51 year old Farmer needing a spreadsheet to run scenarios.

[d3322]

I own bare farmland generating rental income
I have other income generating sources like grain bin site income, machinery sales, Roth, etc.

Are there any other Farmers who have retired early?

Is there any software, or a spreadsheet for farmers who have land payments, tractor payments, etc?

My farm is a C-corp, which adds another level of complexity to this because of the double-taxation.

I just want it to all go away, I am so sick and tired of farming and I can't wait to get out.

 

[Sunset]

Welcome !

I'm just going to jump right in so there is something to discuss, consider it approximately correct.

Of course don't know if you are married with spouse working or not. Also not sure what you mean by income generating sources.. Roth ?

Not a farmer, but like most businesses.

Calculate your net value of the property, machinery, etc (gross value - owed - sales cost) = Can I retire.

If you sold everything, and bought 50% stocks and 50% bonds, could you retire ?

At age 51, you have a long way to medicare, and SS (do you qualify for SS ? ). At your age, I'd think 3% would be a safe rate, but not the 4% you always hear. Others could chime in as maybe 2.5% is the actual safe number.

For example: $1 million would generate $30,000 for your life. So how many Millions will you need to retire ?

 

[pb4uski]

Is there really double taxation? Why wouldn't your C corporation dividends be qualified dividends and at 0% or 15%?

No software tool available that I know of, you would have to DIY in Excel but it isn't different from any other income producing property like real estate.

 

[Stormy Kromer]

I'm a 58 year old former farmer in Southern MN. I can't say I'm a retired farmer because I never really got on my feet when I started out in the 1980's.

I understand farming and farmland ownership and can listen to concerns you have in mind.

I agree with you that if you don't want to farm anymore then don't. Your heart has to be in it or its not worth it to you.

I can tell you this that now is a good time to get out of farming. Demand for land is still at a record high, both sales and cash rent. Used machinery is very valuable too. Be careful with your taxes when selling depreciated assets.

Even with lower commodity prices it seems that there are farmers with large war chests that keep demand high. If crop prices go lower this could change. Its no fun to raise crops and lose money. Ask how I know.

As for a spreadsheet, I'm not aware of one. I still use a pencil, notepad and calculator. Don't do anything without talking to your tax advisor and knowing the consequences. Since you have a C-corp you are more advanced than most farmers.

If you have land and machinery you have valuable assets. At age 51 you could pick and chose your next career, there is a severe labor shortage for any skilled worker. I stay busy working for a couple different farmers running equipment plus a side job running the office of a local body shop. I turn down more opportunities because I value my own time.

I live on my farm but no longer have the desire to run it. Good luck to you.

 

[ivinsfan]

We still farm and your opening post isn't very clear.


If you rent your land, how can you be farming it?


Can you clarify what you are actually asking? I'm happy to answer questions but I need real questions and info to proceed. For example your comment about a C corp is pretty muddled what does it actually mean. Ideally you would keep the C corp open and draw down the balance sheet. Yes if you close the C corp and it has unspent farm profits on its balance sheet, that would be income to you (in the form of dividends) as a principle of the corp. We are working on this issue at the moment.

 

[d3322]

Ivinsfan,
Let me ask a different way. I have a spreadsheet I am using but it is not detailed enough for a farmer.
The calculators and the spreadsheets that are available are geared toward traditional investments in equities, mutual funds, retirement accounts, etc. My situation is different because I have zero investments, and all my money is tied up with farmland and tractors and grain bins.
I own 570 acres that generate $177,840 rental income per year
I sub-rent another 657 acres generating $26,280 per year
I rent out my grain bins and silos for $40,000 income per year
Wages from my C-Corp are $60,000 per year
I am married, have 2 14 year olds
Other passive income from building rental income is $40,000 per year
Cash in the bank nothing is invested $602,000

Liabilities:
Farmland payments = 185,376 per year this will be only $90,000 after 2026 and zero in 2032 unless I buy another farm between now and then.
Living expense = $110,000 per year
House payment which includes horse barns, and shop is $52,000 per year
Taxes = $60,000 per year
Kid's college Roth funds $20,000 per year

My C-Corp generates $250,000 per year after tax and pays me through business expenses like meals, utilities, business attire, gasoline, vehicles, etc

C-corp owns the rolling stock like tractors, semis, and has all of the Leases to land that I currently sublease to other farmers.

