How Many Retirement Plans Does Our Farm Need to Fund?

Successful Farming‘s ‘Can Their Problem be Solved?’ advice column from farm financial adviser Myron Friesen and the question of planning for your retirement, but not your children’s.

Problem:

My wife and I have worked our tails off all of our lives. We have made it through some miserable times with weather, machinery, dust, and manure, not to mention the financial misery that brought us to our knees on several occasions when we thought we might lose everything. It’s kind of hard to imagine what we have, knowing what it took to get here.

Here’s our dilemma: The farm is our 401(k). We have enough for ourselves, but that cannot be said for our children. One has been farming with us and mostly understands. Another is doing pretty well financially off the farm. The other two have always struggled financially. The problem is, they all think they are part of our retirement plan. Not all of our kids are acquiring income, producing assets, or saving any money at all. Plus, when some of them face a little financial hardship, they “hint” to us they could use some money. 

We did not have anyone to ask for help, and that made us fight harder for what we have. Recently, a couple of them boldly told us they are depending on the inheritance they receive from us for their entire retirement plan. How many retirement plans does our farm need to fund?

– From G.K.

Solutions:

First, G.K., congratulations on surviving the farming challenge. Day by day, fewer members of the next generation understand what you just said. The resolve of you and your wife standing together and fighting for the farm through some extreme challenges is nothing short of impressive.

Now, to your problem.

Simply put, in one word — no. You don’t owe it to them to fund their full retirement plan. The challenge is balancing different issues, including the following:

1. What do you and your wife need? You don’t need to cut corners on your living or vacations while your children fail to save money.

2. What do you and your wife want? You should do what you want without feeling guilty. If you have extra, devise a plan to distribute that, now or later.

3. What do your children really need vs. want? Parents like to take care of their children, but just because kids want a new vehicle, house addition, or a vacation doesn’t mean that’s something they need; that’s something they want.

4. Do you feel good about giving something to them? That’s usually a pretty good test. If you don’t feel good about it, why are you giving it?

5. Will what you give them reward irresponsibility or bad behavior? That is not advisable, and giving them more will not change their behavior.

6. Don’t lead them on when they say they expect a full retirement plan. This may mean having to have a difficult conversation, but it’s better to get things out in the open.

7. If they’re expecting all of this from you for their retirement, what are they going to do for their children? Ask them that question. Maybe “generation skip” the asset ownership to your grandchildren, with your children getting the income during their lifetime. That would extend the “retirement plan” but has its own concerns.

8. If your non-farming children believe your farm is their golden goose, how will they treat your farming heir? Protect your farming child from being treated like his siblings’ personal banker.

9. Some retirement plans have a matching feature from the employer. Have they saved as much themselves as they will receive from you? 

G.K., I can tell you this: Some estate distribution plans just turn my stomach. Sometimes, I see enormous sums of assets and cash going to people just waiting for assets to fall into their laps while doing nothing to earn it.

Final thought: What is their fair share of what someone else worked for? You should not feel obligated to fund everyone’s full retirement plan.