction. As one farmer in a focus group stated "Farming kind of becomes a lifestyle. It puts meaning in your day."

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