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Managing for Today and Tomorrow. Retirement Planning Part Two Strategies for Reaching Retirement Goals. Assess Retirement Readiness Options and Strategies. 1. Analyze current and future living expenses

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managing for today and tomorrow
Managing for Today and Tomorrow

Retirement Planning

Part Two

Strategies for Reaching Retirement Goals

assess retirement readiness options and strategies
Assess Retirement Readiness Options and Strategies

1. Analyze current and future living expenses

2. Consider financial reliance on income streams from or sale of the farm business assets

3. Develop next financial management steps for a retirement plan


Ten Essential Steps to

Financial Wellness

1. Live beneath your means.

2. Pay off your credit cards.

3. Pay yourself first.

4. Save 6 months living expenses.

5. Make a will.

6. Seek wise counsel.

7. Fund a retirement savings plans.

8. Plan major expenses.

9. Educate yourself.

10. Review progress.


Step 7 Enjoy prosperity as you define It!


Priorities for Building Wealth

Step 6 Retire low-interest debt.

Step 5 If applicable, consider savings plans for education such as Coverdell or 529 Savings Plans, Coverdell, etc. for children/grandchildren.

Step 4 Contribute to retirement savings at a level that represents 10-15% of household income. Employer plans, ROTH, SEP, etc.

Step 3 Revisit the emergency fund, building it to an amount equal to 6-12 months worth of living expenses.

Step 2 Pay off high-interest rate (credit card type) debt, using the “debt snowball” (paying off smallest balance account first) or concentrating on the highest rate debt first, whichever provides the greatest emotional motivation.

Step 1 Build a nominal emergency savings fund - $1,000 to $3,000

employee benefit research institute survey
Employee Benefit Research Institute Survey
  • 4 out of 10 workers say they saved nothing whatsoever for the future.
  • 4 out of 10 people admit they never took steps to calculate the actual cost of a comfortable retirement, their “Number.”
  • Of those who calculated their Number, 1 out of 3 doesn’t remember what those calculations revealed.
  • 45% saved less than $25K for retirement.
  • Only 18% saved more than $100K in reserves for retirement.
assessing current and future living expenses
Assessing Current and Future Living Expenses
  • Work through Retirement Needs Worksheet.
  • Incorporate your desired retirement lifestyle into your projections.
    • General rule is 75 – 80% of pre-retirement income will be needed.
    • However, that does not factor in your individual preferences for how you’d like to spend retirement. You may find that you need close to 100% of pre-retirement income to do the things on your bucket list.
assess sources of retirement income
Assess Sources of Retirement Income
  • Work through Retirement Planning Asset Worksheet.
    • OR complete the Retirement Income Calculator.
    • OR complete the 5 questions in the Assessing Retirement Readiness My Plan Snapshot.
  • Consider earned Social Security benefits.
  • Ongoing Farm/Ranch related income that will be generated through cash/share rents and asset sales of resources no longer needed for your desired role in retirement.
  • Examine how much income can be generated and withdrawn from your retirement savings.
    • General rule of thumb is 4% withdrawal rate.
    • Look at the Retirement Nest Egg Calculator to see how alternative withdrawal rates impact the likelihood you’ll outlive your money.

Estimate life expectancy and assess when to begin drawing benefits.

Estimate social security benefits earned.

retirement needs calculators
Retirement Needs Calculators
  • T. Rowe Price's Retirement Income Calculator:

  • Fidelity's My Plan Snapshot: 5 Questions to Assess Retirement Readiness:
  • Vanguard's Nest Egg Calculator:

  • Fidelity's Retirement Income Planner:

determine financial reliance on farm business as source of income generation
Determine Financial Reliance on Farm Business as Source of Income Generation
  • Determine what role you want to continue to play in retirement as it relates to the farm business.
    • Do you prefer the stability of cash rents or do you prefer the added risks/rewards that may come from share leases?
  • Keep in mind that if the focus is on income-generating capabilities, equity acquired over time can only be converted into income by renting or selling the asset.
    • Closely consider the farm/ranch assets and decide whether renting or selling best fits your required income-generating needs with other motivations that might exist (semi-retirement, passing the farm to heirs, etc.).
defining your own retirement number
Defining your own Retirement “Number”
  • Assuming a 4% drawdown, every $100,000 in retirement savings will provide $4,000 per year during retirement.
  • $1 million provides $40K per year; $1.5 million - $60K
  • Assets generating post-retirement income or other benefit programs should be factored into your calculation. Consider a part-time, post-retirement job.
    • $100 per month is equivalent to $30K in retirement savings.
    • Minimum wage job, 20 hrs/wk– 50 wks/yr. – makes up for a $150K retirement savings deficiency.
retirement savings plan alternatives
Retirement Savings Plan Alternatives
  • Thrift Savings Plan, 401(k), 403(b) etc. – pre-tax contribution, tax-deferred growth, may have “matching” contributions.
  • ROTH IRA – after-tax contributions, tax-free growth.
  • Traditional, Deductible IRA – deductible contributions, tax-deferred growth.
  • Traditional, Nondeductible IRA – tax-deferred growth.
  • SEP, SIMPLE IRAs – tax deductible contributions, tax- deferred growth.
  • Taxable Investment Account – long-term capital gains and dividends get preferred tax treatment, no restrictions.
retirement savings mistakes
Retirement Savings Mistakes
  • Choosing not to participate in any savings program.
  • Improper asset allocation, the guideline for retirement: 100 - Age = % Stock Allocation.
  • Improper use of “dollar cost averaging” with monthly contributions.
  • Failure to periodically rebalance.
  • Incurring penalties, early/late


  • Failure to keep beneficiary

info updated.

early savers 30 asset class categories
Early Savers (30) – Asset Class Categories
  • U.S. Equity – 40%
  • International Equity – 20%
  • Real Estate – 10%
  • Aggregate Bond – 30%

Retirement Savings Allocation Guidelines

mid life savers 45 asset class categories
Mid-Life Savers (45) – Asset Class Categories
  • US Equity – 30%
  • International Equity – 15%
  • Real Estate – 10%
  • Aggregate Bond – 45%

Retirement Savings Allocation Guidelines

pre retirees and active retirees 50 asset class categories
Pre-Retirees and Active Retirees (50) – Asset Class Categories
  • US Equity – 35%
  • International Equity – 10%
  • Real Estate – 5%
  • Aggregate Bond – 35%
  • US Treasuries – 15%

Retirement Savings Allocation Guidelines

mature retirees 65 asset class categories
Mature Retirees (65) – Asset Class Categories
  • US Equity – 25%
  • International Equity – 10%
  • Real Estate – 5%
  • Aggregate Bond – 35%
  • US Treasuries – 25%

Retirement Savings Allocation Guidelines

develop next steps actions for a retirement plan that satisfies your goals
Develop Next Steps/Actions for a Retirement Plan That Satisfies Your Goals

1) Estimate living costs using the sheet on pages 251 and 253

2) After calculating annual costs, schedule the big ticket items to see when the associated costs will be incurred


Develop Next Steps/Actions for a Retirement Plan That Satisfies Your Goals

3) Determine farm and non-farm assets to be used to

  • generate revenue - land, annuities, bonds, dividend reliable stocks
  • be a source of income through draw down - depreciable assets and off farm investments
  • be protected and sold as a last resort - home farm and legacy personal property