Planning to retire in the near future? Then now is a good time to evaluate your current situation and map out a plan for the future. And, with people today living longer than ever before, you want to make sure you have set aside enough funds to last your entire lifetime. That requires careful consideration of these four factors:
1. Review your personal finances.
In order to maintain the lifestyle you desire, you need to manage what you owe as well as what you own. A periodic review of your personal net worth can help keep you on sound financial footing. Review your savings, retirement plans and other investment accounts with your financial adviser to get an idea of how long your money will last or if the farm will need to be sold to fund your retirement.
Based on your circumstances, consider the following:
What are your anticipated living expenses including, fixed debts, variable debt such as credit cards, travel and entertainment?
How long do you expect to live?
Will you need additional funds to support a younger spouse?
If you are suddenly taken ill, who will handle day-to-day operations of the farm including milking the cows?
Are funds readily available and easily accessible to hire help if needed?
Or, will animals have to be sold on short notice?
Do you plan to leave an inheritance for your children, grandchildren, or make a bequest to a favorite charity?
2. Consider long-term care insurance.
If you haven’t done so yet, you might want to invest in long-term care insurance. More than 50 percent of Americans are expected to need some form of long-term care — either home care or institutional care — at some point in their lives. The average cost of nursing home care is approximately $60,000 a year, and the cost of home care can range from $50 per day to more than $200 a day. Without long-term care insurance, that cost can quickly eat up your retirement savings.
3. Plan your estate.
Careful estate planning can ensure that a good part of the wealth you have accumulated over your lifetime is protected and distributed according to your wishes. If you haven’t done so yet, take time to draw up a will, a living will, power of attorney authorizing another person to handle your farming affairs should you become incapacitated, and a health-care proxy naming someone to make health-care decisions for you should you become unable to do so. And, remember, a will should be reviewed and updated periodically.
4. Take advantage of tax breaks.
If you have invested wisely and accumulated enough funds to spare, lifetime gifts to family members or others can reduce your assets and subsequent estate tax liability. You can give gifts of up to $11,000 per person each year without incurring any gift tax or reducing your applicable exclusion amount. Spouses together may gift up to $22,000 per person each year.
Even if you have already reached retirement, it’s not too late to develop a plan to help make your funds last as long as you do. But before you take any action, discuss your financial and estate-planning objectives, concerns and fears with your family, financial advisers and attorney.
David Chlus, senior vice president of investments with Smith Barney, Inc., in Utica, N.Y., and a partner in a 90-cow dairy.