Retirement information for ranchers |

Retirement information for ranchers

According to the latest USDA Census of Agriculture, the average age of the U.S. rancher is 58 and climbing. As this generation of ranchers age, plans for retirement, transition and succession are of top priority.

Richelle Hofer, an associate with Cornerstone Financial Services in Sioux Falls, SD, spoke at the 2011 South Dakota State Fair to a crowd of ranchers, and she offered advice on retirement basics.

“There are three important questions every person thinking about retirement must ask themselves,” said Hofer. “First, the most important step in retirement is what kind of retirement you want. This answer is different for everyone. Some people want to travel; others want to spend time to enjoy their grandchildren. What are your goals? What will fulfill you in retirement?”

The second question, Hofer explained, is simple. What age do you want to retire?

“Some folks want to retire early when considering history of family illnesses,” she said. “They want to enjoy life before it’s too late. However, some want to work until the day they die; a lot of ranchers are this way. A happy retirement is what we all work for and strive for, but there are many things to plan and consider to make this happen.”

The third question is, how long do you plan on being in retirement?

“People are living longer, and that retirement savings dwindles a lot quicker these days,” Hofer explained. “An important step is estimating your expenses. Track your spending for a year, and take a look at your month-by-month expenses and income. Obviously expenses change, but this gives people a good idea of what it will cost for them to live down the road.”

According to Hofer, Americans are living longer, healthier lives than ever before, retiring earlier and doing more in retirement years. Many look at retirement as a reward for a lifetime of hard work, an opportunity to spend time with loved ones, pursue hobbies and travel. Others will start new careers or even go back to school.

“The one thing we all have in common is that we all want to be financially independent,” Hofer said. “A realistic retirement strategy can make this a reality. Because retirement may be many years away, it’s easy to put off planning for it. The longer you wait, the harder it is to make up the difference later. The sooner you start, the more time your investments have to grow, and a few years can make a big difference in how much you’ll accumulate.”

Here are a few pieces of advice from Hofer’s presentation:

• Start planning and investing now. Investing just $3,000 annually starting at age 20, assuming 6 percent annual growth, reinvestment of all earnings and no tax, the nugget could grow to nearly $700,000 by age 70.

• Understand that the average American lives 18.6 years longer than previous generations, so it makes sense to plan for a retirement period that lasts 25 years or more.

• Anticipate expenses. Make considerations for food, clothing, housing, utilities, transportation, insurance, health-care costs, taxes, debts, education, gifts, savings and investments, recreation and ranch-transition legal fees and costs.

“Traditionally, retirement income has been described as a three-legged stool comprised of Social Security retirement benefits, traditional employer pension income and income savings and investments,” Hofer explained.

“A few things to consider are 401(k) plans and IRAs,” she continued. “The 401(k) plan has become one of the most popular types of employer-sponsored retirement plans. If you’re age 50 or older, you can make an additional catch-up contribution of $5,500. An individual retirement arrangement (IRA) is a personal savings vehicle that offers specific tax benefits. There are two types: traditional and Roth. Both allow you to contribute up to $5,000 each year in 2011 and individuals age 50 or older can make additional $1,000 contributions.”

Finally, Hofer discussed the importance of annuities.

“Does everyone know what an annuity is?” she asked. “An annuity is a contract between you and an insurance company. You can invest money in a lump sum or a series of payments with a life insurance company, and in exchange, the insurance company promises to make payments to you or to a named beneficiary in the future. Earnings in an annuity grow tax deferred. One very important thing is to make sure your will and beneficiary list are kept updated at all times.”

Hofer presented on behalf of Cornerstone Financial Services and Gordon Wollmon, MS-Financial Planning. For more retirement advice, visit

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