In agriculture, retirement can mean something quite different compared with other U.S. households.
Often, our parents and senior relatives on the farm or ranch are far from “retired,” and, in fact, remain active participants in daily operations and decisions.
Financially, retirement in agriculture can be different, too. Compared to the general population, farmers and ranchers have a distinctive combination of assets, income sources, and saving habits, with large percentages of their financial portfolios intertwined in the business equity, all which must be carefully considered when planning for intergenerational transfers, and while generating and maintaining retirement income.
As for actual savings accounts, while 60 percent of all households nationwide participate in some type of a retirement account, just 40 percent of eligible farm households do. In fact, only 7 percent of farmers and ranchers contribute to the types of Individual Retirement Accounts (IRA) that can provide helpful tax advantages, with just 3 percent of the general population having an IRA.
That’s why the U.S. Department of the Treasury recently launched a new tool, known as myRA, for anyone interested in a simple, safe, understandable, and affordable method to start saving for retirement.
It costs nothing to open an account, there are no fees, and contributions are invested in a U.S. Treasury security that safely earns interest. You can contribute as little as a few dollars each month, or even create automatic contributions from your bank account or paycheck, up to $5,500 per year. When you’re ready, you can roll over these savings into a private sector Roth IRA at any time to continue growing your savings.
The myRA is not intended to replace existing employer-sponsored retirement plans, such as a 401(k) plan, because those accounts may offer special incentives like an employer matching payment. But if you don’t have access to a retirement savings plan, or excessive fees and complicated investment options are daunting, or perhaps you would like the younger members of your family to have better retirement awareness, then the U.S. Treasury’s myRA savings account might be an option for you?
Even if your future goal is to receive on-farm income, inheritance, or varying degrees of off-farm income such as social security, rental income, or veterans benefits, a myRA account still may be a helpful addition to your portfolio. Plus it is never too early to start saving: if you are 18 or older, not a full time student, and not a dependent, you are eligible.
So as the holidays approach, and the year nears its end, perhaps a new myRA could be a great way to take that first step towards building, or complementing, that retirement nest egg. To learn more about the program and its beneficial tax attributes, visit myRA.gov.