America's farmers are at a higher risk of experiencing declining standards of living in retirement, according to a paper released today by the American Corn Growers Association (ACGA) and Americans for Secure Retirement (ASR).
The study, entitled Lifetime Income Crucial to Farmers' Retirement Security, warns Congress that to provide farmers with a secure retirement, "the challenge goes far beyond Social Security." Measures must be implemented that would help turn farmers' hard earned assets into funds that will provide steady income for life.
The report details how farm and ranch operators and their workers face significant and unique obstacles in planning and providing for their retirement. "With less access to employer-based pensions and volatile business risks, farmers often face a more difficult retirement path than the average American," notes Larry Mitchell, CEO of the American Corn Growers Associations.
The study recommends that policymakers should encourage investments in retirement vehicles that provide steady income that cannot be outlived, such as lifetime annuities, to complement Social Security. Lifetime annuities are specifically helpful to farmers because many have real, tangible farm assets -- such as farm land, machinery and livestock -- and non-farm assets such as stocks, bonds, real estate and cash -- that if managed properly can essentially provide a "paycheck" for life.
Key findings of Lifetime Income Crucial to Farmers' Retirement Security include:
- Farmers are less likely to participate in employer-sponsored retirement plans, further limiting their sources of retirement income. Just 30% of agricultural workers in America work for an employer with some form of retirement plan. Even more startling, less than a quarter actually participate in a retirement plans. That means that the vast majority of farm workers, they have no other guaranteed sources of retirement income beyond Social Security.
- Farming, as a business, is far more volatile than most, making saving for retirement more difficult. Everything from weather and biological risks to global economic conditions to policies can cause significant variation in farm income. These factors combined illustrate why the variability of farm household income far exceeds all US households.
- Retirement ripple effect created in rural communities. Of the 386 counties in the US with persistent poverty, 340 of them are rural. Retired farmers and farm wives that outlive their savings only add to the demands that strained local governments are facing to provide health, transportation and other social services to the poor and elderly.
- Farm wives are particularly vulnerable to declining standards of living in retirement. Today, an average 65-year old woman can expect to live nearly an additional 20 years, and there is approximately a one in three chance that she will live to age 90. Because they live longer than men and spend more time in retirement, farm wives are especially at risk for drastic declines in their standard of living in retirement. According to the USDA, two-thirds of rural persons age 60 or above earning less than $10,000 were women and by age 85 the statistic jumps to four-fifths.
A bill introduced in Congress earlier this year called The Retirement Security for Life Act (H.R. 819, S. 381) would address many of the issues cited in this report and is gaining bi-partisan support among key legislators. Under the proposal, individuals would not pay federal taxes on one-half of the income generated by lifetime annuities, up to a maximum of $20,000 in excluded income per year. For a typical American in the 25% tax bracket, this would provide an annual tax savings of up to $5,000.
Mitchell adds, "We believe that legislation that encourages lifetime annuitization would give farmers more tools to control their retirement standard of living."