Personally, we own the land, buildings, grain bins, and we own 1 SUV personally.

personal net worth is $7.7
C-corp net worth is $3.5

I have no idea if this is enough to retire. I think it might be, but I need help.

 

[ivinsfan]

These are 2 different questions..how does the C corp get rental payments from land you own personally? What's the meaning of the term subrent.. what entity makes your farmland payments..you need to find a professional to walk you through this, I'm not able to help you ..if your C corp owns land you have a problem

 

[Stormy Kromer]

Hi d3322. Thanks for the update. check your pm.

 

[HI Bill]

personal net worth is $7.7
C-corp net worth is $3.5

While I'm a lot confused by your assets, liabilities, and income, I'll focus on one #. $7.7M. If you use Firecalc (link at the bottom of this page), and input $7.7M in assets and your annual expenditures, it will give you an idea of your potential success rate if invested in the stock market. The short story is if you just put in your $7.7M, and ask it to come up with a 100% success rate for 30 years, you'd get a spending level of $276,794 annually. This doesn't include social security. However, if an asset is your primary home, it doesn't generate income, so we don't usually include it in your invested assets.

If I were you and was sick of farming, I'd be looking at selling all of the farming-related assets (keeping taxes in mind, and selling off over a number of years) and paying off your house (if you stay there). I'd invest the bulk of your earnings in something like Vanguard's VTI. You should have little to no work to do, little to no rental and income risk, and should be able to take at least 4% of your investments annually. Most here do the early retirement thing with far less assets than you have.

 

[ivinsfan]

HI Bill.....farmland is an odd duck. I've never been able to figure out the proper number for our potential SWR. (we still farm so it's not an issue at this point). Farmland is an asset that throws out steady income and generally shows good gains in value.


Say you have nice farmland that throws out 100K (minus RE taxes) income yearly. I'm referring to rental income not active farm income. Yes you can certainly sell it for a very nice number but then you are forgoing the 100K in annual income. Depending on when you bought it you might also have a huge income tax bill. so minus 100K in income, you've sold the appreciating income producing property and have a big tax bill.



My DH and I have always kind of grouped the farmland in the annuity type class income. This is when we are trying to project a SWR. So technically you don't include the actual value of the farmland in your SWR.



So in your calculations the entire value of the farmland doesn't mean anything unless you plan on selling it. Now I'm aware you didn't say to sell farmland specifically but usually it's not really the way to go.

 

[Sunset]

Just trying to clear up some confusion:

..............
Cash in the bank nothing is invested $602,000
...

I hope you have this money earning 5% and not just literally sitting in a bank account paying 0.3%
You could be earning easily 5% while having access to all the money (within a few days), not locking any up.

......
C-corp owns the rolling stock like tractors, semis, and has all of the Leases to land that I currently sublease to other farmers.
........

Just try to clear up understanding:
So your C-corp leases land from other folks, 657 acres, and then turns around and leases out that same land (sublease) for slightly higher rate and you make some $$ off it.
Plus your C-corp owns the rolling stock and leases out tractors and semis, etc..

You personally own 570 acres in your name (not the c-corp).

......
personal net worth is $7.7
C-corp net worth is $3.5
...

The C-corp net worth is from the rolling stock (tractors , semis, etc)

Seems to me, you have enough to retire, but unwinding it all will take a few years.

 

[ivinsfan]

Just trying to clear up some confusion:



I hope you have this money earning 5% and not just literally sitting in a bank account paying 0.3%
You could be earning easily 5% while having access to all the money (within a few days), not locking any up.



Just try to clear up understanding:
So your C-corp leases land from other folks, 657 acres, and then turns around and leases out that same land (sublease) for slightly higher rate and you make some $$ off it.
Plus your C-corp owns the rolling stock and leases out tractors and semis, etc..

You personally own 570 acres in your name (not the c-corp).



The C-corp net worth is from the rolling stock (tractors , semis, etc)

Seems to me, you have enough to retire, but unwinding it all will take a few years.

Actually these numbers don't make sense to me....the OP needs 185K to make land payments, only the interest portion of the payments would be deductible. Principal is not deductible. So he needs the amount of principle plus taxes he needs to pay on that amount.



Does the C corp pay rent on all the acres? you can't use C Corp machinery to farm random acres of land. Our land at this point is rented by the C Corp and the income passes through to the owners and operators. (who are the same people).



As far as the big pot of money in the C corp it takes a lot of cash to plant and farm that many acres.


And yes I'm confused about the sublease comment too.