The average age of a rancher or farmer is getting higher every year. So, it is little wonder that some of the brightest minds in agriculture and food production are increasingly concerned about how to attract a new generation of people into the business. Reports also abound as to the shrinking number of men and women who are deciding not to take over the family ranch of farm when their parent retire.
That’s one reason why groups like the National Cattlemen’s Beef Association (NCBA) have been pressing for years for the federal government to change the law regarding death taxes. NCBA in January said it strongly supports the Death Tax Repeal Act, led by Reps. Randy Feenstra (R-IA-04) and Sanford Bishop (D-GA-02). The Senate companion bill is led by Sen. John Thune (R-SD). Repealing the federal estate tax, also known as the death tax, is a top priority for NCBA.
It is unconscionable for cattle producers to face a tax that forces them to sell all or part of their family’s farm or ranch due to the death of a family member, said NCBA President and South Dakota cattle producer Todd Wilkinson at the time. With the cost of farmland rapidly rising, the death tax presents a significant threat to the future of family farms and ranches. Most cattle producers have significant assets but are cash poor and operate on thin margins, leaving them with few options when they are saddled with an unexpected tax liability, he said.
Some producers are forced to sell off assets, including land, livestock, farm equipment or even their home, added Wilkinson. This is an incredible loss and it starts a vicious cycle where future generations continue to face punitive taxes their ancestors paid multiple times. Rural America needs a tax code that promotes multi-generational, family-owned businesses instead of chopping them up, he said.
Current death tax relief is set to expire at the end of 2025, and it is vital that Congress acts soon and provide permanent relief for family operations, NCBA said. If the federal estate tax exemption reverts to pre-2017 limits, coupled with the rapid inflation of farmland values, many more families will be subject to the death tax, it says. At the time of writing this, it was unclear if the legislation had made any progress.
Meanwhile, I came across a fascinating new USDA report that outlines to what degree farmers and ranchers are set up for retirement through various accounts. It also reveals that they are getting older. Farmers face unique circumstances in saving for and maintaining income during retirement compared with other U.S. residents, says USDA’s Economic Research Service (ERS). As business owners, their annual incomes fluctuate depending on market and weather situations and they may have limited access to employer-sponsored retirement savings plans. However, the majority of farm households include members with off-farm employment, which may provide more stable income and access to retirement benefits, says ERS.
ERS researchers used data from Agricultural Resource Management Surveys from 2018 to 2022 to assess retirement preparedness among U.S. farmers and ranchers. They found that median farm household income was higher than the median income of U.S. households in that period. They also found a greater share of farm households (61%) maintained savings in retirement accounts (including 401(k), 403(b), individual retirement accounts and Keogh accounts) than U.S. households overall (54%) and nonfarm self-employed households (52%).
When researchers narrowed their focus to farmers and ranchers at retirement age, they found that in 2021 around 45% of principal operators were 65 years old or older. Among this population, 57% held assets in retirement accounts, which is a higher proportion than the 47% of older U.S. households generally but lower than the 59% of older nonfarm self-employed U.S. households. The findings point to differences in retirement savings across different household types but also suggest that older farm households were less likely than younger farm households to have retirement savings, says ERS.
Even though older farm households were more likely to have retirement accounts than the general population, they had lower levels of retirement savings, says ERS. On average, older farm households had $247,600 in retirement savings, compared with $260,900 for older U.S. households and $516,800 for older nonfarm self-employed households. However, farm households had higher levels of total assets than the average U.S. household, although some of their assets may be more difficult to access during retirement. Much of their wealth was concentrated in their farm operations, and tax implications for principal operators could affect whether farm households decide to draw on farm assets during retirement, says ERS. — Steve Kay, WLJ columnist
(Steve Kay is editor/publisher of Cattle Buyers Weekly, an industry newsletter published at P.O. Box 2533, Petaluma, CA, 94953; 707-765-1725. Kay’s Korner appears exclusively in WLJ.)
